[Title 7 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2016 Edition]
[From the U.S. Government Publishing Office]
[[Page i]]
Title 7
Agriculture
________________________
Parts 1940 to 1949
Revised as of January 1, 2016
Containing a codification of documents of general
applicability and future effect
As of January 1, 2016
Published by the Office of the Federal Register
National Archives and Records Administration as a
Special Edition of the Federal Register
[[Page ii]]
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[[Page iii]]
Table of Contents
Page
Explanation................................................. v
Title 7:
SUBTITLE B--Regulations of the Department of Agriculture
(Continued)
Chapter XVIII--Rural Housing Service, Rural
Business-Cooperative Service, Rural Utilities
Service, and Farm Service Agency, Department of
Agriculture (Continued) 5
Finding Aids:
Table of CFR Titles and Chapters........................ 317
Alphabetical List of Agencies Appearing in the CFR...... 337
List of CFR Sections Affected........................... 347
[[Page iv]]
----------------------------
Cite this Code: CFR
To cite the regulations in
this volume use title,
part and section number.
Thus, 7 CFR 1940.301
refers to title 7, part
1940, section 301.
----------------------------
[[Page v]]
EXPLANATION
The Code of Federal Regulations is a codification of the general and
permanent rules published in the Federal Register by the Executive
departments and agencies of the Federal Government. The Code is divided
into 50 titles which represent broad areas subject to Federal
regulation. Each title is divided into chapters which usually bear the
name of the issuing agency. Each chapter is further subdivided into
parts covering specific regulatory areas.
Each volume of the Code is revised at least once each calendar year
and issued on a quarterly basis approximately as follows:
Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1
The appropriate revision date is printed on the cover of each
volume.
LEGAL STATUS
The contents of the Federal Register are required to be judicially
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie
evidence of the text of the original documents (44 U.S.C. 1510).
HOW TO USE THE CODE OF FEDERAL REGULATIONS
The Code of Federal Regulations is kept up to date by the individual
issues of the Federal Register. These two publications must be used
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To determine whether a Code volume has been amended since its
revision date (in this case, January 1, 2016), consult the ``List of CFR
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative
List of Parts Affected,'' which appears in the Reader Aids section of
the daily Federal Register. These two lists will identify the Federal
Register page number of the latest amendment of any given rule.
EFFECTIVE AND EXPIRATION DATES
Each volume of the Code contains amendments published in the Federal
Register since the last revision of that volume of the Code. Source
citations for the regulations are referred to by volume number and page
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inserted following the text.
OMB CONTROL NUMBERS
The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires
Federal agencies to display an OMB control number with their information
collection request.
[[Page vi]]
Many agencies have begun publishing numerous OMB control numbers as
amendments to existing regulations in the CFR. These OMB numbers are
placed as close as possible to the applicable recordkeeping or reporting
requirements.
PAST PROVISIONS OF THE CODE
Provisions of the Code that are no longer in force and effect as of
the revision date stated on the cover of each volume are not carried.
Code users may find the text of provisions in effect on any given date
in the past by using the appropriate List of CFR Sections Affected
(LSA). For the convenience of the reader, a ``List of CFR Sections
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the Code prior to the LSA listings at the end of the volume, consult
previous annual editions of the LSA. For changes to the Code prior to
2001, consult the List of CFR Sections Affected compilations, published
for 1949-1963, 1964-1972, 1973-1985, and 1986-2000.
``[RESERVED]'' TERMINOLOGY
The term ``[Reserved]'' is used as a place holder within the Code of
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``[Reserved]'' location at any time. Occasionally ``[Reserved]'' is used
editorially to indicate that a portion of the CFR was left vacant and
not accidentally dropped due to a printing or computer error.
INCORPORATION BY REFERENCE
What is incorporation by reference? Incorporation by reference was
established by statute and allows Federal agencies to meet the
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This material, like any other properly issued regulation, has the force
of law.
What is a proper incorporation by reference? The Director of the
Federal Register will approve an incorporation by reference only when
the requirements of 1 CFR part 51 are met. Some of the elements on which
approval is based are:
(a) The incorporation will substantially reduce the volume of
material published in the Federal Register.
(b) The matter incorporated is in fact available to the extent
necessary to afford fairness and uniformity in the administrative
process.
(c) The incorporating document is drafted and submitted for
publication in accordance with 1 CFR part 51.
What if the material incorporated by reference cannot be found? If
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CFR INDEXES AND TABULAR GUIDES
A subject index to the Code of Federal Regulations is contained in a
separate volume, revised annually as of January 1, entitled CFR Index
and Finding Aids. This volume contains the Parallel Table of Authorities
and Rules. A list of CFR titles, chapters, subchapters, and parts and an
alphabetical list of agencies publishing in the CFR are also included in
this volume.
[[Page vii]]
An index to the text of ``Title 3--The President'' is carried within
that volume.
The Federal Register Index is issued monthly in cumulative form.
This index is based on a consolidation of the ``Contents'' entries in
the daily Federal Register.
A List of CFR Sections Affected (LSA) is published monthly, keyed to
the revision dates of the 50 CFR titles.
REPUBLICATION OF MATERIAL
There are no restrictions on the republication of material appearing
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INQUIRIES
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For inquiries concerning CFR reference assistance, call 202-741-6000
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The e-CFR is a regularly updated, unofficial editorial compilation
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available at www.ecfr.gov.
Oliver A. Potts,
Director,
Office of the Federal Register.
January 1, 2016.
[[Page ix]]
THIS TITLE
Title 7--Agriculture is composed of fifteen volumes. The parts in
these volumes are arranged in the following order: parts 1-26, 27-52,
53-209, 210-299, 300-399, 400-699, 700-899, 900-999, 1000-1199, 1200-
1599, 1600-1759, 1760-1939, 1940-1949, 1950-1999, and part 2000 to end.
The contents of these volumes represent all current regulations codified
under this title of the CFR as of January 1, 2016.
The Food and Nutrition Service current regulations in the volume
containing parts 210-299, include the Child Nutrition Programs and the
Food Stamp Program. The regulations of the Federal Crop Insurance
Corporation are found in the volume containing parts 400-699.
All marketing agreements and orders for fruits, vegetables and nuts
appear in the one volume containing parts 900-999. All marketing
agreements and orders for milk appear in the volume containing parts
1000-1199.
For this volume, Cheryl E. Sirofchuck was Chief Editor. The Code of
Federal Regulations publication program is under the direction of John
Hyrum Martinez, assisted by Stephen J. Frattini.
[[Page 1]]
TITLE 7--AGRICULTURE
(This book contains parts 1940 to 1949)
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SUBTITLE B--Regulations of the Department of Agriculture (Continued)
Part
chapter xviii--Rural Housing Service, Rural Business-
Cooperative Service, Rural Utilities Service, and Farm
Service Agency, Department of Agriculture (Continued)..... 1940
[[Page 3]]
Subtitle B--Regulations of the Department of Agriculture (Continued)
[[Page 5]]
CHAPTER XVIII--RURAL HOUSING SERVICE, RURAL BUSINESS-COOPERATIVE
SERVICE, RURAL UTILITIES SERVICE, AND FARM SERVICE AGENCY, DEPARTMENT OF
AGRICULTURE (CONTINUED)
--------------------------------------------------------------------
Editorial Note: Nomenclature changes to chapter XVIII appear at 61 FR
1109, Jan. 16, 1996, and at 61 FR 2899, Jan. 30, 1996.
SUBCHAPTER H--PROGRAM REGULATIONS (CONTINUED)
Part Page
1940 General..................................... 7
1941
[Reserved]
1942 Associations................................ 117
1943
[Reserved]
1944 Housing..................................... 187
1946
[Reserved]
1948 Rural development........................... 287
1949
[Reserved]
[[Page 7]]
SUBCHAPTER H_PROGRAM REGULATIONS (CONTINUED)
PART 1940_GENERAL--Table of Contents
Subparts A-F [Reserved]
Subpart G_Environmental Program
Sec.
1940.301 Purpose.
1940.302 Definitions.
1940.303 General policy.
1940.304 Special policy.
1940.305 Policy implementation.
1940.306 Environmental responsibilities within the National Office.
1940.307 Environmental responsibilities within the State Office.
1940.308 Environmental responsibilities at the District and County
Office levels.
1940.309 Responsibilities of the prospective applicant.
1940.310 Categorical exclusions from National Environmental Policy Act
(NEPA) reviews.
1940.311 Environmental assessments for Class I actions.
1940.312 Environmental assessments for Class II actions.
1940.313 Actions that normally require the preparation of an
Environmental Impact Statement (EIS).
1940.314 Criteria for determining a significant environmental impact.
1940.315 Timing of the environmental review process.
1940.316 Responsible officials for the environmental review process.
1940.317 Methods for ensuring proper implementation of categorical
exclusions.
1940.318 Completing environmental assessments for Class II actions.
1940.319 Completing environmental assessments for Class I actions.
1940.320 Preparing EISs.
1940.321 Use of completed EIS.
1940.322 Record of decision.
1940.323 Preparing supplements to EIS's.
1940.324 Adoption of EIS or environmental assessment prepared by another
Federal Agency.
1940.325 FmHA or its successor agency under Public Law 103-354 as a
cooperating Agency.
1940.326 FmHA or its successor agency under Public Law 103-354 as a lead
Agency.
1940.327 Tiering.
1940.328 State Environmental Policy Acts.
1940.329 Commenting on other Agencies' EIS's.
1940.330 Monitoring.
1940.331 Public involvement.
1940.332 Emergencies.
1940.333 Applicability to planning assistance.
1940.334 Direct participation of State Agencies in the preparation of
FmHA or its successor agency under Public Law 103-354 EISs.
1940.335 Environmental review of FmHA or its successor agency under
Public Law 103-354 proposals for legislation.
1940.336 Contracting for professional services.
1940.337-1940.349 [Reserved]
1940.350 Office of Management and Budget (OMB) control number.
Exhibit A to Subpart G of Part 1940--Departmental Regulation
Exhibit B to Subpart G of Part 1940--Development and Implementation of
Natural Resource Management Guide
Exhibit C to Subpart G of Part 1940--Implementation Procedures for the
Farmland Protection Policy Act; Executive Order 11988,
Floodplain Management; Executive Order 11990, Protection of
Wetlands; and Departmental Regulation 9500-3, Land Use Policy
Exhibit D to Subpart G of Part 1940--Implementation Procedures for the
Endangered Species Act
Exhibit E to Subpart G of Part 1940--Implementation Procedures for the
Wild and Scenic Rivers Act
Exhibit F to Subpart G of Part 1940--Implementation Procedures for the
Coastal Barrier Resources Act
Exhibit G to Subpart G of Part 1940 [Reserved]
Exhibit H to Subpart G of Part 1940--Environmental Assessment for Class
II Actions
Exhibit I to Subpart G of Part 1940--Finding of No Significant
Environmental Impact
Exhibit J to Subpart G of Part 1940--Locations and Telephone Numbers of
Federal Emergency Management Administration's Regional Offices
Exhibit K to Subpart G of Part 1940--Locations and Telephone Numbers of
U.S. Fish and Wildlife Service's Wetland Coordinators
Exhibit L to Subpart G of Part 1940--Exceptions to Restrictions of
Coastal Barrier Resources Act
Exhibit M to Subpart G of Part 1940--Implementation Procedures for the
Conservation of Wetlands and Highly Erodible Land Affecting
Farmer Program Loans and Loans to Indian Tribes and Tribal
Corporations
Subpart H [Reserved]
[[Page 8]]
Subpart I_Truth in Lending_Real Estate Settlement Procedures
1940.401 Truth in lending.
1940.402-1940.405 [Reserved]
1940.406 Real estate settlement procedures.
Subparts J-K [Reserved]
Subpart L_Methodology and Formulas for Allocation of Loan and Grant
Program Funds
1940.551 Purpose and general policy.
1940.552 Definitions.
1940.553-1940.559 [Reserved]
1940.560 Guarantee Rural Rental Housing Program.
1940.561-1940.562 [Reserved]
1940.563 Section 502 non-subsidized guaranteed Rural Housing (RH) loans.
1940.564 Section 502 subsidized guaranteed Rural Housing loans.
1940.565 Section 502 subsidized Rural Housing loans.
1940.566 Section 504 Housing Repair loans.
1940.567 Section 504 Housing Repair grants.
1940.568 Single Family Housing programs appropriations not allocated by
State.
1940.569-1940.574 [Reserved]
1940.575 Section 515 Rural Rental Housing (RRH) loans.
1940.576 Rental Assistance (RA) for new construction.
1940.577 Rental Assistance (RA) for existing projects.
1940.578 Housing Preservation Grant (HPG) program.
1940.579 Multiple Family Housing appropriations not allocated by State.
1940.580-1940.584 [Reserved]
1940.585 Community Facility loans.
1940.586-1940.587 [Reserved]
1940.588 Business and Industry Guaranteed and Direct Loans, Rural
Business Enterprise Grants, Rural Business Opportunity Grants,
and Intermediary Relending Program.
1940.589 Rural Energy for America Program.
1940.590 [Reserved]
1940.591 Community Program Guaranteed loans.
1940.592 Community facilities grants.
1940.593 Other Rural Business-Cooperative Service programs.
1940.594-1940.600 [Reserved]
Exhibit A to Subpart L of Part 1940 [Reserved]
Exhibit B to Subpart L of Part 1940--Section 515 Nonprofit Set Aside
(NPSA)
Exhibit C to Subpart L of Part 1940--Housing in Underserved Areas
Subparts M-S [Reserved]
Subpart T_System for Delivery of Certain Rural Development Programs
1940.951 General.
1940.952 [Reserved]
1940.953 Definitions.
1940.954 State participation.
1940.955 Distribution of program funds to designated States.
1940.956 State rural economic development review panel.
1940.957 State coordinator.
1940.958 Designated agency.
1940.959 Area plan.
1940.960 Federal employee panel members.
1940.961 Allocation of appropriated funds.
1940.962 Authority to transfer direct loan amounts.
1940.963 Authority to transfer guaranteed loan amounts.
1940.964 [Reserved]
1940.965 Processing project preapplications/applications.
1940.966-1940.967 [Reserved]
1940.968 Rural Economic Development Review Panel Grant (Panel Grant).
1940.969 Forms, exhibits, and subparts.
1940.970 [Reserved]
1940.971 Delegation of authority.
1940.972-1940.999 [Reserved]
1940.1000 OMB control number.
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; and 42 U.S.C. 1480.
Editorial Note: Nomenclature changes to part 1940 appear at 80 FR
9876, Feb. 24, 2015.
Subparts A-F [Reserved]
Subpart G_Environmental Program
Source: 53 FR 36240, Sept. 19, 1988, unless otherwise noted.
Sec. 1940.301 Purpose.
(a) This subpart contains the major environmental policies of the
Farmers Home Administration (FmHA) or its successor agency under Public
Law 103-354. It also provides the procedures and guidelines for
preparing the environmental impact analyses required for a series of
Federal laws, regulations, and Executive orders within one environmental
document. The timing and use of this environmental document within the
FmHA or its successor agency under Public Law 103-354 decision-making
process is also outlined.
(b) This subpart is intended to be consistent with the Council on
Environmental Ouality's (CEQ) Regulations
[[Page 9]]
for Implementing the Procedural Provisions of the National Environmental
Policy Act (NEPA), 40 CFR parts 1500-1508. CEQ's regulations will not be
repeated in this subpart except when essential for clarification of
important procedural or substantive points. Otherwise, citations to
applicable sections of the regulations will be provided. The CEQ
regulations will be available at all FmHA or its successor agency under
Public Law 103-354 offices.
(c) This subpart is designed to integrate the requirements of NEPA
with other planning and environmental review procedures required by law,
or by Agency practice, so that all such procedures run concurrently
rather than consecutively. The environmental document, which results
from the implementation of this subpart, provides on a project basis a
single reference point for the Agency's compliance and/or implementation
of the following requirements and policies:
(1) The National Environmental Policy Act, 42 U.S.C. 4321;
(2) Safe Drinking Water Act--Section 1424(e), 42 U.S.C. 300h;
(3) Endangered Species Act, 16 U.S.C. 1531;
(4) Wild and Scenic Rivers Act, 16 U.S.C. 1271;
(5) The National Historic Preservation Act, 16 U.S.C. 470 (See
subpart F of part 1901 of this chapter for more specific implementation
procedures);
(6) Archaeological and Historic Preservation Act, 16 U.S.C. 469 (See
subpart F of part 1901 of this chapter for more specific implementation
procedures);
(7) Coastal Zone Management Act--Section 307(c) (1) and (2), 16
U.S.C. 1456;
(8) Farmland Protection Policy Act, subtitle I, Pub. L. 97-98;
(9) Coastal Barrier Resources Act, Pub. L. 97-348;
(10) Executive Order 11593, Protection and Enhancement of the
Cultural Environment (See subpart F of part 1901 of this chapter for
more specific implementation procedures);
(11) Executive Order 11514, Protection and Enhancement of
Environmental Quality;
(12) Executive Order 11988, Floodplain Management;
(13) Executive Order 11990, Protection of Wetlands;
(14) Title 7, parts 1b and 1c, Code of Federal Regulations,
Department of Agriculture's National Environmental Policy Act; Final
Policies and Procedures;
(15) Title 7, part 3100, Code of Federal Regulations, Department of
Agriculture's Enhancement, Protection, and Management of the Cultural
Environment (See subpart F of part 1901 of this chapter for more
specific implementation procedures);
(16) Title 7, part 658, Code of Federal Regulations, Department of
Agriculture, Soil Conservation Service, Farmland Protection Policy;
(17) Title 87, part 12, Code of Federal Regulations, Highly Erodible
Land and Wetland Conservation;
(18) Departmental Regulation 9500-3, Land Use Policy (See exhibit A
of this subpart);
(19) Departmental Regulation 9500-4, Fish and Wildlife Policy.
(d) The primary objectives of this subpart are for the Agency to
make better decisions by taking into account potential environmental
impacts of proposed projects and by working with FmHA or its successor
agency under Public Law 103-354 applicants, other Federal agencies,
Indian tribes, State and local governments, and interested citizens and
organizations in order to formulate actions that advance the program
goals in a manner that will protect, enhance, and restore environmental
quality. To accomplish these objectives, the identification of
potentially significant impacts on the human environment is mandated to
occur early in the Agency's planning and decisionmaking processes.
Important decision points are identified. The completion of the
environmental review process is coordinated with these decision points,
and this review must be completed prior to the Agency's first major
decision on whether or not to participate in the proposal. This early
availability of the results of the environmental review process is
intended to ensure that Agency decisions are based on an understanding
of their environmental consequence, as well as the consequences of
alternative courses of action.
(e) Reducing delays, duplication of effort, and superfluous analyses
are
[[Page 10]]
provided for in this subpart. FmHA or its successor agency under Public
Law 103-354 environmental documents are to be supported by accurate
analyses and will concentrate on the issues that are timely and relevant
to the action in question, rather than amassing needless detail. Such
documents and their preparation and review will be coordinated with
other Federal or State agencies jointly participating in proposed
actions or related actions, in order to avoid duplication of effort, and
to achieve a coordinated and timely response.
(f) Public involvement is desirable, and to facilitate public
involvement, environmental documents will be available to interested
citizens as early in the decisionmaking process as possible and before
decisions are made. Provisions are included for citizens or interested
parties to express their views and any concerns.
(g) The FmHA or its successor agency under Public Law 103-354
officials responsible for the environmental review process are
identified.
(h) The FmHA or its successor agency under Public Law 103-354
actions covered by this subpart include:
(1) Financial assistance to include grants, loans, and guarantees,
(2) Subdivision approvals,
(3) The management, leasing and sale of inventory property, and
(4) Other major federal actions such as proposals for legislation
and the issuance of regulations.
Sec. 1940.302 Definitions.
Following is a list of definitions that apply to the implementation
of this subpart. Please note that Sec. 1940.301(b) of this subpart
refers to the Council on Environmental Quality's Regulations for
Implementing the Procedural Provisions of the National Environmental
Policy Act, 40 CFR parts 1500-1508. Consequently, the definitions
contained in part 1508 of the Council's regulations apply to this
subpart, as well as those listed below.
(a) Emergency circumstance. One involving an immediate or imminent
danger to public health or safety.
(b) Environmental review documents. The documents required by this
subpart for the purpose of documenting FmHA or its successor agency
under Public Law 103-354's compliance with the environmental laws and
regulations applicable to the FmHA or its successor agency under Public
Law 103-354 actions covered in this subpart. These documents include:
(1) Form FmHA or its successor agency under Public Law 103-3541940-
22, ``Environmental Checklist for Categorical Exclusions,''
(2) Form FmHA or its successor agency under Public Law 103-354 1940-
21, ``Environmental Assessment of Class I Action,''
(3) Environmental Assessment for Class II Actions (exhibit H of this
subpart), and
(4) Environmental Impact Statements (EIS).
(c) Flood or flooding. A general and temporary condition of partial
or complete inundation of land areas, from the overflow of inland and/or
tidal waters, and/or the rapid accumulation or runoff of surface waters
from any source. Two important classifications of floods are as follows.
(1) A one-percent chance flood or based flood--A flood of a
magnitude that occurs once every 100 years on the average. Within any
one-year period there is one chance in 100 of the occurrence of such a
flood. Most importantly, however, the cumulative risk of flooding
increases with time. Statistically, there is about one chance in five
that a flood of this magnitude will occur within a 20-year period, the
length of time commonly defined as the useful life of a facility. Over a
30-year period, the life of a typical mortgage, the probability of such
a flood occurring increases to greater than one chance in four.
(2) A 0.2-percent chance flood--A flood of a magnitude that occurs
once every 500 years on the average. (Within any one-year period there
is one chance in 500 of the occurrence of such a flood.) As with the
one-percent chance flood, the cumulative risk of this flood occurring
also increases with time.
(d) Floodplains. Lowland and relatively flat areas adjoining inland
and coastal waters, including flood-prone areas of offshore islands. At
a minimum, floodplains consist of those
[[Page 11]]
areas subject to a one percent or greater chance of flooding in any
given year. The term floodplain will be taken to mean the base
floodplain, unless the action involves a critical action, in which case
the critical action floodplain is the minimum floodplain of concern.
(1) Base floodplain (or 100-year floodplain)--The area subject to
inundation from a flood of a magnitude that occurs once every 100 years
on the average (the flood having a one-percent chance of being equalled
or exceeded in any given year).
(2) Critical action floodplain (or 500-year floodplain)--The area
subject to inundation from a flood of a magnitude that occurs once every
500 years on the average (the flood having 0.2-percent chance of being
equalled or exceeded in any given year).
(e) Indirect impacts. Those reasonably foreseeable environmental
impacts that result from the additional public facility, residential,
commercial, or industrial development or growth that a federally
financed project may cause, induce or accommodate. Consequently,
indirect impacts often occur later in time than the construction of the
Federal project and can be removed in distance from the construction
site. For example, a water transmission line may be designed to serve
additional residential development. The environmental impacts of that
residential development represent an indirect impact of the federally
funded water line. Those indirect impacts which deserve the greatest
consideration include changes in the patterns of land use, population
density or growth rate, and the corresponding changes to air and water
quality and other natural systems.
(f) Mitigation measure. A measure(s) included in a project or
application for the purpose of avoiding, minimizing, reducing or
rectifying identified, adverse environmental impacts. Examples of such
measures include:
(1) The deletion, relocation, redesign or other modifications of the
project's elements;
(2) The dedication to open space of environmentally sensitive areas
of the project site, which would otherwise be adversely affected by the
action or its indirect impacts;
(3) Soil erosion and sedimentation plans to control runoff during
land-disturbing activities;
(4) The establishment of vegetative buffer zones between project
sites and adjacent land uses;
(5) Protective measures recommended by environmental and
conservation agencies having jurisdiction or special expertise regarding
the project's impacts;
(6) Storm water management plans to control potential downstream
flooding effects that would result from a project;
(7) Zoning; and
(8) Reuse of existing facilities as opposed to new construction.
(g) No-action alternative. The alternative of not approving an
application for financial assistance, a subdivision feasibility
analysis, or an Agency proposal.
(h) Practicable alternative. An alternative that is capable of
attainment within the confines of relevant constraints. The test of
practicability, therefore, depends upon the particulars of the situation
under consideration and those constraints imposed by environmental,
economic, legal, social and technological parameters. This test,
however, is not limited by the temporary unavailability of sufficient
financial resources to implement an alternative. That is, alternatives
cannot be rejected solely on the basis of moderately increased costs.
The range of alternatives that must be analyzed to determine if a
practicable alternative exists includes the following three categories
of alternatives:
(1) Alternative project sites or designs,
(2) Alternative projects with similar benefits as the proposed
actions, and
(3) The no-action alternative.
(i) Preparer of Environmental Review Documents. The FmHA or its
successor agency under Public Law 103-354 official who is responsible
for reviewing the potential environmental impacts of the proposed action
and for completing the appropriate environmental review document. Under
the circumstances indicated, the following Agency positions and
divisions will act as the preparer of
[[Page 12]]
the environmental review documents covered by this subpart.
(1) County Office. When the approval official for the action under
review is located at the County Office level, that official will
prepare, as required, Environmental Checklist for Categorical Exclusions
and Class I and Class II assessments.
(2) District Office. When the approval official for the action under
review is located at the District Office level, that official will
prepare, as required, Environmental Checklist for Categorical Exclusions
and Class I and Class II assessments or may delegate this responsibility
to either:
(i) The District Office staff member having primary responsibility
for assembling the associated pre-application, application or other case
materials, analyzing the materials and developing recommendations for
the approval official, or
(ii) A County Office staff member having the same responsibilities
as the District Office member, if the action is initiated at the County
Office level.
(3) State Program Chief. For actions approved within the State
Office, the Chief will prepare, as required, Environmental Checklist for
Categorical Exclusions and Class I and II assessments or may delegate
this responsibility to either:
(i) The appropriate State Office Loan Specialist, if not the State
Environmental Coordinator (SEC),
(ii) An architect or engineer on the Chief's staff who is not the
SEC, or
(iii) A District or County Office staff member located within the
office in which the action is initiated and having the responsibilities
outlined in paragraph (i)(2)(i) of this section.
(4) State Environmental Coordinator. EIS's for actions within the
approval authority of County Supervisors, District Directors, and State
Office officials.
(5) Assistant Administrators for Programs. Checklists, assessments,
and EIS's for all actions initiated within their program office.
(6) Program Support Staff. Checklists, assessments, and EIS's that
the Deputy Administrator for Program Operations requests be done.
(j) Water resource project. Includes any type of construction which
would result in either impacts on water quality and the beneficial uses
that water quality criteria are designed to protect or any change in the
free-flowing characteristics of a particular river or stream to include
physical, chemical, and biological characteristics of the waterway. This
definition encompasses construction projects within and along the banks
of rivers or streams, as well as projects involving withdrawals from,
and discharges into such rivers or streams. Projects which require Corps
of Engineers dredge and fill permits are also water resource projects.
Sec. 1940.303 General policy.
(a) FmHA or its successor agency under Public Law 103-354 will
consider environmental quality as equal with economic, social, and other
relevant factors in program development and decision-making processes.
(b) In assessing the potential environmental impacts of its actions,
FmHA or its successor agency under Public Law 103-354 will consult early
with appropriate Federal, State, and local agencies and other
organizations to provide decision-makers with both the technical and
human aspects of environmental planning.
(c) When adverse environmental impacts are identified, either direct
or indirect, an examination will be made of alternative courses of
action, including their potential environmental impacts. The objective
of the environmental review will be to develop a feasible alternative
with the least adverse environmental impact. The alternative of not
proceeding with the proposal will also be considered particularly with
respect to the need for the proposal.
(d) If no feasible alternative exists, including the no-action
alternative, measures to mitigate the identified adverse environmental
impacts will be included in the proposal.
(e) The performance of environmental reviews and the consideration
of alternatives will be initiated as early as possible in the FmHA or
its successor agency under Public Law 103-354 application review process
so that the Agency will be in the most flexible
[[Page 13]]
and objective position to deal with these considerations.
Sec. 1940.304 Special policy.
(a) Land use. (1) FmHA or its successor agency under Public Law 103-
354 recognizes that its specific mission of assisting rural areas,
composed of farms and rural towns, goes hand-in-hand with protecting the
environmental resources upon which these systems are dependent. Basic
resources necessary to both farm and rural settlements include important
farmlands and forestlands, prime rangelands, wetlands, and floodplains.
The definitions of these areas are contained in the appendix to
Departmental Regulation 9500-3, Land Use Policy, which is included as
exhibit A of this subpart. For assistance in locating and defining
floodplains and wetlands, the locations and telephone numbers of the
Federal Emergency Management Administration's regional offices have been
included as exhibit J of this subpart, and similar information for the
U.S. Fish and Wildlife Service's Wetland Coordinators has been included
as exhibit K of this subpart. Given the importance of these resources,
as emphasized in the Departmental Regulation, Executive Order 11988,
``Floodplain Management,'' and Executive Order 11990, ``Protection of
Wetlands,'' it is FmHA or its successor agency under Public Law 103-
354's policy not to approve or fund any proposals that, as a result of
their identifiable impacts, direct or indirect, would lead to or
accommodate either the conversion of these land uses or encroachment
upon them. The only exception to this policy is if the approving
official determines that
(i) There is no practicable alternative to the proposed action,
(ii) The proposal conforms to the planning criteria identified in
paragraph (a)(2) of this section, and
(iii) The proposal includes all practicable measures for reducing
the adverse impacts and the amount of conversion/encroachment.
(A) For Farmer Program loans and guarantees, and loans to Indian
Tribes and Tribal Corporations, exhibit M of this subpart imposes
additional and more restrictive requirements regarding wetland and
highly erodible land conservation.
(B) Unless otherwise exempted by the provisions of exhibit M, the
proceeds of any Farmer Program loan or loan to an Indian Tribe or Tribal
Corporation made or guaranteed by FmHA or its successor agency under
Public Law 103-354 cannot be used.
(1) For a purpose that will contribute to excessive erosion of
highly erodible land (as defined in exhibit M), or
(2) For a purpose that will contribute to conversion of wetlands (as
defined in exhibit M) to produce an agricultural commodity.
(2) It is also recognized that unless carefully reviewed, some
proposals designed to serve the needs of rural communities can adversely
affect the existing economic base and settlement patterns of the
community, as well as create development pressures on land and
environmental resources essential to farm economies. An example of such
a proposal might be the extension of utilities and other types of
infrastructure beyond a community's existing settlement pattern and into
important farmlands for the purpose of commercial or residential
expansion, even though there is available space within the existing
settlement pattern for such expansion. Not only may the loss of
important farmlands unnecessarily result, but the community may be faced
with the economic costs of providing public services to outlying areas,
as well as the deterioration of its central business or commercial area;
the latter may not be able to compete with the newer, outlying
commercial establishments. These results are undesirable, and to avoid
their occurrence, projects designed to meet rural community needs (i.e.,
residential, industrial, commercial, and public facilities) will not be
approved unless the following conditions are met.
(i) The project is planned and sited in a manner consistent with the
policies of this section, the Farmland Protection Policy Act, and
Departmental Regulation 9500-3 (exhibit A of this subpart).
(ii) The project is not inconsistent with an existing comprehensive
and enforceable plan that guides growth and
[[Page 14]]
reflects a realistic strategy for protecting natural resources, and the
project is compatible, to the extent practicable, with State, unit of
local government, and private programs and policies to protect farmland.
(If no such plan or policies exist, there is no FmHA or its successor
agency under Public Law 103-354 requirement that they either be prepared
and adopted, as further specified in paragraph (a)(3) of this section.)
(iii) The project will encourage long-term, economically viable
public investment by fostering or promoting development patterns that
ensure compact community development, that is, development that is
limited to serving existing settlement patterns or is located in
existing settlement patterns, e.g., the rehabilitation and renovation of
existing structures, systems and neighborhoods; infilling of
development; the provision of a range of moderate-to-high residential
densities appropriate to local and regional needs. When these
development patterns or types are not practicable, the development must
be contiguous with the existing settlement pattern and provide for a
range of moderate-to-high residential densities appropriate to local and
regional needs. It is recognized that some FmHA or its successor agency
under Public Law 103-354 Community Programs projects are designed to
serve rural residents, such as rural water and waste disposal systems
and, therefore, cannot be limited in service area to these areas
contiguous with existing settlement patterns. These types of projects
will be designed to primarily serve existing structures and rural
residents in noncontiguous areas. Any additional capacity within the
system will be limited to meet reasonable growth needs, and, to the
extent practicable, be designed to meet such needs within existing
settlements and areas contiguous to them.
(3) The conditions specified in paragraph (a)(2) of this section
should not be construed as advocating excessive densities, congestion,
or loss of open space amenities within rural communities. Desirable
living conditions can be obtained under these objectives, along with
economic and social benefits for the community and the surrounding farm
operations. Additionally, these conditions should not be construed as
requiring localities to develop plans which contain the conditions. In
any instance in which these planning conditions or criteria do not exist
within the project area, project reviews will not be postponed until the
criteria are adopted. Rather, projects will be reviewed and funding
decisions made in light of a project's consistency with the contents of
this subpart (excluding paragraph (a)(2)(ii) of this section, which
would not be applicable).
(b) Endangered species. FmHA or its successor agency under Public
Law 103-354 will not authorize, fund, or carry out any proposal or
project that is likely to
(1) Jeopardize the continued existence of any plant or wildlife
species listed by the Secretary of the Interior or Commerce as
endangered or threatened; or
(2) Destroy or adversely modify the habitats of listed species when
such habitats have been determined critical to the species' existence by
the Secretary of the Interior or Commerce, unless FmHA or its successor
agency under Public Law 103-354 has been granted an exemption for such
proposal by the Endangered Species Committee pursuant to paragraph (h)
of section 7 of the Endangered Species Act.
(c) Wild and scenic rivers. FmHA or its successor agency under
Public Law 103-354 will not provide financial assistance or plan
approval for any water resource project that would have a direct and
adverse effect on the values for which a river has been either included
in the National Wild and Scenic Rivers System or is designated for
potential addition. Additionally, FmHA or its successor agency under
Public Law 103-354 will not approve or assist developments (commercial,
industrial, residential, farming or community facilities) located below
or above a wild, scenic or recreational river area, or on any stream
tributary thereto which will invade the area or unreasonably diminish
the scenic, recreational, and fish and wildlife values present in the
area.
(d) Historic and cultural properties. As part of the environmental
review process, FmHA or its successor agency under Public Law 103-354
will identify
[[Page 15]]
any properties that are listed in, or may be eligible for, listing in
the National Register of Historic Places and are located within the
project's area of potential environmental impacts. Consultations will be
undertaken with State Historic Preservation Officers and the Advisory
Council on Historic Preservation, through the implementation of subpart
F of part 1901 of this chapter, in order to determine the most
appropriate course of action for protecting such identified properties
or mitigating potential adverse impacts to them.
(e) Coastal barriers. Under the requirements of the Coastal Barrier
Resources Act, FmHA or its successor agency under Public Law 103-354
will not provide financial assistance for any activity to be located
within the Coastal Barrier Resources System unless
(1) Such activity meets the criteria for an exception, as defined in
section 6 of the Act, and
(2) Consultation regarding the activity has been completed with the
Secretary of the Interior.
(f) Water and energy conservation. FmHA or its successor agency
under Public Law 103-354 will encourage the conservation of water and
energy in the development of its programs and policies and will
encourage applicants to incorporate all economically feasible water and
energy-saving features and designs within their proposals.
(g) Intergovernmental initiatives on important land resources. On a
broader scale, FmHA or its successor agency under Public Law 103-354
will advocate, in cooperation with other USDA agencies (through the USDA
State-level committee system), the retention of important farmlands and
forestlands, prime rangeland, wetlands and floodplains whenever proposed
conversions to other uses
(1) Are caused or encouraged by actions or programs of a Federal
Agency, or
(2) Require licensing or approval by a Federal Agency, unless other
needs clearly override the benefits derived from retention of such
lands.
(h) Water quality. FmHA or its successor agency under Public Law
103-354 will not provide financial assistance to any activity that would
either impair a State water quality standard, including designated and/
or existing beneficial uses that water quality criteria are designed to
protect, or that would not meet antidegradation requirements.
Sec. 1940.305 Policy implementation.
(a) Environmental impact analysis. The implementation of the
environmental impact analysis requirements described in this subpart
serves as the primary mechanism for FmHA or its successor agency under
Public Law 103-354 as follows:
(1) Incorporating environmental quality considerations into FmHA or
its successor agency under Public Law 103-354 program and decision-
making processes,
(2) Obtaining the views of the public and government agencies on
potential environmental impacts associated with FmHA or its successor
agency under Public Law 103-354 projects, and
(3) Using all practicable means to avoid or to minimize any possible
adverse environmental effects of FmHA or its successor agency under
Public Law 103-354 actions.
(b) Natural resource management. The State Director will develop a
natural resource management guide. This guide will serve as an essential
mechanism for implementing Sec. 1940.304 of this subpart; and,
therefore, the guide must be consistent with and reflect the objectives
and policies contained in Sec. 1940.304 of this subpart. At the same
time, however, it must be tailored to take into account important State,
regional, and local natural resource management objectives. The guide
will be issued as a State Supplement for prior approval. The basic
content, purposes, and uses of the guide are enumerated in exhibit B of
this subpart and can be summarized as follows:
(1) The guide will serve as a mechanism for assembling an inventory
of the locations within the State of those natural resources, land uses,
and environmental factors that have been specified by Federal, State and
local authorities as deserving some degree of protection or special
consideration;
(2) The guide will summarize the various standards or types of
Federal, State, or local protection that apply to
[[Page 16]]
the natural resources, land uses, and environmental factors listed in
the inventory; and
(3) Applications for individual projects must be reviewed for
consistency with the guide.
(c) Intergovernmental initiatives. When commenting on proposed
Federal actions subject to environmental impact statements, FmHA or its
successor agency under Public Law 103-354 commentors will focus on the
consistency of these actions with the appropriate State natural resource
management guide. A similar focus or element will be addressed in FmHA
or its successor agency under Public Law 103-354's review of the
Environmental Protection Agency's 201 Wastewater Management Plans.
(d) Farmland Protection Policy Act and Departmental Regulation 9500-
3, Land Use Policy. The natural resource management guide serves as a
tool for implementing the requirements of the Act and the Departmental
Regulation at the broad level of implementing the Agency's programs at
the State level. These requirements must also be followed in the review
of applications for financial assistance or subdivision approval, as
well as the disposal of real property. FmHA or its successor agency
under Public Law 103-354's implementation procedures for the project
review process are contained in exhibit C of this subpart.
(e) Endangered Species. FmHA or its successor agency under Public
Law 103-354 will implement the consultation procedures required under
section 7 of the Endangered Species Act as specified in 50 CFR part 402.
It is important to note that these consultation procedures apply to the
disposal of real property and all FmHA or its successor agency under
Public Law 103-354 applications for financial assistance and subdivision
approval, including those applicants which are exempt from environmental
assessments. FmHA or its successor agency under Public Law 103-354's
implementation procedures are contained in exhibit D of this subpart.
(f) Wild and scenic rivers. Each application for financial
assistance or subdivision approval and the proposed disposal of real
property will be reviewed to determine if it will affect a river or
portion of it, which is either included in the National Wild and Scenic
Rivers System, designated for potential addition to the system, or
identified in the Nationwide Inventory prepared by the National Park
Service (NPS) in the Department of the Interior (DOI). FmHA or its
successor agency under Public Law 103-354's procedures for completing
this review are contained in exhibit E of this subpart.
(g) Historic and cultural properties. (1) As part of the
environmental review process, FmHA or its successor agency under Public
Law 103-354 will identify any properties that are listed in or may be
eligible for listing in the National Register of Historic Places, and
located within the area of potential environmental impact.
Identification will consist of consulting the published lists of the
National Register and formally contacting and seeking the comments of
the appropriate State Historic Preservation Officer (SHPO). Since it is
not always possible from the consultation with the SHPO to determine
whether historic and cultural properties are present within the
project's area of environmental impact, it may be necessary for FmHA or
its successor agency under Public Law 103-354 to consult public records
and other individuals and organizations, such as university
archaeologists, local historical societies, etc. These latter
discussions should take place before initiating a detailed site survey
since they may provide reliable information that obviates the need for a
survey. However, whenever insufficient information exists to document
the presence or absence of potentially eligible National Register
properties and where the potential for previously unidentified
properties is recognized by FmHA or its successor agency under Public
Law 103-354, the SHPO, or other interested parties, FmHA or its
successor agency under Public Law 103-354 will conduct the necessary
investigations to determine if such properties are present within the
area of potential environmental impact. FmHA or its successor agency
under Public Law 103-354 will involve the SHPO in the planning and
formulation of any historic, cultural, architectural or archaeological
testing,
[[Page 17]]
studies or surveys conducted to investigate the presence of such
properties and will utilize persons with appropriate knowledge and
experience.
(2) If the information obtained, as a result of the consultation and
investigations conducted by FmHA or its successor agency under Public
Law 103-354, indicates the presence of an historic or cultural property
within the area of potential environmental impact that, in the opinion
of the SHPO and FmHA or its successor agency under Public Law 103-354,
appear to meet the National Register Criteria (36 CFR 60.4), the
property will be considered eligible for the National Register of
Historic Places. If the SHPO and FmHA or its successor agency under
Public Law 103-354 do not agree on the property's eligibility for the
National Register or if the Secretary of the Interior or the Advisory
Council on Historic Preservation so requests, FmHA or its successor
agency under Public Law 103-354 will request a determination of
eligibility from the Keeper of the National Register in accordance with
36 CFR part 63. Consultations will be initiated with the SHPO and the
Advisory Council on Historic Preservation in accordance with 36 CFR part
800, through the implementation of subpart F of part 1901 of this
chapter, to determine the most appropriate course of action to protect
all National Register and eligible properties within the area of
potential environmental impact.
(3) Further instructions detailing the procedures to be followed in
considering and protecting historic and cultural properties and the
responsible Agency officials are contained in subpart F of part 1901 of
this chapter. These procedures will be followed whenever a proposal,
considered by FmHA or its successor agency under Public Law 103-354, has
the potential to affect National Register or eligible properties.
(h) Coastal barriers. In those States having coastal barriers within
the Coastal Barrier Resources System, each application for financial
assistance or subdivision approval, as well as the proposed disposal of
real property, will be reviewed to determine if it would be located
within the system, and, if so, whether the action must be denied on this
basis or meets the Act's criteria for an exception. To accomplish the
review, all affected State, District and County Offices will maintain a
current set of maps, as issued by DOI, which depict those coastal
barriers within their jurisdiction that have been included in the
system. FmHA or its successor agency under Public Law 103-354's
implementation procedures for accomplishing this review requirement and
for consulting as necessary with DOI are contained in exhibit F of this
subpart. The exceptions to the restrictions of the Coastal Barrier
Resources Act are contained in exhibit L of this subpart.
(i) Water and energy conservation. Water and energy conservation
measures will be considered at both the program and project level in a
manner consistent with program regulations.
(j) Noise abatement. For purposes of assessing noise impacts and for
determining the acceptability of housing sites in terms of their
exposure to noise, FmHA or its successor agency under Public Law 103-354
has adopted and follows the standards and procedures developed by the
U.S. Department of Housing and Urban Development (HUD) and contained in
24 CFR part 51 of subpart B entitled, ``Noise Abatement and Control.''
(k) Water quality. Each application for financial assistance or
subdivision approval and the proposed disposal of real property will be
reviewed to determine if it would impair a State water quality standard
or meet antidegradation requirements. When necessary, the proposed
activity will be modified to protect water quality standards, including
designated and/or existing beneficial uses that water quality criteria
are designed to protect, and meet antidegradation requirements.
Sec. 1940.306 Environmental responsibilities within the National Office.
(a) Administrator. The Administrator of FmHA or its successor agency
under Public Law 103-354 has the direct responsibility for Agency
compliance with all environmental laws, Executive orders, and
regulations that apply to FmHA or its successor agency under
[[Page 18]]
Public Law 103-354's program and administrative actions. As such, the
Administrator ensures that this responsibility is adequately delegated
to Agency staff and remains informed on the general status of Agency
compliance, as well as the need for any necessary improvements. The
Administrator is also responsible for ensuring that the Agency's
manpower and financial needs for accomplishing adequate compliance with
this subpart are reflected and documented in budget requests for
departmental consideration.
(b) Deputy Administrator Program Operations. (1) The Deputy
Administrator for Program Operations has the delegated overall Agency
responsibility for developing and implementing environmental policies
and compliance procedures, monitoring their effectiveness, and advising
the Administrator on the status of compliance, to include
recommendations for any necessary changes in this subpart. The incumbent
is also responsible for developing and documenting, as part of the
Agency's budget formulation process, the manpower and financial needs
necessary to implement this subpart.
(2) The specific responsibilities of the Deputy Administrator--
Program Operations are as follows:
(i) Provide for the Agency an interdisciplinary approach to
environmental impact analysis and problem resolution, as required by the
CEQ regulations;
(ii) Provide the leadership and technical expertise for the
implementation of the Agency's environmental policies with special
emphasis being placed on those policies relating to natural resource
management, energy conservation, and orderly community development;
(iii) Coordinate the implementation of this subpart with affected
program offices;
(iv) Provide policy direction and advice on the implementation of
this subpart to Agency staff, particularly to SECs and technical support
personnel within State Offices;
(v) Consult and coordinate, as needed or upon request, with the
Department's interagency committees dealing with environmental, land
use, and historic preservation matters;
(vi) Monitor the Agency's record in complying with this subpart;
(vii) Provide training programs and materials for the Agency staff
assigned the functions identified in this subpart;
(viii) Review, as necessary, applications for funding assistance,
proposed policies and regulations, and recommend their approval,
disapproval, or modification after analyzing and considering their
anticipated adverse environmental impacts, their benefits, and their
consistency with the requirements of this subpart;
(ix) Develop and direct Agency procedures for complying with
environmental legislation, Executive orders, and regulations, including,
but not limited to, those listed in Sec. 1940.301(c) of this subpart;
(x) Maintain a position identified as the Senior Environmental
Specialist (hereafter called the Environmental Specialist), who will
serve as the responsible Agency official under the National
Environmental Policy Act and the National Historic Preservation Act,
maintain liaison on environmental matters with interested public groups
and Federal agencies, and serve as the focal point for developing and
coordinating the Agency's procedures for the requirements listed in
Sec. 1940.301(c) of this subpart; and
(xi) Review and evaluate legislative and administrative proposals in
terms of their environmental impact.
(c) Assistant Administrators for Programs. The Assistant
Administrators for Programs will:
(1) Ensure, as necessary, that environmental assessments and EISs
for proposed program regulations are prepared by their staff;
(2) Ensure that all proposed actions that fall under the
requirements of this subpart, and that are submitted to the National
Office for approval or concurrence, contain adequate analyses and
documentation of their potential environmental impacts (Transfer of
program funds from National Office to State Office control to enable the
State Office to approve an application is not considered to be National
Office approval of or concurrence in an application);
[[Page 19]]
(3) Consider and include, in the development of program regulations,
feasible policies and mechanisms that promote program goals in a manner
that either enhances environmental quality or reduces unnecessary
adverse environmental impacts; and
(4) Designate one or more staff members to serve as a program
environmental coordinator, having generally the same duties and
responsibilities within the program office as the SEC has within the
State Office (See Sec. 1940.307(b) of this subpart).
Sec. 1940.307 Environmental responsibilities within the State Office.
(a) State Director. The State Director will:
(1) Serve as the responsible FmHA or its successor agency under
Public Law 103-354 official at the State Office level for ensuring
compliance with the requirements of this subpart; and
(2) Appoint one individual to serve as the SEC. Thereafter, the SEC
will report directly to the State Director on the environmental matters
contained in this subpart.
(b) State Environmental Coordinator (SEC). The SEC will:
(1) Act as advisor to the State Director on environmental matters
and coordinate the requirements of this subpart;
(2) Review those Agency actions which are not categorically excluded
from this subpart (see Sec. Sec. 1940.311 and 1940.312 of this subpart)
and which require the approval and/or clearance of the State Office and
recommend to the approving official either project approval,
disapproval, or modification after analyzing and considering the--
(i) Anticipated adverse environmental impacts,
(ii) The anticipated benefits, and
(iii) The action's consistency with this subpart's requirements;
(3) Represent the State Director at conferences and meetings dealing
with environmental matters of a State Office nature;
(4) Maintain liaison on State Office environmental matters with
interested public groups and local, State, and other Federal agencies;
(5) Serve as the State Director's alternate on State-level USDA
committees dealing with environmental, land use and historic
preservation matters;
(6) Solicit, whenever necessary, the expert advice and assistance of
other professional staff members within the State Office in order to
adequately implement this subpart;
(7) Provide technical assistance as needed on a project-by-project
basis to State, District, and County Office staffs;
(8) Develop controls for avoiding or mitigating adverse
environmental impacts and monitor their implementation;
(9) Provide assistance in resolving post-approval environmental
matters at the State Office level;
(10) Maintain records for those actions required by this subpart;
(11) Coordinate for the State Director the development of the State
Office natural resource management guide;
(12) Provide direction and training to State, District, and County
Office staffs on the requirements of this subpart; and
(13) Coordinate for the State Director the monitoring of the State
Office's compliance with this subpart and keep the State Director
advised of the results of the monitoring process.
(c) Program Chiefs. State Office Program Chiefs will:
(1) Be responsible for the adequacy of the environmental impact
reviews required by this subpart for all program actions to be approved
at the State Office level or concurred in at that level;
(2) Coordinate the above reviews as early as possible with the SEC,
so that the latter can assist in addressing the resolution of any
unresolved or difficult environmental issues in a timely manner; and
(3) Incorporate into projects and actions measures to avoid or
reduce potential adverse environmental impacts identified in
environmental reviews.
Sec. 1940.308 Environmental responsibilities at the District and
County Office levels.
(a) The District Director will be responsible for carrying out the
actions required by this subpart to be completed at the District Office
level.
(b) The County Supervisor will be responsible for carrying out the
actions
[[Page 20]]
required by this subpart to be completed at the County Office level.
(c) In discussing FmHA or its successor agency under Public Law 103-
354 assistance programs with potential applicants, District Directors
and County Supervisors will inform them of the Agency's environmental
requirements, as well as the environmental information needs and
responsibilities that FmHA or its successor agency under Public Law 103-
354 applicants are expected to address. (See Sec. 1940.309 of this
subpart.)
Sec. 1940.309 Responsibilities of the prospective applicant.
(a) FmHA or its successor agency under Public Law 103-354 expects
applicants and transferees (and in the case of the loan guarantee
programs, borrowers and transferees) to consider the potential
environmental impacts of their requests at the earliest planning stages
and to develop proposals that minimize the potential to adversely impact
the environment. Prospective applicants should contact County
Supervisors or District Directors, as appropriate, to determine FmHA or
its successor agency under Public Law 103-354's environmental
requirements as soon as possible after they decide to pursue FmHA or its
successor agency under Public Law 103-354 financial assistance.
(b) As specified in paragraph (c) of this section, applicants for
FmHA or its successor agency under Public Law 103-354 assistance will be
required to provide information necessary to FmHA or its successor
agency under Public Law 103-354 to evaluate their proposal's potential
environmental impacts and alternatives to them. For example, the
applicant will be required to provide a complete description of the
project elements and the proposed site(s) to include location maps,
topographic maps, and photographs when needed. The applicant will also
be required to provide data on any expected gaseous, liquid and solid
wastes to be produced, including hazardous wastes as defined by the
Resource Conservation and Recovery Act or State law, and all permits
and/or correspondence issued by the appropriate local, State, and
Federal agencies which regulate treatment and disposal practices.
(c) Form FmHA or its successor agency under Public Law 103-354 1940-
20, ``Request for Environmental Information,'' will be used for
obtaining environmental information from applicants whose proposals
require an environmental assessment under the requirements of this
subpart. These same applicants must notify the appropriate State
Historic Preservation Officer of the filing of the application and
provide a detailed project description as specified in Item 2 of Form
FmHA or its successor agency under Public Law 103-354 1940-20 and the
FMI. If the applicant's proposal meets the definition of a Class II
action as defined in Sec. 1940.312 of this subpart, all of Form FmHA or
its successor agency under Public Law 103-354 1940-20 must be completed.
If the applicant's proposal meets the definition of a Class I action as
defined in Sec. 1940.311 of this subpart, the entire form need not be
completed, but just the face of the form and categories (1), (2), (13),
(15), (16), and (17) of Item 1b of the FMI. As an exception to the
foregoing statement, an applicant for an action that is normally
categorically excluded but requires a Class I assessment for any of the
reasons stated in Sec. 1940.317(e) of this subpart is not required to
complete Form FmHA or its successor agency under Public Law 103-354
1940-20. Additionally, for Class I actions within the Farm Programs, a
site visit by the FmHA or its successor agency under Public Law 103-354
official completing the environmental assessment obviates the need for
the applicant to complete any of the form, and the adoption by FmHA or
its successor agency under Public Law 103-354 of a Soil Conservation
Service (SCS) environmental assessment or evaluation for the action
obviates the need to complete the form for either a Class I or Class II
action.
(d) Applicants will ensure that all required materials are current,
sufficiently detailed and complete, and are submitted directly to the
FmHA or its successor agency under Public Law 103-354 office processing
the application. Incomplete materials or delayed submittals may
seriously jeopardize consideration or postponement of a proposed action
by FmHA or its successor agency under Public Law 103-354.
[[Page 21]]
(e) During the period of application review and processing,
applicants will not take any actions with respect to their proposed
undertakings which are the subject of the application and which would
have an adverse impact on the environment or limit the range of
alternatives. This requirement does not preclude development by
applicants of preliminary plans or designs or performance of other work
necessary to support an application for Federal, State, or local permits
or assistance. However, the development of detailed plans and
specifications is discouraged when the costs involved inhibit the
realistic consideration of alternative proposals.
(f) Applicants are required to provide public notification and to
fully cooperate in holding public information meetings as described in
Sec. Sec. 1940.318(e), 1940.320 (c) and (g), and 1940.331 (b) and (c)
of this subpart.
(g) Any applicant that is directly and adversely affected by an
administrative decision made by FmHA or its successor agency under
Public Law 103-354 under this subpart may appeal that decision under the
provisions of subpart B of part 1900 of this chapter.
Sec. 1940.310 Categorical exclusions from National Environmental
Policy Act (NEPA) reviews.
(a) General guidelines. The following actions have been determined
not to have a significant impact on the quality of the human
environment, either individually or cumulatively. They will not be
subject to environmental assessments or impact statements. It must be
emphasized that even though these actions are excluded from further
environmental reviews under NEPA, they are not excluded from either the
policy considerations contained in Sec. Sec. 1940.303 through 1940.305
of this subpart or from compliance with other applicable local, State,
or Federal environmental laws. Also, the actions preceded by an asterisk
(*) are not excluded from further review depending upon whether in some
cases they would be located within, or in other cases, potentially
affect:
(1) A floodplain,
(2) A wetland,
(3) Important farmlands, or prime forestlands or rangelands,
(4) A listed species or critical habitat for an endangered species,
(5) A property that is listed on or may be eligible for listing on
the National Register of Historic Places,
(6) An area within an approved State coastal zone management
program,
(7) A coastal barrier or a portion of a barrier within the Coastal
Barrier Resources System,
(8) A river or portion of a river included in, or designated for,
potential addition to the Wild and Scenic Rivers System,
(9) A sole source aquifer recharge area, or
(10) A State water quality standard (including designated and/or
existing beneficial uses and antidegradation requirements).
(i) Whether location within one of the preceding resource areas is
sufficient to require a further review or a potential impact to one of
them must also be identified to require a review is determined by FmHA
or its successor agency under Public Law 103-354's completion of Form
FmHA or its successor agency under Public Law 103-354 1940-22 in
accordance with the FMI and Sec. 1940.317 of this subpart.
(ii) When the categorical exclusion classification is lost, as
specified in Sec. 1940.317 of this subpart, the action must be reviewed
under the requirements of paragraph (g) of that section. This
requirement serves to implement Sec. 1508.4 of the CEQ regulations
which requires Federal agencies to detect extraordinary circumstances in
which a normally excluded action may have a significant environmental
effect.
(iii) Further guidance on the use of these exclusions is contained
in Sec. 1940.317 of this subpart.
(b) Housing assistance. *(1) The provision of financial assistance
for the purchase of a single family dwelling or a multi-family project
serving no more than four families, i.e., units;
(2) The approval of an individual building lot that is located on a
scattered site and either not part of a subdivision or within a
subdivision not requiring FmHA or its successor agency under Public Law
103-354's approval;
*(3) Rehabilitation, replacement, or renovation of any existing
housing
[[Page 22]]
units, with no expansion in the number of units;
(4) Self-Help Technical Assistance Grants;
*(5) The approval of a subdivision that consists of four or fewer
lots and is not part of, or associated with, building lots or
subdivisions;
(6) Technical Supervisory Assistance Loans and Grants;
(7) Weatherization of any existing housing unit(s), unless the
property is listed in the National Register of Historic Places or may be
eligible for listing, or is located either within the Coastal Barrier
Resources System or in a listed or potentially eligible historic
district, in which case the application will require a Class I
assessment as specified in Sec. 1940.317(g) of this subpart;
(8) The financing of housing construction or the approval of lots in
a previously approved FmHA or its successor agency under Public Law 103-
354 subdivision provided that
(i) The action is consistent with all previously adopted
stipulations for the multi-family housing project or subdivision, and
(ii) The FmHA or its successor agency under Public Law 103-354
environmental impact review that was previously completed for the
original application is still current with respect to applicable
environmental requirements and conditions present at the site, and it
assessed the lots or expansion for which approval is being requested;
(9) The purchase of any existing, non-FmHA or its successor agency
under Public Law 103-354 owned housing unit(s), unless the property is
listed in the National Register of Historic Places or may be eligible
for listing, or is located either within a 100-year floodplain, the
Coastal Barrier Resources System, or in a listed or potentially eligible
historic district, in which case the application will require a Class I
assessment as specified in Sec. 1940.317(g) of this subpart; and
(10) Appraisals of nonfarm tracts and small farms for rural housing
loans.
(c) Community and business programs and nonprofit national
corporations loan and grant program. *(1) Financial assistance directed
to existing businesses, facilities, and/or structures that does not
involve new construction or large increases in employment; does not
involve a facility that presently or previously produced or stored
hazardous waste or disposed of hazardous waste on the facility's
property; and does not result in the increased production of gaseous,
liquid, or solid wastes, or a change in the type or content of such
wastes as long as waste production, handling, treatment and disposal
practices presently comply with applicable Federal, State and local
regulations and there is no history of violations. If any of these waste
production, handling, treatment, disposal or compliance criteria cannot
be met, a Class I assessment must be initiated to include a narrative
discussion of the types and quantities of wastes produced and the
adequacy of the treatment, storage, and disposal practices, if the
involved wastes meet the criteria for a Class I assessment contained in
Sec. 1940.311(b)(3)(iii) of this subpart. If not, a Class II assessment
must be completed.
*(2) Projects that solely involve the acquisition, construction,
reconstruction, renovation, or installation of facilities, structures or
businesses, for replacement or restoration purposes, with minimal change
in use, size, capacity, purpose or location from the original facility
(e.g., replacement in-kind of utilities such as water or sewer lines and
appurtenances, reconstruction of curbs and sidewalks, street repaving,
and building modifications, renovations, and improvements);
(3) Project management actions relating to invitation for bids,
contract award, and the actual physical commencement of construction
activities;
(4) Financial assistance for a technical assistance grant under the
nonprofit national corporation loan and grant program;
(5) Projects that solely involve the purchase and installation of
office equipment, public safety equipment, or motor vehicles; and
(6) Amendments to approved projects meeting the criteria of
paragraph (e)(2) of this section.
(7) Rural Business Investment Program actions, which can be divided
into:
[[Page 23]]
(i) Non-leveraged program actions that include licensing by USDA of
Rural Business Investment Companies (RBIC); and
(ii) Leveraged program actions that include licensing by USDA of
RBIC and Federal financial assistance in the form of technical grants or
guarantees of debentures of an RBIC, unless such federal assistance is
used to finance construction or development of land.
(d) Farm programs. (1) Financial assistance for the purchase of an
existing farm, or an enlargement to one, provided no shifts in land use
are proposed beyond the limits stated in paragraphs (d) (10) and (11) of
this section;
(2) Financial assistance for the purchase of livestock and essential
farm equipment, including crop storing and drying equipment, provided
such equipment is not to be used to accommodate shifts in land use
beyond the limits stated in paragraphs (d) (10) and (11) of this
section;
(3) Financial assistance for:
(i) The payment of annual operating expenses, which does not cover
activities specifically addressed in this section or Sec. 1940.311 or
Sec. 1940.312 of this subpart;
(ii) Family living expenses, and
(iii) Refinancing debts;
*(4) Financial assistance for the construction of essential farm
dwellings and service buildings of modest design and cost, as well as
repairs and improvements to them;
(5) Financial assistance for onsite water supply facilities to serve
a farm dwelling, farm buildings, and livestock needs;
(6) Financial assistance for the installation or enlargement of
irrigation facilities, including storage reservoirs, diversion dams,
wells, pumping plants, canals, pipelines, and sprinklers designed to
irrigate less than 80 acres, provided that neither a State water quality
standard, a property listed or potentially eligible for listing on the
National Register of Historic Places, a river or portion of a river
included in, or designated for, potential addition to the Wild and
Scenic Rivers System, nor a wetland is affected. If a wetland is
affected, the application will fall under Class II as defined in Sec.
1940.312 of this subpart. Potential effects to a water quality standard,
an historic property or the Wild and Scenic Rivers System require that a
review be initiated under a Class I assessment as specified in Sec.
1940.317(g) of this subpart.
(7) Financial assistance that solely involves the replacement or
restoration of irrigation facilities, to include those facilities
described in paragraph (d)(6) of this section, with minimal change in
use, size, capacity, or location from the original facility(s) provided
that neither a State water quality standard, a property listed or
potentially eligible for listing on the National Register of Historic
Places, a river or portion of a river included in or designated for
potential addition to the Wild and Scenic Rivers System, nor a wetland
is affected. If a wetland is affected, the application will fall under
Class II as defined in Sec. 1940.312 of this subpart. Potential effects
to a water quality standard, an historic property, or the Wild and
Scenic Rivers System require that a Class I assessment be completed as
specified in Sec. 1940.317(g) of this subpart. Also, to qualify for
this exclusion, the facilities to be replaced or restored must have been
used for similar irrigation purposes at least two out of the last three
consecutive growing seasons. Otherwise, the action will be viewed as an
installation of irrigation facilities.
(8) Financial assistance for the development of farm ponds or lakes
of no more than 5 acres in size, provided that, neither a State water
quality standard, a property listed or potentially eligible for listing
on the National Register of Historic Places, a river or portion of a
river included in or designated for potential addition to the Wild and
Scenic Rivers System, nor a wetland is affected. If a wetland is
affected, the application will fall under Class II as defined in Sec.
1940.312 of this subpart. Potential effects to a water quality standard,
an historic property, or the Wild and Scenic Rivers System require that
a review be initiated under a Class I assessment as specified in Sec.
1940.317(g) of this subpart;
*(9) Financial assistance for the conversion of:
(i) Land in agricultural production to pastures or forests, or
(ii) Pastures to forests;
[[Page 24]]
*(10) Financial assistance for land-clearing operations of no more
than 15 acres, provided no wetlands are affected, and financial
assistance for any amount of land involved in tree harvesting conducted
on a sustained yield basis and according to a Federal, State or other
governmental unit approved forestry management and marketing plan; and
(11) Financial assistance for the conversion of no more than 160
acres of pasture to agricultural production, provided that in a
conversion to agricultural production no State water quality standard or
wetlands are affected. If a wetland is affected, the application will
fall under Class II as defined in Sec. 1940.312 of this subpart. If a
water quality standard would be impaired or antidegradation requirement
not met, a Class I assessment is required as specified in Sec.
1940.317(g) of this subpart.
(e) General exclusions. (1) The award of financial assistance for
planning purposes, management and feasibility studies, or environmental
impact analyses;
(2) For actions other than those covered by exhibit M of this
subpart, loan-closing and servicing activities, transfers, assumptions,
subordinations, construction management activities and amendments and
revisions to approved projects, including the provision of additional
financial assistance that do not alter the purpose, operation, location,
or design of the project as originally approved;
(3) The issuance of regulations and instructions, as well as
amendments to them, describing administrative and financial procedures
for processing, approving, and implementing the Agency's financial
assistance programs;
(4) Procurement activities for goods and services, routine facility
operations, personnel actions, and other such management activities
related to the operation of the Agency;
(5) Reduction in force or employee transfers resulting from workload
adjustments, reduced personnel or funding levels, skill imbalances, or
other similar circumstances; and
*(6) The lease or disposal of real property by FmHA or its successor
agency under Public Law 103-354 whenever the transaction is either not
controversial for environmental reasons or will not result in a change
in use of the real property within the reasonably foreseeable future.
[53 FR 36240, Sept. 19, 1988, as amended at 76 FR 80220, Dec. 23, 2011]
Sec. 1940.311 Environmental assessments for Class I actions.
The Agency's proposals and projects that are not identified in Sec.
1940.310 of this subpart as categorical exclusions require the
preparation of an environmental assessment in order to determine if the
proposal will have a significant impact on the environment. For purposes
of implementing NEPA, the actions listed in this section are presumed to
be major Federal actions. If an action has a potential to create a
significant environmental impact, an EIS must be prepared. (In
situations when there is clearly a potential for a significant impact,
the EIS may be initiated directly without the preparation of an
assessment.) It is recognized that many of the applications funded
annually by FmHA or its successor agency under Public Law 103-354
involve small-scale projects having limited environmental impacts.
However, because on occasion they have the potential to create a
significant impact, each must be assessed to determine the degree of
impact. The scope and level of detail of an assessment for a small-scale
action, though, need only be sufficient to determine whether the
potential impacts are substantial and further analysis is necessary.
Therefore, for the purpose of implementing NEPA, FmHA or its successor
agency under Public Law 103-354 has classified its smaller scale
approval actions as Class I actions. The format which will be used for
accomplishing the environmental assessment of a Class I action is
provided in Form FmHA or its successor agency under Public Law 103-354
1940-21. An important aspect of this classification method is that it
allows FmHA or its successor agency under Public Law 103-354's
environmental review staff to concentrate most of its time and efforts
on those actions having the potential for more serious or complex
environmental impacts. Additional guidance on the application of NEPA to
Class I
[[Page 25]]
actions is provided in Sec. 1940.319 of this subpart.
(a) Housing assistance. If either of the following actions is an
expansion of a previously approved FmHA or its successor agency under
Public Law 103-354 housing project, see Sec. 1940.310(b)(8) of this
subpart to determine if it meets the requirements for a categorical
exclusion. In the case of an expansion for which an environmental
assessment was not done for the original FmHA or its successor agency
under Public Law 103-354 project, the size of the proposal for
assessment purposes is determined by adding the number of units in the
original project(s) to those presently being requested.
(1) Financial assistance for a multi-family housing project,
including labor housing which comprises at least 5 units, but no more
than 25 units; and
(2) Financial assistance for or the approval of a subdivision, as
well as the expansion of an existing one which involves at least 5 lots
but no more than 25 lots; and
(3) Financial assistance for a housing preservation grant.
(b) Community and business programs and nonprofit national
corporations loan and grant program. Class I assessments will be
prepared for the following categories:
(1) Financial assistance for water and waste disposal facilities and
natural gas facilities that meet all of the following criteria:
(i) There will not be a substantial increase in the volume of
discharge or the loading of pollutants from any existing or expanded
sewage treatment facilities, or a substantial increase in an existing
withdrawal from surface or ground waters. A substantial increase may be
evidenced by an increase in hydraulic capacity or the need to obtain a
new or amended discharge or withdrawal permit.
(ii) There will not be either a new discharge to surface or ground
waters or a new withdrawal from surface or ground waters such that the
design capacity of the discharge or withdrawal facility exceeds 50,000
gallons per day and provided that the potential water quality impacts
are documented in a manner required for a Class II assessment and
attached as an exhibit to the Class I assessment.
(iii) From the boundaries listed below, there is no extension,
enlargement or construction of interceptors, collection, transmission or
distribution lines beyond a one-mile limit estimated from the closest
point of the boundary most applicable to the proposed service area:
(A) The boundary formed by the corporate limits of the community
being served.
(B) If there are developed areas immediately contiguous to the
corporate limits of a community, the boundary formed by the limits of
these developed areas.
(C) If an unincorporated area is to be served, the boundary formed
by the limits of the developed areas.
(iv) The proposal is designed for predominantly residential use with
other new or expanded users being small-scale commercial enterprises
having limited secondary impacts.
(v) For a proposed expansion of sewage treatment or water supply
facilities, such expansions would serve a population that is no more
than 20 percent greater than the existing population.
(vi) The proposal is not controversial for environmental reasons,
nor have relevant questions been raised regarding its environmental
impact which cannot be addressed in a Class I assessment.
(2) Financial assistance for group homes, detention facilities,
nursing homes, or hospitals, providing a net increase in beds of not
more than 25 percent or 25 beds, whichever is greater; and
(3) Financial assistance for the construction or expansion of
facilities, such as fire stations, real stores, libraries outpatient
medical facilities, service industries, additions to manufacturing
plants, office buildings, and wholesale industries, that:
(i) Are confined to single, small sites; and
(ii) Are not a source of substantial traffic generation; and
(iii) Do not produce either substantial amounts of liquid or solid
wastes or any of the following type(s) of wastes:
[[Page 26]]
(A) Gaseous, liquid, or solid waste that is hazardous toxic,
radioactive, or odorous;
(B) Either a liquid waste, whether or not disposed of on-site, that
cannot be accepted by a publicly owned treatment works without first
receiving pretreatment, or a liquid waste discharge that is a point
source subject to a Federal, or State discharge permit; or
(C) Gaseous waste or air pollutant that will be emitted either from
a new source at a rate greater than one hundred tons per year or from an
expanded source at a rate greater than twenty-five tons per year.
(4) Financial assistance for a livestock-holding facility or feed-
lot meeting the criteria of Sec. 1940.311(c)(8) of this subpart.
(c) Farm Programs. In completing environmental assessments for the
following Class I actions and the Class II actions listed in Sec.
1940.312(d), special attention will be given to avoiding a duplication
of effort with other Department agencies, particularly SCS. For
applications in which the applicant is receiving assistance from other
agencies, technical assistance from SCS, for example, FmHA or its
successor agency under Public Law 103-354 will request from that agency
a copy of any applicable environmental review conducted by it and will
adopt that review if the requirements of Sec. 1940.324 of this subpart
are met. FmHA or its successor agency under Public Law 103-354 will work
closely with the other Federal Agencies to supplement previous or
ongoing reviews whenever they cannot be readily adopted.
(1) Financial assistance for the installation or enlargement of
irrigation facilities including storage reservoirs, diversion dams,
wells, pumping plants, canals, pipelines, and sprinklers designed to
irrigate at least 80 acres, but no more than 160 acres and provided that
no wetlands are affected, in which case the application will fall under
Class II as defined in Sec. 1940.312 of this subpart:
(2) Financial assistance for the development of farm ponds or lakes
of more than 5 acres in size, but no more than 10 acres, provided that
no wetlands are affected. If wetlands are affected, the application will
fall under Class II as defined in Sec. 1940.312 of this subpart;
(3) Financial assistance for land-clearing operations encompassing
over 15 acres, but no more than 35 acres, provided that no wetlands are
affected. If wetlands are affected, the application will fall under
Class II as defined in Sec. 1940.312 of this subpart;
(4) Financial assistance for the construction of energy producing
facilities designed for on-farm needs such as methane digestors and fuel
alcohol production facilities;
(5) Financial assistance for the conversion of more than 160 acres
of pasture to agricultural production, but no more than 320 acres,
provided that in a conversion to agricultural production no wetlands are
affected, in which case the application will fall under Class II as
defined in Sec. 1940.312 of this subpart;
(6) Financial assistance to grazing associations;
(7) Financial assistance for the use of a farm or portion of a farm
for recreational purposes or nonfarm enterprises utilizing no more than
10 acres, provided that no wetlands are affected. If wetlands are
affected, the application will fall under Class II as defined in Sec.
1940.312 of this subpart; and
(8) Financial assistance for a livestock-holding facility or feedlot
having a capacity of at least one-half of those listed in Sec.
1940.312(c)(9) of this subpart. (If the facility is located near a
populated area or could potentially violate a State water quality
standard, it will be treated as a Class II action as required by Sec.
1940.312(c)(10) of this subpart.)
(d) General. (1) Any Federal action which is defined in Sec.
1940.310 of this subpart as a categorical exclusion, but which is
controversial for environmental reasons, or which is the subject of an
environmental complaint raised by a government agency, interested group,
or citizen;
(2) Loan-closing and servicing activities, transfers, assumptions,
subordinations, construction management activities, and amendments and
revisions to all approved actions listed either in this section or
equivalent in size or type to such actions and that alter the purpose,
operation, location or design of the project as originally approved;
[[Page 27]]
(3) The lease or disposal of real property by FmHA or its successor
agency under Public Law 103-354 which meets either the following
criteria:
(i) The lease or disposal may result in a change in use of the real
property in the reasonably foreseeable future, and such change is
equivalent in magnitude or type to either the Class I actions defined in
this section or the categorical exclusions defined in Sec. 1940.310 of
this subpart; or
(ii) The lease or disposal is controversial for environmental
reasons, and the real property is equivalent in size or type to either
the Class I actions defined in this section or the categorical
exclusions defined in Sec. 1940.310 of this subpart.
Sec. 1940.312 Environmental assessments for Class II actions.
Class II actions are basically those which exceed the thresholds
established for Class I actions and, consequently, have the potential
for resulting in more varied and substantial environmental impacts. A
more detailed environmental assessment is, therefore, required for Class
II actions in order to determine if the action requires an EIS. The
format that will be used for completing this assessment is included as
exhibit H of this subpart. Further guidance on Class II actions is
contained in Sec. 1940.318 of this subpart. Class II actions are
presumed to be major Federal actions and are defined as follows:
(a) Housing assistance. If either of the following actions is an
expansion of a previously approved FmHA or its successor agency under
Public Law 103-354 housing project, see Sec. 1940.310(b)(8) of this
subpart to determine if it meets the requirements for a categorical
exclusion, otherwise it is a Class II action.
(1) Financial assistance for a multi-family housing project,
including labor housing, which comprises more than 25 units; and
(2) Financial assistance for, or the approval of, a subdivision as
well as the expansion of an existing one, which involves more than 25
lots.
(b) Community and business programs and nonprofit national
corporations loan and grant program. (1) Class II actions are those
which either do not meet the criteria for a categorical exclusion as
stated in Sec. 1940.311 of this subpart, or involve a livestock-holding
facility or feedlot meeting the criteria for a Class II action as
defined in paragraphs (c) (9) and (10) of this section; and
(2) Non-technical assistance grant or loan guarantee under nonprofit
national corporation loan and grant program.
(c) Farm programs. In completing environmental assessments for the
following actions, FmHA or its successor agency under Public Law 103-354
will first determine if the applicant has sought technical assistance
from the Soil Conservation Service (SCS). If not, the applicant will be
requested to do so. Subsequently, an approved loan will be structured so
as to be consistent with any conservation plan developed with the
application by SCS. However, the FmHA or its successor agency under
Public Law 103-354 approving official need not include an element of the
conservation plan within the loan agreement if that official determines
that the element is both nonessential to the accomplishment of the
plan's objectives and so costly as to prevent the borrower from being
able to repay the loan. The SCS environmental review will be adopted by
FmHA or its successor agency under Public Law 103-354 if the
requirements of Sec. 1940.324 of this subpart are met.
(1) Financial assistance for the installation or enlargement of
irrigation facilities including storage reservoirs, diversion dams,
wells, pumping plants, canals, pipelines, and sprinklers either designed
to irrigate more than 160 acres or that would serve any amount of
acreage and affects a wetland;
(2) Financial assistance for the development of farm ponds or lakes
either larger than 10 acres in size or for any smaller size that would
affect a wetland;
(3) Financial assistance for land-clearing operations either
encompassing more than 35 acres or affecting a wetland, if less than 35
acres is involved;
(4) Financial assistance for the construction or enlargement of
aquaculture facilities;
[[Page 28]]
(5) Financial assistance for the conversion of more than 320 acres
of pasture to agricultural production or for any smaller conversion of
pasture to agricultural production that affects a wetland;
(6) Financial assistance to an individual farmer or an association
of farmers for water control facilities such as dikes, detention
reservoirs, stream channels, and ditches;
(7) Financial assistance for the use of a farm or portion of a farm
for recreational purposes or nonfarm enterprises either utilizing more
than 10 acres or affecting a wetland, if less than 10 acres is involved.
(8) Financial assistance for alteration of a wetland;
(9) Financial assistance for a livestock-holding facility or feedlot
located in a sparsely populated farming area having a capacity as large
or larger than one of the following capacities; 1,000 slaughter steers
and heifers; 700 mature dairy cattle (whether milkers or dry cows);
2,500 swine; 10,000 sheep; 55,000 turkeys; 100,000 laying hens or
broilers when facility has unlimited continuous flow watering systems;
30,00 laying hens or broilers when facility has liquid manure handling
system; 500 horses; and 1,000 animal units from a combination of
slaughter steers and heifers, mature dairy cattle, swine, and sheep;
(The term animal unit means a unit of measurement for any animal feeding
operation calculated by adding the following numbers: the number of
slaughter and feeder cattle multiplied by 1.0, plus the number of mature
dairy cattle multiplied by 1.4, plus the number of swine weighing over
25 kilograms (approximately 55 pounds) multiplied by 0.4, plus the
number of sheep multiplied by 0.1, plus the number of horses multiplied
by 2.0) and
(10) Financial assistance for a livestock-holding facility or
feedlot which either could potentially violate a State water quality
standard or is located near a town or collection of rural homes which
could be impacted by the facility, particularly with respect to noise,
odor, visual, or transportation impacts and having a capacity of at
least one-half of those listed in paragraph (c)(9) of this section.
(d) General. (1) Any action which meets the numerical criteria or
other restriction for a Class I action contained in Sec. 1940.311 of
this subpart, but is controversial for environmental reasons. If the
action is the subject of isolated environmental complaints or any
questions or concerns that focus on a single impact, air quality, for
example, the analysis of such a complaint or questions can be handled
under the assessment format for a Class I action, Form FmHA or its
successor agency under Public Law 103-354 1940-21, as explained in Sec.
1940.319 of this subpart. When several potential impacts are questioned,
however, the assessment format (exhibit H of this subpart) for a Class
II action must be used to address these questions;
(2) Loan-closing and servicing activities, transfers, assumptions,
subordinations, construction management activities and amendments and
revisions to all approved actions listed either in this section or
equivalent in size or type to such actions and that alter the purpose,
operation, location, or design of the project as originally approved;
(3) The approval of plans and State Investment Strategies for Energy
Impacted Areas, designated under section 601 Energy Impacted Area
Development Assistance Program, as well as the applications for
financial assistance (excluding the award of planning funds) for Energy
Impact Areas;
(4) Proposals for legislation as defined in CEQ's regulations, Sec.
1508.17;
(5) The issuance of regulations and instructions, as well as
amendments to these, that described either the entities, proposals and
activities eligible for FmHA or its successor agency under Public Law
103-354 financial assistance, or the manner in which such proposals and
activities must be located, constructed, or implemented; and
(6) The lease or disposal of any real property by FmHA or its
successor agency under Public Law 103-354 which either does not meet the
criteria for a categorical exclusion as stated in Sec. 1940.310(e)(6)
of this subpart or a Class I action as stated in Sec. 1940.311(d)(3) of
this subpart.
[[Page 29]]
Sec. 1940.313 Actions that normally require the preparation of an
Environmental Impact Statement (EIS).
The environmental assessment process will be used, as defined in
this subpart, to identify on a case-by-case basis those actions for
which the preparation of an EIS is necessary. Given the variability of
the types and locations of actions taken by FmHA or its successor agency
under Public Law 103-354, no groups or set of actions can be identified
which in almost every case would require the preparation of an EIS.
Sec. 1940.314 Criteria for determining a significant environmental impact.
(a) EISs will be done for those Class I and Class II actions that
are determined to have a significant impact on the quality of the human
environment. The criteria for determining significant impacts are
contained in Sec. 1508.27 of the CEQ regulations.
(b) In utilizing the criteria for a significant impact, the
cumulative impacts of other FmHA or its successor agency under Public
Law 103-354 actions planned or recently approved in the proposal's area
of environmental impact, other related or similarly located Federal
actions, and non-federal related actions must be given consideration.
This is particularly relevant for frequently recurring FmHA or its
successor agency under Public Law 103-354 actions that on an individual
basis may have relatively few environmental impacts but create a
potential for significantly impacts on a cumulative basis. Housing
assistance is one such example. Consequently, in reviewing proposals for
subdivisions and multi-family housing sites, consideration must be given
to the cumulative impacts of other federally assisted housing in the
area, including FmHA or its successor agency under Public Law 103-354's.
The boundaries of the area to be considered should be based upon such
factors as common utility or public service districts, common
watersheds, and common commuting patterns to central employment or
commercial areas. Additionally, the criteria for significant impacts
utilized by the other involved housing agency(s), (VA and HUD, for
example) must be reviewed when there is a potential for cumulative
impacts. FmHA or its successor agency under Public Law 103-354 will
consult with HUD for determining a significant impact whenever the total
of HUD and FmHA or its successor agency under Public Law 103-354 housing
units being planned within a common area of environmental impact exceeds
the HUD thresholds listed in its NEPA regulations. (See 24 CFR part 50.)
(c) Because the environmental values and functions of floodplains
and wetlands are of critical importance to man, and because these areas
are often extremely sensitive to man-induced disturbances, actions which
affect wetlands and floodplains will be considered to have a significant
environmental impact whenever one or more of the following criteria are
met:
(1) The public health and safety are identifiably affected, that is,
whenever the proposed action may affect any standards promulgated under
the Safe Drinking Water Act (42 U.S.C. 300f et seq.), the Clean Water
Act (33 U.S.C. 1251 et seq.) or similar State authorities.
(2) The preservation of natural systems is identifiably affected,
that is, whenever the proposed action or related activities may
potentially create or induce changes in the existing habitat that may
affect species diversity and stability (both flora and fauna and over
the short and long term) or affect ecosystem productivity over the long
term.
(3) The proposal, if located or carried out within a floodplain,
poses a greater than normal risk for flood-caused loss of life or
property. Examples of such actions include facilities which produce,
use, or store highly volatile, toxic, or water-reactive materials or
facilities which contain occupants who may not be sufficiently mobile to
avoid the loss of life or injury during flood and storm events (i.e.,
hospitals, nursing homes, schools).
Sec. 1940.315 Timing of the environmental review process.
(a) The FmHA or its successor agency under Public Law 103-354 office
to which a potential applicant would go to seek program information and
request application materials will notify
[[Page 30]]
the applicant of the major environmental requirements applicable to the
type of assistance being sought. Emphasis should be placed on describing
FmHA or its successor agency under Public Law 103-354's natural resource
management policies, the nature and purpose of the environmental impact
assessment process, and the permissible actions of the applicant during
this process.
(b) When a preapplication is either filed by the applicant or
required by FmHA or its successor agency under Public Law 103-354 for a
project not categorically excluded, the prospective applicant will be
requested to complete Form FmHA or its successor agency under Public Law
103-354 1940-20 at the time of the issuance of Form AD-622, ``Notice of
Preapplication Review Action,'' or other notice inviting an application.
Form AD-622 will clearly inform the applicant that during the period of
application review, the applicant is to take no actions or incur any
obligations which would either limit the range of alternatives to be
considered or which would have an adverse effect on the environment, and
that satisfactory completion of the environmental review process must
occur prior to the issuance of the letter of conditions for Community
Programs and prior to loan approval for all other programs where a
preapplication is used. FmHA or its successor agency under Public Law
103-354 must make its environmental reviews simultaneously with other
loan processing actions so that they are an integral part of the loan
process. Whenever the potential for a major adverse environmental impact
is recognized, such as issues pertaining to floodplains, wetlands,
endangered species, or the need for an EIS, priority consideration will
be given to resolving this issue by appropriate FmHA or its successor
agency under Public Law 103-354 staff. Loan processing need not cease
during this resolution period, but loan processing actions will not be
taken that might limit alternatives to be considered or whose outcome
may be affected by the environmental review. The environmental impact
review (whether a categorical exclusion, environmental assessment or
EIS) must be completed prior to the issuance of the letter of conditions
for Community Programs, prior to issuance of a conditional commitment
for the Business and Industry and Farmer Program Guaranteed Loan
Programs, and either prior to loan approval or obligation of funds,
whichever occurs first, for all other programs where a preapplication is
used. As an exception, however, whenever an application must be
submitted to the National Office for concurrence or approval, the
environmental review must be completed prior to and included in the
submission to the National Office. The environmental impact review is
not completed by FmHA or its successor agency under Public Law 103-354
until all applicable public notices and associated review periods have
been completed and FmHA or its successor agency under Public Law 103-354
has taken any necessary action(s) to address comments received. The
exception to the provisions of this paragraph is contained in Sec.
1940.332 of this subpart.
(c) When a preapplication is not filed, the prospective applicant
will be required to complete Form FmHA or its successor agency under
Public Law 103-354 1940-20 at the earliest possible time after FmHA or
its successor agency under Public Law 103-354 is contacted for
assistance but no later than when the application is filed with the
appropriate FmHA or its successor agency under Public Law 103-354
office. (For the exception to this statement as regards Farm Programs'
Class I actions, see Sec. 1940.309(c) of this subpart.) FmHA or its
successor agency under Public Law 103-354 will not consider the
application to be complete, until FmHA or its successor agency under
Public Law 103-354 staff have completed the environmental impact review,
whether an assessment or EIS.
(d) For those applications that meet the requirements of a
categorical exclusion, Form FmHA or its successor agency under Public
Law 103-354 1940-22 will be completed by FmHA or its successor agency
under Public Law 103-354 as early as possible after receipt of the
application. The application will not be considered complete until
either the checklist is successfully completed or
[[Page 31]]
the need for any further environmental review is identified and
completed.
Sec. 1940.316 Responsible officials for the environmental review process.
(a) Approving official. With the exception of paragraph (b)(2) of
this section, the FmHA or its successor agency under Public Law 103-354
official responsible for executing the environmental impact
determination and environmental findings for a Class I or Class II
action will be the official having approval authority for the action as
specified in subpart A of part 1901 of this chapter (available in any
the Agency or its successor agency under Public Law 103-354 office).
(b) State Office level. (1) When the approval official is at the
State Office level, the responsible Program Chief will have the
responsibility for preparing the appropriate environmental review
document. Whenever the Chief delegates this responsibility in accordance
with Sec. 1940.302(i) of this subpart, the Chief is responsible for
reviewing the environmental document to ensure that it is adequate, that
any deficiencies are corrected, and that it is signed by the preparer.
When the document is satisfactory to the Chief, the Chief will sign it
as the concurring official. When no delegation occurs, the Chief will
sign as the preparer. If the environmental review document is either a
Class I or Class II assessment, it must be provided to the SEC for
review prior to being submitted to the approval official for final
determinations. The SEC will review the assessment and provide
recommendations to the approval official.
(2) Whenever the preparer and the SEC do not concur on either the
adequacy of the assessment or the recommendations reached, the State
Director, whether or not the approving official, will make the final
decision on the matter or matters in disagreement. The State Director
will also make the final decision whenever a State Office approving
official disagrees with the joint recommendations of the preparer and
the SEC. In either case, should the State Director desire, the matter
will be forwarded to the National Office for resolution. The Program
Support Staff will coordinate its resolution with the appropriate
Assistant Administrator. Failure of these parties to resolve the matter
will require a final decision by the Administrator. The State Director
should also request the assistance of the National Office on actions
that are too difficult to analyze at the State Office level.
(c) District or County Office level. The approval official for the
action under review will be responsible for preparing the appropriate
environmental review document and completing the environmental findings
and impact determinations for Class I and Class II assessments, except
in the circumstances outlined in paragraph (d) of this section. Whenever
the approval official delegates the preparation of the environmental
review in accordance with Sec. 1940.302(i) of this subpart, the
approval official must, after exercising the same responsibilities
assigned to the Program Chief as indicated in paragraph (b)(1) of this
section, sign the environmental review document as the concurring
official. Both District Directors and County Supervisors will contact,
as needed, the SEC for technical assistance in preparing specific
environmental review documents.
(d) Multi-level review. When the approval official is at the County
Office or District Office level but the action must be forwarded to the
State Office for concurrence, the responsible Program Chief will perform
the responsibilities of the concurring official with respect to the
environmental review document and the SEC will review it, if a Class I
or Class II assessment, in a similar manner as indicated in paragraph
(b) of this section. Responsibilities similar to those of the Program
Chief will exist for the District Director when the County Supervisor
forwards an action to the District Office for concurrence.
(e) Reservation of authority. The Administrator reserves the right
to request a State Director to forward to the National Office for review
and approval any action which is highly controversial for environmental
reasons, involves the potential for unique or extremely complex
environmental impacts or is of national, regional, or
[[Page 32]]
great local significance. State Directors have a similar right with
respect to District and County Offices.
Sec. 1940.317 Methods for ensuring proper implementation of categorical
exclusions.
(a) The use of categorical exclusions exempts properly defined
actions or proposals from the review requirements of NEPA. It does not
exempt proposals from the requirements of other environmental laws,
regulations or Executive orders. Each proposal must be reviewed to
determine the applicability of other environmental requirements.
Extraordinary circumstances may cause an application to lose its
categorical exclusion and require a Class I environmental assessment, as
further specified in paragraph (e) of this section. Section 1508.4 of
CEQ's regulations state that ``any procedures under this section will
provide for extraordinary circumstances in which a normally excluded
action may have a significant environmental effect.'' For example, an
application for approval of a subdivision of four lots is normally
excluded from a NEPA review (see Sec. 1940.310(b)(5) of this subpart)
but is not exempt from the requirements of Executive Order 11990,
``Protection of Wetlands.'' In the processing of this application, FmHA
or its successor agency under Public Law 103-354 must determine if a
wetland is to be impacted. Assuming that the development of the proposed
subdivision site necessitates the filling of 2 acres of wetland, such a
potential wetland impact, under the requirements of Sec. 1940.310(a) of
this subpart, represents an extraordinary circumstance that causes the
application to lose its categorical exclusion. An environmental
assessment for a Class I action must then be initiated. This assessment
serves the purposes of providing for the extraordinary circumstance by
analyzing the degree of potential impact and the need for further study
as well as completing and documenting FmHA or its successor agency under
Public Law 103-354's compliance with the Executive order. In this
particular example, unless an alternative site could not be readily
located and the approving official wanted to further pursue
consideration of the application, the environmental assessment would
determine that there was a significant impact and an EIS would be
required. (See Sec. 1940.314 of this subpart.)
(b) The approving official for an action will be responsible for
ensuring that no action which requires an environmental assessment is
processed as a categorical exclusion. In order to fulfill this
responsibility, Form FmHA or its successor agency under Public Law 103-
354 1940-22 will be completed for those actions that would normally be
categorically excluded and as further defined in paragraph (c) of this
section. When Form FmHA or its successor agency under Public Law 103-354
1940-22 must be prepared and the approving official delegates its
preparation in accordance with Sec. 1940.302(i) of this subpart, the
approving official must sign the form as the concurring official. If
that approving official must, prior to approval, forward the action to a
District or State Office for review, a second concurrence must be
executed by the Program Chief or District Director, as determined by the
level of review being conducted. The checklist is filed with the
application and serves as FmHA or its successor agency under Public Law
103-354's documentation of compliance with the environmental laws,
regulations and Executive Orders listed on the checklist. Whenever the
preparer is within the State Office or is in the National Office, the
FmHA or its successor agency under Public Law 103-354 office where the
processing of the application was initiated is responsible for providing
sufficient site and project information in order to complete the
checklist.
(c) Form FmHA or its successor agency under Public Law 103-354 1940-
22 need not be completed for all categorical exclusions as defined in
Sec. 1940.310 of this subpart but only for those listed below. This
list identifies the exclusions by their subject heading and paragraph
number within Sec. 1940.310 of this subpart. Additionally, for the
housing assistance exclusion identified in Sec. 1940.310(b)(8), for
farm programs exclusions listed in Sec. 1940.310(d)(2) and (3), and for
community and business programs exclusions processed under
[[Page 33]]
Sec. 1940.310(e)(2) of this subpart, a notation must be made in the
docket materials or running record for the action by the processing
official that the specific criteria of the applicable exclusion have
been met for the action under review.
(1) Housing assistance--(b), (1), (2), (3), (5), (7), and (9);
(2) Community and Business Programs--(c) (1) and (2);
(3) Farm Programs--(d) (1) through (11);
(4) General exclusions--(e)(2), if action covered by exhibit M of
the subpart, and (6).
(d) In applying the definition of a categorical exclusion to a
project activity, the preparer must consider the following two elements
in addition to the specific project elements for which approval is
requested.
(1) If the application represents one of several phases of a larger
proposal, the application will undergo the environmental review required
for the elements or the size of the total proposal. For example, if
approval of a four-lot subdivision is requested and the application
evidences or the reviewer knows that additional phases are planned and
will culminate in a 16-lot subdivision, the categorical exclusion does
not apply and an environmental assessment for a Class I action must be
initiated and must address the impact of developing 16 lots. Should the
applicant subsequently apply for approval of any of these additional
phases, no further environmental assessment will be required as long as
the original assessment still accurately reflects the environmental
conditions found at the project site and the surrounding areas.
(2) If the application represents one segment of a larger project
being funded by private parties or other government agencies, the size
and elements of the entire project are used in determining the proper
level of environmental assessment to be conducted by FmHA or its
successor agency under Public Law 103-354. If an environmental
assessment is required, it will address the environmental impacts of the
entire project.
(e) Under any one of the following circumstances, an action that is
normally categorically excluded loses its classification as an exclusion
and must be reviewed in the manner described in paragraph (g) of this
section. The following listing corresponds to the list of land uses and
environmental resources contained in part 2 of Form FmHA or its
successor agency under Public Law 103-354 1940-22.
(1) Wetlands--the proposed action:
(i) Would be located adjacent to a wetland or a wetland is within
the project site, and
(ii) The action would affect the values and functions of the wetland
by such means as converting, filling, draining, or directly discharging
into it;
(2) Floodplains--the proposed action:
(i) Includes or involves an existing structure(s) located within a
100-year floodplain (500-year floodplain if critical action), or
(ii) Would be located within a 100-year floodplain (500-year
floodplain if critical action) and would affect the values and functions
of the floodplain by such means as converting, dredging, or filling or
clearing the natural vegetation;
(3) Wilderness (designated or proposed)--the proposed action:
(i) Would be located in a wilderness area, or
(ii) Would affect a wilderness area such as by being visible from
the wilderness area;
(4) Wild or Scenic River (proposed or designated or identified in
the Department of the Interior's nationwide Inventory)--the proposed
action:
(i) Would be located within one-quarter mile of the banks of the
river,
(ii) Involves withdrawing water from the river or discharging water
to the river via a point source, or
(iii) Would be visible from the river;
(5) Historical and Archeological Sites (listed on the National
Register of Historic Places or which may be eligible for listing)--the
proposed action:
(i) Contains a historical or archeological site within the
construction site, or
(ii) Would affect a historical or archeological site;
(6) Critical Habitat or Endangered/Threatened Species (listed or
proposed)--the proposed action:
[[Page 34]]
(i) Contain a critical habitat within the project site,
(ii) Is adjacent to a critical habitat, or
(iii) Would affect a critical habitat or endangered/threatened
species;
(7) Coastal Barrier Included in Coastal Barrier Resources System--
the proposed action would be located within the Coastal Barrier
Resources System;
(8) Natural Landmark (listed on National Registry of Natural
Landmarks)--the proposed action either:
(i) Contains a natural landmark within the project site, or
(ii) Would affect a natural landmark;
(9) Important Farmlands--the proposed action would convert important
farmland to a nonagricultural use(s) except when the conversion would
result from the construction of on-farm structures necessary for farm
operations;
(10) Prime Forest Lands--the proposed action would convert prime
forest land to another use(s), except when the conversion would result
from the construction of on-farm structures necessary for farm
operations;
(11) Prime Rangelands--the proposed action would convert prime
rangeland to another use(s) except when the conversion would result from
the construction of on-farm structures necessary for farm operations;
(12) Approved Coastal Zone Management Area--the proposed action
would be located within such area and no agreement exists with the
responsible State agency obviating the need for a consistency
determination for the type of action under consideration;
(13) Sole Source Aquifer Recharge Area--the proposed action would be
located within such area and no agreement exists with the Environmental
Protection Agency (EPA) obviating the need for EPA's review of the type
of action under consideration; and
(14) State Water Quality Standard--the proposed action would impair
a water quality standard, including designated and/or existing
beneficial uses, or would not meet applicable antidegradation
requirements for point or nonpoint sources.
(f) From the above paragraph (e), it should be noted that the
location within the project site of any of the land uses and
environmental resources identified in paragraphs (e) (1), (2), (9),
(10), (11), (12), and (13) of this section is not sufficient for an
action to lose its categorical exclusion. Rather, the land use or
resource must be affected in the case of paragraphs (e) (1), (2), (9),
(10), and (11) of this section. For paragraphs (e) (12), (13) and (14)
of this section, further review and consultation can be avoided by
written agreement with the responsible agency detailing the types of
actions not requiring interagency review.
(g) Whenever a categorical exclusion loses its status as an
exclusion for any of the reasons stated in paragraph (e) of this
section, the environmental impacts of the action must be reviewed
through the preparation of a Class I assessment, Form FmHA or its
successor agency under Public Law 103-354 1940-21. Not all of the
procedural requirements for a Class I assessment apply in this limited
case, however. The following exemptions exists:
(1) No public notice provisions of this subpart apply.
(2) The applicant does not complete Form FmHA or its successor
agency under Public Law 103-354 1940-20.
(3) The action does not require a Class II assessment should more
than one important land resources be affected.
Sec. 1940.318 Completing environmental assessments for Class II actions.
(a) The first step for the preparer (as defined in Sec. Sec.
1940.302(i) and 1940.316 of this subpart) is to examine Form FmHA or its
successor agency under Public Law 103-354 1940-20 submitted by the
applicant to determine if it is complete, consistent, fully responsive
to the items, signed, and dated. If not, it will be returned to the
applicant with a request for necessary clarifications or additional
data.
(b) Once adequate data has been obtained, the assessment will be
initiated in the format and manner described in exhibit H of this
subpart. In completing the assessment, appropriate experts from State
and Federal agencies, universities, local and private groups will be
contacted as necessary for their views. In so doing, the preparer should
communicate with these agencies or
[[Page 35]]
parties in the most appropriate and expeditious manner possible,
depending upon the seriousness of the potential impacts and the need for
formal documentation. Appropriate experts must be contacted whenever
required by a specific provision of this subpart or whenever the
preparer does not have sufficient data or expertise available within
FmHA or its successor agency under Public Law 103-354 to adequately
assess the degree of a potential impact or the need for avoidance or
mitigation. Comments from an expert must be obtained in writing whenever
required by a specific provision of this subpart or the potential
environmental impact is either controversial, complex, major, or
apparently major. When correspondence is exchanged, it will be appended
to the assessment. Oral discussions should be documented in the manner
indicated in exhibit H of this subpart. On the other hand, there is no
need for the preparer to seek expert views outside of the Agency when
there is no specific requirement to do so and the preparer has
sufficient expertise available within FmHA or its successor agency under
Public Law 103-354 to assess the degree of the potential impact and the
need for avoidance or mitigation.
(c) At the earliest possible stage in the assessment process, the
preparer will identify the Federal, State, and local parties which are
carrying out related activities, either planned or under way.
Discussions with the applicant and FmHA or its successor agency under
Public Law 103-354 staff familiar with the project area should assist in
this identification effort. If there is a potential for cumulative
impacts, the preparer will consult with the involved agencies to
determine the nature, timing and results of their environmental
analysis. These consultations will be documented in the assessment and
considered or adopted when making the environmental impact
determination. (See Sec. 1940.324 of this subpart concerning adoption
of assessments.) If it is determined that the cumulative impacts are
significant, the preparer will further contact the involved Federal
agencies and attempt to determine the lead Federal Agency as discussed
in Sec. Sec. 1940.320(b) and 1940.326 of this subpart.
(d) Consultations similar to those discussed in paragraph (c) of
this section will also be undertaken with those Federal and State
agencies which are directly involved in the FmHA or its successor agency
under Public Law 103-354 action, either through the provision of
financial assistance or the review and approval of a necessary plan or
permit. For example, a construction permit from the U.S. Army Corps of
Engineers may be required for a project. In such an instance, the
environmental assessment cannot be completed until the preparer has
either reviewed the other Agency's completed environmental analysis or
consulted with the other Agency and is reasonably sure of the scope,
content, and expected environmental impact determination of the
forthcoming analysis and has so documented for the FmHA or its successor
agency under Public Law 103-354 assessment this understanding. If the
other Agency believes that the project will have a significant impact, a
joint or lead impact statement will be prepared. If the other Agency
does not believe a significant impact will occur, the preparer will
consider this finding and its supporting analysis in completing the FmHA
or its successor agency under Public Law 103-354 environmental impact
determination. Guidance in adopting an environmental assessment prepared
by another Federal Agency is provided in Sec. 1940.324 of this subpart.
(e) For actions having a variety of complex or interrelated impacts
that are difficult for the preparer to assess, consideration should be
given to holding a public meeting in the manner described in Sec.
1940.331(c) of this subpart. Such meetings should not be assumed as
being limited to projects for which EISs are being prepared. Such a
meeting can serve a useful purpose in better defining and identifying
complex impacts, as well as locating expertise with respect to them. The
results of a public meeting and the follow-up from it can also serve as
a valuable tool in reaching an early understanding on the potential need
for an EIS. When identified impacts are difficult to quantify
[[Page 36]]
(such as odor and visual and community impacts) or controversial, a
public information meeting should be held near the project site and the
local area's concern about it. Whenever held, it should be announced and
organized in the manner described in Sec. 1940.331(c). However, a
transcript of the meeting need not be prepared, but the preparer will
make detailed notes for incorporation in the assessment. (See Sec.
1940.331(c) of this subpart.)
(f) Throughout this assessment process, the preparer will keep in
mind the criteria for determining a significant environmental impact. If
at any time in this process it is determined that a significant impact
would result, the preparer will so notify the approving official. Those
actions specified in Sec. 1940.320 of this subpart will then be
initiated, unless the approving official disagrees with the preparer's
recommended determination, in which case further review of the
determination may be required as explained in Sec. 1940.316 (b), (d)
and (e) of this subpart. As soon as possible after the need for an EIS
is determined, the applicant will also be advised of this in writing, as
well as reinformed of the limitations on its actions during the period
that the EIS is being completed. (See Sec. 1940.309(e) of this
subpart.) The applicant's failure to comply with these limitations will
be considered as grounds for postponement of further consideration of
the application until such problem is alleviated.
(g) Similarly, throughout the assessment process, consideration will
be given to incorporating mechanisms into the proposed action for
reducing, mitigating, or avoiding adverse impacts. Examples of such
mechanisms which are commonly referred to as mitigation measures include
the deletion, relocation, redesign or other modifications of the project
elements; the dedication of environmentally sensitive areas which would
otherwise be adversely affected by the action or its indirect impacts;
soil erosion and sedimentation plans to control runoff during land-
disturbing activities; the establishment of vegetative buffer zones
between project sites and adjacent land uses; protective measures
recommended by environmental and conservation agencies, including but
not limited to interstate, international, Federal, State, area-wide, and
local agencies having jurisdiction or special expertise regarding the
action's impacts; and zoning. Mitigation measures must be tailored to
fit the specific needs of the action, and they must also be practical
and enforceable. Mitigation measures which will be taken must be
documented in the assessment (Item XIX of exhibit H of this subpart),
and include an analysis of their environmental impacts and potential
effectiveness and placed in the offer of financial assistance as special
conditions or in the implementation requirements when the action does
not involve financial assistance. These measures will be consistent with
the basic goal of the proposed action and developed in consultation with
the appropriate program office.
(h) As part of the assessment process, the preparer will initiate
the consultation and compliance requirements for the environmental laws,
regulations, and Executive orders specified in the assessment format.
The assessment cannot be completed until compliance with these laws and
regulations is appropriately documented. The project's failure to meet
the requirements specified in Item 10b of Form FmHA or its successor
agency under Public Law 103-354 1940-21 for a Class I action and Item
XXIb of exhibit H of this subpart for a Class II action will result in
postponement of further consideration of the application until such
problem is alleviated.
(i) When the preparer has completed the assessment, the related
materials and correspondence utilized will be attached. The preparer
will then either recommend to the approving official that the action has
the potential for significantly affecting the quality of the human
environment or will recommend that the action does not have this
potential and, therefore, the preparation of an EIS is not necessary.
(Item 10a of Form FmHA or its successor agency under Public Law 103-354
1940-21 for Class I action and item XXIa of exhibit H of this subpart
for a Class II action.) The recommended environmental findings will also
be completed.
[[Page 37]]
(Item 10b of Form FmHA or its successor agency under Public Law 103-354
1940-21 for a Class I action and Item XXIb of exhibit H of this subpart
for a Class II action.) In those instances specified in Sec. 1940.316,
the assessment will then be forwarded to the concurring official and, as
required, to the SEC for review. The concurring official will
coordinate, as necessary, with the preparer any questions, concerns or
clarifications and complete and document the review prior to the
assessment being submitted to the approving official or the SEC. The SEC
will coordinate with the concurring official in a similar fashion
whenever the latter's review is required.
(j) The approving official will review the environmental file and
recommendations. The official will then execute the environmental impact
determination and findings. If the conclusions reached are that there is
no significant impact and there is compliance with the listed
requirements, the format contained in exhibit I of this subpart will be
used. If a significant impact is determined, the steps specified in
Sec. 1940.320 of this subpart will be initiated for the preparation of
the EIS. If a determination is made that the proposed action does not
comply with the environmental requirements that are explained in this
subpart and listed in Item 10b of Form FmHA or its successor agency
under Public Law 103-354 1940-21 for a Class I action or Item XXIb of
exhibit H of this subpart for a Class II action and there are no
feasible alternatives (practicable alternatives when required by
specific provisions of this subpart), modifications, or mitigation
measures which could comply, the action will be denied or disapproved.
If the approving official's determination or findings differ from the
recommendations of the preparer, concurring official or the SEC, this
difference will be addressed in the manner specified in Sec. 1940.316
of this subpart.
(k) When there is no need for further review as discussed in
paragraph (j) of this section and findings of compliance and a
determination of no significant impact are reached, the assessment
process is conditionally concluded. To conclude the assessment, the
applicant will then be requested to provide public notification of these
results as indicated in Sec. 1940.331(b)(3) of this subpart. The
approving official will not approve the pending application for at least
15 days from the date the notification is last published. If comments
are received as a result of the notification, they will be included in
the environmental assessment and considered. Any necessary changes
resulting from this consideration will be made in the assessment, impact
determinations, and findings. If the changes require further
implementation steps, such as the preparation of an EIS, they will be
undertaken. If there are no changes in the findings and determination
steps, such as the preparation of an EIS, they will be undertaken. If
there are no changes in the findings and determinations, the approving
official may continue to process the application. The environmental
documents, i.e., the assessment, related correspondence, Form FmHA or
its successor agency under Public Law 103-354 1940-20, and the finding
of no significant impact will be included with the approval documents
which are assembled for review and clearance within the approving
office.
(l) Whenever changes are made to an action or comments or new or
changed information relating to the action's potential environmental
effects is received after the assessment is completed but prior to the
action's approval, such change, comment, or information will be
evaluated by the approving official to determine the impact on the
completed assessment. Whenever the contents or findings of that
assessment are affected, the assessment process for that action will be
revised and any other related requirement of this subpart met. Changes
to an action in terms of its location(s), design, purpose, or operation
will normally require, at a minimum, modification of the original
assessment to reflect such change(s) and the associated environmental
impacts.
(m) When comments are received after the action has been approved,
the approving official will consider the environmental importance of the
comments and the necessity and ability to amend both the action, with
respect to the issue raised and the action's stage of implementation.
The National Office
[[Page 38]]
may be consulted to assist in determining whether there are any
remaining environmental requirements which need to be met under the
specific circumstances. A similar procedure will be followed when new or
changed information is received after project approval. Amendments and
revisions to actions will be handled as specified in Sec. Sec. 1940.310
through 1940.313 of this subpart.
Sec. 1940.319 Completing environmental assessments for Class I actions.
(a) As stated in this subpart, a main purpose of Form FmHA or its
successor agency under Public Law 103-354 1940-21, is to provide a
mechanism for reviewing actions with normally minimal impacts and for
documenting a finding of no significant impact, as well as compliance
determinations for other applicable environmental laws, regulations and
policies. The second major purpose is to serve as a screening tool for
identifying those Class I actions which have more than minimal impacts
and which, therefore, require a more detailed environmental review.
(b) The approach to reviewing a Class I action under the assessment
format of Form FmHA or its successor agency under Public Law 103-354
1940-21 is exactly the same as for a Class II action. The preparer (as
defined in Sec. Sec. 1940.302(i) and 1940.316 of this subpart) must
become familiar with the elements of the action, the nature of the
environment to be affected, the relationship to any other Federal
actions or related nonfederal actions, and the applicable environmental
laws and regulations.
(c) The data submission requirements placed on the applicant for a
Class I action are not as extensive as for a Class II action. The
requirements are limited to completing the face of Form FmHA or its
successor agency under Public Law 103-354 1940-20, as well as categories
(1), (2), (13), (15), (16), and (17) of Item 1b of the FMI, whenver a
previously completed environmental analysis covering these categories is
not available. Should it later be determined that the magnitude of the
Class I action's impact warrants a more detailed assessment, the
applicant will be required to submit the remaining items of the data
request. Additionally, the circumstances under which FmHA or its
successor agency under Public Law 103-354 does not require the
submission of Form FmHA or its successor agency under Public Law 103-354
1940-20 by an applicant whose proposed action requires a Class I
assessment are specified in Sec. 1940.317(f) of this subpart.
(d) The preparer must ensure that the data received from the
applicant is complete, consistent, signed and dated before initiating
the assessment. If it is not, the applicant will be required to make the
necessary changes and clarifications. The reviewer must also ensure that
the application properly meets the definition of a Class I action.
Phased or segmented projects, as discussed in Sec. 1940.317(d) of this
subpart, will be identified and the elements and the size of the entire
project used to classify the action.
(e) An important element of this assessment is to determine if the
action affects an environmental resource which is the subject of a
special Federal consultation or coordination requirement. Such resources
are listed in the assessment format, Form FmHA or its successor agency
under Public Law 103-354 1940-21, and include wetlands, floodplains, and
historic properties, for example. If one of the listed resources is to
be affected, the preparer must demonstrate the required compliance by
accomplishing the review and coordination requirements for that
resource. Documentation of the steps taken and coordination achieved
will be attached. However, if more than one listed resource is to be
affected, this will be viewed as the action having more than minimal
impacts and the environmental assessment format for a Class II action
will be initiated except if the action under review is an application
for a Housing Preservation Grant.
(f) Similarly in completing item 3, General Impacts of Form FmHA or
its successor agency under Public Law 103-354 1940-21, the assessment
format for a Class II action must be initiated if more than one category
of impacts cannot be checked as minimal. If there is a single category
which needs analysis, this can be accomplished by attaching an
appropriate exhibit addressing the questions and issues for that
[[Page 39]]
impact, as specified in the environmental assessment format for a Class
II action. See Sec. 1940.311(b)(1) of this subpart for when an attached
discussion of water quality impacts is mandatory.
(g) The comments of State, regional, and local agencies obtained
through applicable permit reviews or the implementation of Executive
Order 12372, Intergovernmental Review of Federal Programs, will be
incorported into the assessment, if this review applies to the action.
The receipt of negative comments of an environmental nature will warrant
the initiation of a more detailed assessment under the format for a
Class II action (exhibit H of this subpart). Also, the issue of
controversy must be addressed, and if the action is controversial for
environmental reasons, the environmental assessment format for a Class
II action (exhibit H of this subpart) will be completed. However, if the
action is the subject of isolated environmental complaints or any
questions or concerns that focus on a single impact, air quality, for
example, the analysis of such complaints or questions can be handled
under the assessment format for a Class I action. This analysis will
then be provided by the approving official to the party or parties which
raised the matter with FmHA or its successor agency under Public Law
103-354. When several potential impacts are questioned, however, the
more detailed assessment format will be accomplished to address these
questions.
(h) The potential cumulative impacts of this action, particularly as
it relates to other FmHA or its successor agency under Public Law 103-
354 actions recently approved in the area or planned, will be analyzed.
If the cumulative impact is not minimal and, for example, cumulatively
exceeds the criteria and thresholds discussed in paragraphs (e), (f) and
(g) of this section, the environmental assessment format for a Class II
action will be completed. The actions of other Federal agencies and
related nonfederal actions must also be assessed on this basis. When
there is a Federal action involved, the environmental review conducted
by that Agency will be requested and, if it sufficiently addresses the
cumulative impact, can be utilized by the preparer as the FmHA or its
successor agency under Public Law 103-354 assessment, assuming the
impacts are not significant. (See Sec. 1940.324 of this subpart.) If
the other Agency is doing or planning an EIS, the preparer will inform
that Agency of our action and request to be a cooperating agency.
(i) The preparer will have the responsibility of initiating the
assessment format for a Class II action (exhibit H of this subpart)
whenever the need is identified. This should be done as early as
possible in the review process. The preparer should not complete the
assessment for a Class I action when it is obvious that the assessment
format for a Class II action will be needed. The preparer will simply
start the more detailed assessment and inform the applicant of the
additional data requirements.
(j) Exhibit I will be completed by the approval official in the same
instances for a Class I assessment as for a Class II assessment.
However, public notification of FmHA or its successor agency under
Public Law 103-354's finding of no significant environmental impact will
not be required for a Class I assessment. Also, special provisions for
completing a Class I assessment for an action that is normally
categorically excluded but loses its classification as an exclusion are
contained in Sec. 1940.317(g) of this subpart. With the exception of
the two preceding sentences, all other procedural requirements of the
assessment process, such as the timing of the assessment and the
limitations on the applicant's actions, apply to a Class I assessment.
Sec. 1940.320 Preparing EISs.
(a) Responsibility. Whenever the District Director or County
Supervisor determines there is a need to prepare an EIS, the State
Director will be notified. The EIS will be prepared at the State Office
and the State Director will assume the responsibility for preparing it.
The State will in turn notify the Administrator of these EISs, as well
as those needed EISs identified by a State Office review. EISs will be
prepared according to this section. The State Director will be
responsible for actions initiated within the State. However, in
[[Page 40]]
so doing, the State Director will consult with the National Office to
determine that the document meets the requirements of NEPA. State
Directors will be responsible for issuing such EISs. However, unless
delegated authority by the Administrator, based upon a demonstrated
capability and experience in preparing EISs, the State Director will not
issue the EIS until reviewed and approved by the Administrator.
(b) Organizing the EIS process. Prior to initiating the scoping
process outlined below, the preparer of the EIS will take several
organizational steps to ensure that the EIS is properly coordinated and
completed as efficiently as possible. To accomplish this, the below-
listed parties need to be identified in advance; the list should be
expanded as familiarity with the project increases. Those parties
falling within the first four groups should be formally requested to
serve as cooperating agencies. If any of these agencies appear to be a
more appropriate lead agency than FmHA or its successor agency under
Public Law 103-354 (using the criteria contained in Sec. 1501.5(c) of
the CEQ regulations), consultations should be initiated with that agency
to determine the lead agency. If difficulties arise in completing this
determination, the National Office will be consulted for assistance. All
of the parties identified below will be sent a copy of the notice of
intent to prepare the EIS and an invitation to the scoping meeting, as
discussed in paragraph (c) of this section.
(1) All Federal and State agencies that are being requested to
provide financial assistance for the project or related projects;
(2) All Federal agencies that must provide a permit for the project
should it be approved;
(3) All Federal agencies that have a specific environmental
expertise in major environmental issues identified to date;
(4) The Agency responsible for the implementation of the State's
environmental impact analysis requirement, if one has been enacted or
promulgated by the State;
(5) All Federal, State, and local agencies that will be requested to
comment on the draft EIS;
(6) All individuals and organizations that have expressed an
interest in the project; and
(7) National, regional, or local environmental organizations whose
particular area of interest corresponds to the major impacts identified
to date.
(c) Scoping process. As soon as possible after a decision has been
made to prepare an EIS, the following process will be initiated by the
preparer for identifying the major issues to be addressed in the EIS and
for developing a coordinated government approach to the preparation and
review of the EIS.
(1) The first step in this process will be the publication of a
notice of intent to prepare the EIS. The notice will indicate that an
EIS will be prepared and will briefly describe the proposed action and
possible alternatives; state the name, address, and phone number of the
preparer, indicating that this person can answer questions about the
proposed action and the EIS; list any cooperating agencies, and include
the date and time of the scoping meeting. If the latter information is
not known at the time the notice of intent is prepared, it will be
incorporated into a special notice, when available, and published and
distributed in the same manner as the notice of intent. It will be the
responsibility of the preparer of the EIS to inform the National Office
of the need to publish a notice of intent which will coordinate the
publication of the notice in the Federal Register. For requirements
relating to the timing the publication of the notice of intent within
the project area, as well as the applicant's responsibilities for the
notice, see Sec. 1940.331(b) of this subpart.
(2) A scoping meeting will be held. To the extent possible, the
scoping meeting should be integrated with any other early planning
meetings of the Agency or other involved agencies. The scoping meeting
will be chaired by the preparer of the EIS and will be organized to
accomplish the following major purposes (as well as other purposes
listed in Sec. 1501.7 of the CEQ regulations).
(i) Invite the participation of affected Federal, State, and local
agencies, any affected Indian Tribe, the proponent of the action, and
any interested parties
[[Page 41]]
including those who may disagree with the action for environmental
reasons;
(ii) Determine the scope and the significant issues to be analyzed
in depth in the EIS;
(iii) Identify and eliminate, from detailed study, the issues which
are not significant or which have been covered by prior environmental
review, narrowing the discussion of these issues in the statement to a
brief presentation of why they will not have a significant effect on the
human environment or providing a reference to their coverage elsewhere;
(iv) Allocate assignments for preparation of the EIS among the lead
and cooperating agencies, with the lead Agency retaining responsibility
for the statement;
(v) Indicate any public environmental assessments and other EISs
which are being or will be prepared that are related to, but are not
part of, the scope of the impact statement under consideration;
(vi) Identify other environmental review and consultation
requirements so the lead and cooperating agencies may prepare other
required analyses and studies concurrently with, and integrated with,
the environmental impact statement; and
(vii) Indicate the relationship between the timing of the
preparation of environmental analyses and the Agency's tentative
planning and decisionmaking schedule;
(3) Minutes of the scoping meeting, including the major points
discussed and decisions made, will be prepared and retained by the
preparer of the EIS as part of the environmental file. The preparer will
offer, during the scoping meeting, to send copies of the minutes to any
interested party upon written request.
(d) Interdisciplinary approach. The EIS will be prepared using an
interdisciplinary approach that will ensure the integrated use of the
natural and social sciences and the environmental design arts. The
disciplines of the preparers will be appropriate to address the
potential environmental impact associated with the project. This can be
accomplished both in the information collection stage and the analysis
stage by communication and coordination with environmental experts at
local, State and Federal agencies (particularly cooperating agencies)
and universities near the project site. When needed information or
expertise is not readily available, these needs should be met through
procurement contracts with qualified consulting firms. Consulting firms
can be utilized to prepare the entire EIS or portions of it as specified
in Sec. 1940.336 of this subpart.
(e) Content and format of EIS. The EIS will be prepared in the
format and manner described in part 1502 of the CEQ regulations. There
is a great deal of specific guidance in that part which will not be
repeated here.
(f) Circulation of the EIS. FmHA or its successor agency under
Public Law 103-354 will circulate for review and comment the draft and
final EIS as broadly as possible. Therefore, it will be necessary for
the preparer to have sufficient copies printed or reproduced for this
purpose. In identifying the parties to receive a draft EIS, the same
process should be utilized as is employed for inviting participants to
the scoping meeting. (See paragraph (b) of this section.) Special
emphasis should be given to transmitting the draft to those agencies
with jurisdiction or expertise on the proposed action's major impacts,
as well as those parties who have expressed an interest in the action.
The final EIS will be provided to all parties that commented on the
draft EIS.
(g) Filing of the EIS. The Deputy Administrator for Program
Operations or any State Director that has been delegated the authority
to prepare an EIS must file the EIS with EPA in accordance with Sec.
1506.9 of the CEQ regulations. The official filing date for an EIS is
the day that it is received by EPA's Office of Federal Activities.
Filing of the EIS cannot occur until copies of the EIS have been
transmitted to commenting agencies and made available to the public.
Transmittal of the EIS must, therefore, occur either prior to its being
filed with EPA (received by EPA) or no later than close of business of
the same day that it is filed.
(h) Public information meetings. A public information meeting, as
specified in Sec. 1940.331(c)(1) of this subpart, will be held near the
project site to discuss and receive comments on the draft EIS.
[[Page 42]]
(i) Response to comments. The preparer of the EIS will respond to
comments on the draft EIS as required by Sec. 1503.4 of the CEQ
regulations. The major and most frequently raised issues during the
public information meeting will also be identified and addressed.
(j) Timing of review. The preparer of the EIS will be responsible
for ensuring that the timing requirements for FmHA or its successor
agency under Public Law 103-354 actions and the review periods for draft
and final EISs are fully met (Sec. 1506.10 of CEQ regulations).
Prescribed review periods are calculated from the date that EPA's Office
of Federal activities publishes in the Federal Register a notice of
availability for the EIS. Any request to reduce a prescribed review
period will be made to EPA in accordance with Sec. 1506.10(d) of the
CEQ regulations.
Sec. 1940.321 Use of completed EIS.
(a) The final EIS will be a major factor in the Agency's final
decision. Agency staff making recommendations on the action and the
approving official will be familiar with the contents of the EIS and its
conclusions and will consider these in formulating their respective
positions with respect to the action. The final EIS and all comments
received on the draft will accompany the proposal through the FmHA or
its successor agency under Public Law 103-354 final clearance process.
The alternatives considered by the approving official will be those
addressed in the final EIS.
(b) As part of this review process, the preparer of the EIS will
complete the recommendations listed in Item XXIb and c of exhibit H of
this subpart and provide them to the approving official prior to a final
decision.
Sec. 1940.322 Record of decision.
Upon completion of the EIS and its review within FmHA or its
successor agency under Public Law 103-354 and before any action is taken
on the decision reached on the proposal, the approving official will
prepare, in consultation with the preparer of the EIS, a concise record
of the decision which will be available for public review. The record
will:
(a) State the decision reached;
(b) Certify that the timing requirements for the EIS process have
been fully met;
(c) Identify all alternatives considered in reaching the decision
specifying the alternative or alternatives that were considered to be
environmentally preferable and discuss the relevant factors
(environmental, economic, technical, statuatory mission and, if
applicable, national policy) that were considered in the decision;
(d) State whether all practicable means to avoid or minimize
environmental harm from the alternative selected have been adopted, and
if not, why not; and
(e) If any mitigation measures have been adopted, specify the
monitoring and enforcement program that will be utilized.
Sec. 1940.323 Preparing supplements to EIS's.
(a) Either the State Office or the National Office, as appropriate,
will prepare supplements to either draft or final EIS's if:
(1) A substantial change or changes occur in the proposed action and
such changes are relevant to the environmental impacts previously
presented; and
(2) Significant new circumstances or information arise which are
relevant to environmental concerns and bear on the proposed action or
its impacts.
(b) If the preparer of the draft or final EIS determines that the
changes or new circumstances referenced in paragraph (a) of this section
do not require the preparation of a supplemental EIS, the preparer will
complete an environmental assessment for a Class II action which will
document the reasons for this determination.
(c) The preparer will be responsible for advising the approving
official of the need for a supplement. The latter will make the Agency's
formal determination in a manner consistent with Sec. 1940.316 of this
subpart.
(d) All of the requirements of this subpart that apply to the
completion of an initial EIS apply to the completion of a supplement
with the exception of the scoping process, which is optional.
Additionally, if the approving official
[[Page 43]]
believes that there is a need for expedited or special procedures in the
completion of a supplement, the approval of CEQ must first be obtained
by the Administrator for any alternative procedures. The final
supplement will be included in the project file or docket and used in
the Agency's decisionmaking process in the same manner as a final EIS.
(See Sec. 1940.321 of this subpart and in particular subparagraphs (f),
(g), and (j) of that section as well as Sec. 1502.9(c)(4) of the CEQ
regulations for associated circulation, filing, and timing
requirements.)
Sec. 1940.324 Adoption of EIS or environmental assessment prepared
by another Federal Agency.
(a) FmHA or its successor agency under Public Law 103-354 may adopt
an EIS or portion thereof prepared by another Federal Agency after
completion if:
(1) An independent review of the document is conducted by the
preparer of the FmHA or its successor agency under Public Law 103-354
environmental review and it is concluded that the document meets the
requirements of this subpart; and
(2) If the actions covered in the EIS are substantially the same as
those proposed by FmHA or its successor agency under Public Law 103-354
and the environmental conditions in the project area have not
substantially changed since its publication, FmHA or its successor
agency under Public Law 103-354 will recirculate the EIS as a ``final''
and so notify the public as specified in Sec. 1940.331(b) of this
subpart. The final EIS will contain an appropriate explanation of the
FmHA or its successor agency under Public Law 103-354 involvement and
will be sent to all parties who would typically receive a draft EIS
published by FmHA or its successor agency under Public Law 103-354. If
there are differences between the actions or the environmental
conditions as discussed in the original EIS, that EIS will be updated to
cover these differences and recirculated as a draft EIS with the public
so notified. From that point, it will be reviewed and processed in the
same manner as any other FmHA or its successor agency under Public Law
103-354 EIS. For circulation, filing, and timing requirements, see
paragraphs (f), (g), and (j) of Sec. 1940.320 of this subpart as well
as Sec. Sec. 1506.3(c), 1506.9, and 1506.10 of the CEQ regulations.
(b) If the adopted EIS is not final within the agency that prepared
it, or if the action it assesses is the subject of a referral under part
1504 of the CEQ regulations, or if the statement's adequacy is the
subject of a judicial action which is not final, FmHA or its successor
agency under Public Law 103-354 must so specify and provide an
explanation in the recirculated EIS.
(c) After recirculation (whether as a draft or final), the EIS will
be reviewed and processed in the same manner as any other FmHA or its
successor agency under Public Law 103-354 EIS.
(d) FmHA or its successor agency under Public Law 103-354 may also
adopt all or part of environmental assessments or environmental reviews
prepared by other Federal agencies. In this case, only paragraph (a)(1)
of this section applies. If the requirements of that paragraph can be
met except for the fact that the Federal agency whose assessment is to
be adopted has no preliminary public notice requirements similar to FmHA
or its successor agency under Public Law 103-354's (see Sec.
1940.331(b)(4) of this subpart), the assessment can be adopted without
FmHA or its successor agency under Public Law 103-354 publishing a
preliminary public notice. Additionally, when all of another Federal
agency's assessment is adopted, without supplementation, for a Class II
action and a finding of no significant environmental impact (exhibit I
of this subpart) is reached by the proper FmHA or its successor agency
under Public Law 103-354 official, no public notification of FmHA or its
successor agency under Public Law 103-354's finding of no significant
environmental impact is required if:
(1) The other Federal agency or its designee published a similar
finding in a newspaper of general circulation in the vicinity of the
proposed action;
(2) The other Federal agency's or its designee's public notice
clearly described the action subject to the FmHA or its successor agency
under Public Law 103-354 environmental review; and
[[Page 44]]
(3) The other Federal agency's or its designee's public notice was
published less than eighteen months from the date FmHA or its successor
agency under Public Law 103-354 adopted the assessment.
Sec. 1940.325 FmHA or its successor agency under Public Law 103-354
as a cooperating Agency.
(a) FmHA or its successor agency under Public Law 103-354 will serve
as a cooperating Agency when requested to do so by the lead Agency for
an action in which FmHA or its successor agency under Public Law 103-354
is directly involved or for an action which is directly related to a
proposed FmHA or its successor agency under Public Law 103-354 action.
An example of the latter would be a request from EPA to participate in
an EIS covering its sewage treatment plans for a community, as well as
the community's water system plans pending before FmHA or its successor
agency under Public Law 103-354. A memorandum of understanding or other
written correspondence will be developed with the lead agency in order
to define FmHA or its successor agency under Public Law 103-354's role
as the cooperating agency. The State Director will coordinate FmHA or
its successor agency under Public Law 103-354's participation as a
cooperating Agency for an action at the State Office level. The
Administrator will have the same responsibility at the National Office
level.
(b) When requested to be a cooperating Agency on a basis other than
that discussed above, the State Director will consider the expertise
which FmHA or its successor agency under Public Law 103-354 could add to
the particular EIS process in question and existing workload
commitments. If a decision is made on either of these two bases not to
participate as a cooperating Agency, a copy of the letter signed by the
State Director or Administrator and so informing the lead Agency will be
sent to CEQ.
(c) As a cooperating Agency, FmHA or its successor agency under
Public Law 103-354 will participate in the development and
implementation of the scoping process. If requested by the lead Agency,
provide the lead Agency with staff support and descriptive materials
with respect to the analyses of the FmHA or its successor agency under
Public Law 103-354 portion of the action(s) to be covered, review and
comment on all preliminary draft materials prior to their circulation
for public review and comment, and attend and participate in public
meetings called by the lead Agency concerning the EIS.
(d) The State Director will request the lead Agency to fully
identify the Agency's involvement in all public documents and
notifications.
(e) FmHA or its successor agency under Public Law 103-354 will use
the EIS as its own as long as FmHA or its successor agency under Public
Law 103-354's comments and concerns are adequately addressed by the lead
Agency and the final EIS is considered to meet the requirements of this
subpart. It will be the responsibility of the preparer of the FmHA or
its successor agency under Public Law 103-354 environmental review
document to formally advise the approving official on these two points.
The failure of the lead Agency's EIS to meet either of these
stipulations will require FmHA or its successor agency under Public Law
103-354 to follow the steps outlined in Sec. 1940.324 of this subpart
prior to the approving official's decision on the FmHA or its successor
agency under Public Law 103-354 action.
Sec. 1940.326 FmHA or its successor agency under Public Law 103-354
as a lead Agency.
(a) When other Federal agencies are involved in an FmHA or its
successor agency under Public Law 103-354 action or related actions that
require the preparation of an EIS, the preparer will consult with these
agencies to determine a lead Agency for preparing the EIS. The criteria
for making this determination will be those contained in Sec. 1505.5 of
the CEQ regulations. If there is a failure to reach a determination
within a reasonably short time after consultation is initiated, the
National Office will be contacted. The assistance of CEQ will then be
requested by the Administrator in order to conclude the determination of
a lead Agency.
[[Page 45]]
(b) When acting as lead Agency, the FmHA or its successor agency
under Public Law 103-354 preparer will request other Federal and State
agencies to serve as cooperating agencies on the basis of the guidance
provided in Sec. 1940.320(b) of this subpart. A memorandum of
understanding or other written correspondence should be developed with a
cooperating agency in order to define that agency's role in the
preparation of the EIS.
Sec. 1940.327 Tiering.
To the extent possible, FmHA or its successor agency under Public
Law 103-354 may consider the concept of tiering in the preparation of
environmental assessments and EISs. Tiering refers to the coverage of
general matters in broader environmental impact statements, such as one
done for a national program or regulation, with subsequent narrower
statements or environmental analyses incorporating by reference the
broader matters and concentrating on the issues specific to the action
under consideration. Tiering can be used when the sequence of analysis
is from the program level to site-specific actions taken under that
program or from an initial EIS to a supplement which discusses the
issues requiring supplementation.
Sec. 1940.328 State Environmental Policy Acts.
(a) Numerous States have enacted environmental policy acts or
regulations similar to NEPA, hereafter referred to as State NEPA's. It
is important that FmHA or its successor agency under Public Law 103-354
staff have an understanding of which States have such requirements and
how they apply to applicant's proposals. It will be the responsibility
of each State Director to determine the applicable State requirements
and to establish a working relationship with the State personnel
responsible for their implementation.
(b) In processing projects located within States having State
NEPA's, the preparer of the FmHA or its successor agency under Public
Law 103-354 assessment will determine as early as possible in the
assessment process whether the project falls under the requirements of
the State NEPA. If it does, one of the following cases will exist and
the appropriate actions specified will be taken.
(1) The applicant has complied with the State's NEPA, and it was
determined under the State's requirements that the proposed project
would not result in sufficient potential impacts to warrant the
preparation of an impact statement or other detailed environmental
report required by the State NEPA. This finding or conclusion by the
State will be considered in the FmHA or its successor agency under
Public Law 103-354's review, and any supporting information used by the
State will be requested. However, the State's finding can never be the
total basis for FmHA or its successor agency under Public Law 103-354's
environmental impact determination. An independent and thorough review
in accordance with the requirements of this subpart must be conducted by
the preparer.
(2) The applicant has complied with the State NEPA, and it was
determined under its implementing guidelines that a significant impact
will result. This fact will be given great weight in the Agency's
environmental determination. However, the State's definition of
significant environmental impact may encompass a much lower threshold of
impacts compared to FmHA or its successor agency under Public Law 103-
354's. In such a case, if the preparer does not believe that a
significant impact will result under Agency guidelines for determining
significant impacts, the environmental assessment will be prepared and
include a detailed discussion with supporting information as to why the
environmental reviewer's recommendation differs from that of the
State's. However, the assessment cannot be completed until the State's
impact statement requirements have been fulfilled by the applicant and
the resulting impact statement has been reviewed by the preparer. An
environmental impact determination will then be executed based upon the
assessment and the statement.
(c) It should be emphasized that at no time does the completion of
an impact statement under the requirements of a State NEPA obviate the
requirement for FmHA or its successor agency
[[Page 46]]
under Public Law 103-354 to prepare an impact statement. Consequently,
as soon as it is clear to the preparer that the Agency will have to
prepare a statement, every attempt should be made to accomplish the
statement simultaneously with the State's. Coordination with State
personnel is necessary so that data and expertise can be shared. In this
manner, duplication of effort and the review periods for the separate
statements can be minimized. This process clearly requires a close
working relationship with the appropriate State personnel.
Sec. 1940.329 Commenting on other Agencies' EIS's.
(a) State Directors are authorized to comment directly on EIS's
prepared by other Federal agencies. In so doing, comments should be as
specific as possible. Any recommendations for the development of
additional information or analyses should indicate why there is a need
for the material.
(b) Comments should concentrate on those matters of primary
importance to FmHA or its successor agency under Public Law 103-354 and
on areas of Agency expertise, such as rural planning and development.
Any potential conflicts with FmHA or its successor agency under Public
Law 103-354 programs, plans, or actions should be clearly identified.
Special attention should be given to the relationship of the
alternatives under study to the State Office's natural resource
management guide and the objectives of the Department's land use
regulation (exhibit A of this subpart). Copies of comments addressing
land use questions will be provided to the appropriate chairman of the
USDA State-level committee dealing with land use matters.
(c) Whenever a State Director has serious concerns over the
acceptability of the anticipated environmental impacts, the State
Director will notify the Administrator.
Sec. 1940.330 Monitoring.
(a) FmHA or its successor agency under Public Law 103-354 staff who
normally have responsibility for the postapproval inspection and
monitoring of approved projects will ensure that those measures which
were identified in the preapproval stage and required to be undertaken
in order to reduce adverse environmental impacts are effectively
implemented.
(b) This staff, as identified in paragraph (a) of this section, will
review the action's approval documents and consult with the preparer of
the action's environmental review document prior to making site visits
or requesting project status reports in order to determine if there are
environmental requirements to be monitored.
(c) The preparer will directly monitor actions containing difficult
or complex environmental special conditions.
(d) Before certifying that conditions contained within offers of
financial assistance have been fully met, the responsible monitoring
staff will obtain the position of the preparer for those conditions
developed as a result of the environmental review.
(e) Whenever noncompliance with an environmental special condition
is detected by FmHA or its successor agency under Public Law 103-354
staff, the preparer and the SEC will be immediately informed. The
approving official will then take appropriate steps, in consultation
with the responsible program office, the SEC and preparer, to bring the
action into compliance.
Sec. 1940.331 Public involvement.
(a) Objective. The basic objective of FmHA or its successor agency
under Public Law 103-354's public involvement process is threefold. It
is to ensure that interested citizens can readily obtain knowledge of
the environmental review status of FmHA or its successor agency under
Public Law 103-354's funding applications, have the opportunity to input
into this review process before decisions are made, and have access to
the environmental documents supporting FmHA or its successor agency
under Public Law 103-354 decisions.
(b) Public notice requirements. (1) For projects that undergo the
preparation of an environmental impact statement, the first element of
formal public participation in the EIS process involves the publication
of the notice of intent to prepare an EIS. The content of the
[[Page 47]]
notice of intent and its publication by FmHA or its successor agency
under Public Law 103-354 in the Federal Register are explained in Sec.
1940.320 of this subpart. With respect to notification within the
project area, the applicant will be requested to publish a copy of the
notice of intent and the date of the scoping meeting in the newspaper of
general circulation in the vicinity of the proposed action and in any
local or community-oriented newspapers within the proposed action's area
of environmental impact. The notice will be published in easily readable
type in the nonlegal section of the newspaper(s). It will also be
bilingual if the affected area is largely non-English speaking or
bilingual. Individual copies of the notice will be sent by the applicant
to the appropriate regional EPA office, any State and regional review
agencies established under Executive Order 12372; the State Historic
Preservation Officer; local radio stations and other news media; any
State or Federal agencies planning to provide financial assistance to
this or related actions or required to review permit applications for
this action, any potentially affected Indian Tribe; any individuals,
groups, local, State, and Federal agencies known to be interested in the
project; affected property owners; and to any other parties that FmHA or
its successor agency under Public Law 103-354 has identified to be so
notified. It will also be posted at a readable location on the project
site. The applicant will provide FmHA or its successor agency under
Public Law 103-354 with a copy of the notice as it appeared in the
newspaper(s), the date(s) published, and a list of all parties receiving
an individual notice. Publication and individual transmittal of the
notice for the scoping meeting will be accomplished at least 14 days
prior to the date of the meeting.
(2) Coincident with the distribution of either a draft or final EIS,
a notice of the statement's availability will be published within the
project area in the same manner as a notice of intent to prepare an EIS.
FmHA or its successor agency under Public Law 103-354 will request EPA
to publish in the Federal Register a notice of the statement's
availability in accordance with EPA's requirements and pursuant to Sec.
1506.10 of the CEQ regulations.
(3) For Class II actions that are determined not to have a
significant environmental impact, the Agency will require the applicant
to publish a notification of this determination. This notice will be
published in the same manner as a notice of intent to prepare an EIS but
will appear for at least 3 consecutive days if published in a daily
newspaper or otherwise in two consecutive publications. Individual
copies will be sent to the same parties that are required to be sent a
notice of intent, as specified in paragraph (b)(1) of this section, with
the exception of local radio stations and other news media. Also, there
is no requirement to post this notice on the project site. The applicant
will provide FmHA or its successor agency under Public Law 103-354 with
a copy of this notice, the dates the notice was published, and a list of
all parties receiving an individual notice. This notification procedure
does not apply to actions reviewed solely on the basis of a Class I
assessment.
(4) The public notice procedures for actions that will affect
floodplains, wetlands, important farmlands, prime rangelands or prime
forest lands are contained in exhibit C of this subpart. These
procedures apply to actions that require either an EIS, Class II
assessment or Class I assessment. However, whenever an action normally
classified as a categorical exclusion requires a Class I assessment
because of the potential impact to one of these important land
resources, no public notice procedures apply in the course of completing
the Class I assessment. When applicable to an action, as specified in
exhibit C of this subpart, these public notice procedures can apply at
two distinct stages. The first stage, a preliminary notice, applies to
any of the five important land resources. The second stage, a final
notice, is followed by a fifteen-day public review period and applies
only to actions that will impact floodplains or wetlands. For Class II
actions, this final notice procedure must be combined with any
applicable finding of no significant environmental impact, which is
described in paragraph (b)(3) of this section. Individual
[[Page 48]]
copies of the preliminary and final notices will be sent to the same
parties that are required to be sent a notice of finding of no
significant impact, as specified in paragraph (b)(3) of this section,
with the following exception. Whenever property owners affected by
proposed mitigation measures, such as proposed hook-up restrictions on
portions of water or sewer lines that will traverse floodplains, are
advised of these proposed measures in a preliminary notice, these
property owners need not be sent copies of the final notice as long as
the mitigation measures in the final notice are unchanged from the
preliminary notice and no property owners raised objections or concerns
over the mitigation measures.
(5) The public notice requirements associated with holding a public
information meeting are specified in paragraph (c) of this section.
(c) Public information meetings. (1) Public information meetings
will be held for an action undergoing an EIS as specified in Sec.
1940.320 of this subpart. As part of the EIS process, a public
information meeting will be held near the project site to discuss and
receive comments on the draft EIS. It will be scheduled no sooner than
15 days after the release of the draft EIS. It will be announced in the
same manner as the scoping meeting, and the list of parties receiving an
individual notification will also be developed in the same manner. The
meeting will be chaired by the State Director or a designee and will be
fully recorded so that a transcript can be produced. The applicant will
be requested to assist in obtaining a facility for holding the meeting.
To the extent possible, this meeting will be combined with public
meetings required by other involved agencies.
(2) Whenever a public information meeting is held as part of the
completion of an environmental assessment, it will be scheduled,
announced, and held in generally the same manner as a public information
meeting for an EIS. However, a minimum of 7 days advance notice of the
meeting is sufficient, and a transcript of the meeting will not be
required. Rather a summary of the meeting to include the major issues
raised will be prepared by the FmHA or its successor agency under Public
Law 103-354 official who chaired the meeting.
(d) Distribution of environmental documents. FmHA or its successor
agency under Public Law 103-354 officials will promptly provide to
interested parties, upon request, copies of environmental documents,
including environmental assessments, draft and final environmental
impact statements, and records of decision. Interested parties can
request these materials from the appropriate State Director or approval
official for project activities and from the Administrator on other
activities subject to environmental review.
Sec. 1940.332 Emergencies.
(a) Action requiring EIS. When an emergency circumstance makes it
necessary to take an action with significant environmental impact
without observing the provisions of this subpart or the CEQ regulations,
the Administrator will consult with CEQ about alternative arrangements
before the proposed action is taken. It must be recognized that CEQ's
regulations limit such arrangements to actions necessary to control the
immediate impacts of the emergency. Other actions remain subject to NEPA
review. For purposes of this subpart, an emergency circumstance is
defined as one involving an immediate or imminent danger to public
health or safety.
(b) Action not requiring EIS. When an emergency circumstance makes
it necessary to take an action with apparent non-significant
environmental impact without observing the provisions of this subpart or
the CEQ regulations, the Administrator will be so notified. The
Administrator reserves the authority to waive or amend all procedural
aspects of this subpart relating to the preparation of environmental
assessments including but not limited to the applicant's submission of
Form FmHA or its successor agency under Public Law 103-354 1940-20,
public notice requirements and/or their associated comment periods, the
timing of the assessment process, and the content of environmental
review documents. Alternative arrangements will be established on a case
by case basis taking
[[Page 49]]
into account the nature of the emergency and the time reasonably
available to respond to it. These alternative arrangements will, to the
extent possible, attempt to achieve the substantive requirements of this
subpart such as avoiding impacts to important land resources, when
practicable, and minimizing potential adverse environmental impacts. In
all cases, the environmental findings and determinations required for
Class I and Class II assessments must be executed by the appropriate
FmHA or its successor agency under Public Law 103-354 officials prior to
approval of the action and be based upon the best information available
under the circumstances and the prescribed alternative arrangements.
(Refer to paragraph (a) of this section should the approval official for
the action determine that an EIS is necessary.) Additionally, all
applicable consultation and coordination procedures required by law or
regulation will be initiated with the appropriate Federal or State
agency(s). Such procedures will be accomplished in the most expeditious
manner possible and modified to the extent necessary and mutually
agreeable between FmHA or its successor agency under Public Law 103-354
and the affected agency(s). The provisions of this paragraph are limited
to the same emergency circumstances and scope of action as specified in
paragraph (a) of this section.
Sec. 1940.333 Applicability to planning assistance.
The award of FmHA or its successor agency under Public Law 103-354
funds for the purpose of providing technical assistance or planning
assistance will not be subject to any environmental review. However,
applicants will be expected to consider in the development of their
plans and to generally document within their plans:
(a) The existing environmental quality and the important
environmental factors within the planning area, and
(b) The potential environmental impacts on the planning area of the
plan as well as the alternative planning strategies that were reviewed.
Sec. 1940.334 Direct participation of State Agencies in the preparation
of FmHA or its successor agency under Public Law 103-354 EISs.
FmHA or its successor agency under Public Law 103-354 may be
assisted by a State Agency in the preparation of an EIS subject to the
conditions indicated below. At no time, however, is FmHA or its
successor agency under Public Law 103-354 relieved of its
responsibilities for the scope, objectivity, and content of the entire
statement of any other responsibility under NEPA.
(a) The FmHA or its successor agency under Public Law 103-354
applicant for financial assistance is a State Agency having statewide
jurisdiction and responsibility for the proposed action;
(b) FmHA or its successor agency under Public Law 103-354 furnishes
guidance to the State Agency as to the scope and content of the impact
statement and participates in the preparation;
(c) FmHA or its successor agency under Public Law 103-354
independently evaluates the statement and rectifies any major
deficiencies prior to its circulation by the Agency as an EIS;
(d) FmHA or its successor agency under Public Law 103-354 provides,
early in the planning stages of the project, notification to and
solicits the views of any land management entity (State or Federal
Agency responsible for the management or control of public lands)
concerning any portion of the project and its alternatives which may
have significant impacts upon such land management entities; and
(e) If there is any disagreement on the impacts addressed by the
review process outlined in paragraph (d) of this section, FmHA or its
successor agency under Public Law 103-354 prepares a written assessment
of these impacts and the views of the land management entities for
incorporation into the draft impact statement.
Sec. 1940.335 Environmental review of FmHA or its successor agency
under Public Law 103-354 proposals for legislation.
(a) As stated in Sec. 1940.312(d)(4) of this subpart, all FmHA or
its successor
[[Page 50]]
agency under Public Law 103-354 proposals for legislation will receive
an environmental assessment. The definition of such a proposal is
contained in Sec. 1508.17 of the CEQ regulations.
(b) The environmental assessment and, when necessary, the EIS will
be prepared by the responsible Agency staff that is developing the
legislation.
(c) If an EIS is required, it will be prepared according to the
requirements of Sec. 1506.8 of the CEQ Regulations.
Sec. 1940.336 Contracting for professional services.
(a) Assistance from outside experts and professionals can be secured
for the purpose of completing EIS, assessments, or portions of them.
Such assistance will be secured according to the Federal and Agriculture
Procurement Regulations contained in chapters 1 and 4 of title 48 of the
Code of Federal Regulations.
(b) The contractor will be selected by FmHA or its successor agency
under Public Law 103-354 in consultation with any cooperating agencies.
In order to avoid any conflict of interest, contractors competing for
the work will be required to execute a disclosure statement specifying
that they have no financial or other interest in the outcome of the
project.
(c) The Administrator will provide the State Director with a
proposed scope of work for use in securing such professional services.
(d) Applicants will not be required to pay the costs of these
professional services.
Sec. Sec. 1940.337-1940.349 [Reserved]
Sec. 1940.350 Office of Management and Budget (OMB) control number.
The collection of information requirements in this regulation has
been approved by the Office of Management and Budget and has been
assigned OMB control number 0575-0094.
Sec. Exhibit A to Subpart G of Part 1940--Departmental Regulation
Number: 9500-3.
Subject: Land Use Policy.
Date: March 22, 1983.
OPI: Land Use Staff, Soil Conservation Service.
Section
1. Purpose
2. Cancellation
3. Policy
4. Abbreviations
5. Definitions
6. Responsibilities
7. Appendix A
1. Purpose
The Nation's farmlands, forest lands, rangelands, flood plains, and
wetlands are unique natural resources providing food, fiber, wood, and
water necessary for the continued welfare of the people of the United
States and protection from floods. Each year, large amounts of these
lands are converted to other uses. Continued conversion of the Nation's
farmlands, forest lands, and rangelands may impair the ability of the
United States to produce sufficient food, fiber, and wood to meet
domestic needs and the demands of export markets. Continued conversion
of the Nation's wetlands may reduce the availability of adequate
supplies of suitable-quality water, indigenous wildlife species, and the
productive capacity of the Nation's fisheries. Continued encroachments
on flood plains decrease the natural flood-control capacity of these
land areas, create needs for expensive manmade flood-control measures
and disaster-relief activities, and endanger both lives and property.
Land use allocation decisions are matters of concern to USDA.
Decisions concerning land use arise from needs to accommodate needed
growth and development; prevent unwarranted and costly sprawl; avoid
unwarranted conversion of farm, range, and forest lands and wetlands
from existing uses and unwarranted encroachment on flood plains;
maintain and enhance agricultural and forest production capabilities;
maintain wildlife, fish, and seafood habitat; provide or improve
community services and facilities; assure appropriate environmental
quality; and assure adequate supplies of suitable-quality water. These
needs are highly interdependent and often compete with each other for
the limited supply of available land and water.
It is Departmental policy to promote land use objectives responsive
to current and long-term economic, social, and environmental needs. This
policy recognizes the rights and responsibilities of State and local
governments for regulating the uses of land under their jurisdiction. It
also reflects the Department's responsibility to (a) assure that the
United States retains a farm, range, and forest land base sufficient to
produce adequate supplies, at reasonable production costs of high-
quality food, fiber, wood, and other agricultural products that may be
needed; (b) assist individual landholders and State and local
governments in defining and
[[Page 51]]
meeting needs for growth and development in such ways that the most
productive farm, range, and forest lands are protected from unwarranted
conversion to other uses; and (c) assure appropriate levels of
environmental quality.
In accordance with the authority contained in 7 U.S.C. 1010 and 7
U.S.C. 2204 and consistent with 7 CFR 2.19(f) and provisions of the
Farmland Protection Policy Act, Subtitle I, Title XV, Pub. L. 97-98, the
Department sets forth this statement of policy on land use.
2. Cancellations
This regulation supersedes Secretary's Memorandum 9500-2 dated March
10, 1982.
3. Policy
Federal agencies, in implementing programs, make decisions that
affect current and potential uses of land. The Department will:
a. Promote and support planning procedures that allow landholders,
interest groups, and State and local governments to have input at all
appropriate stages of the decisionmaking process for public projects,
programs, or activities; that recognize the rights and responsibilities
of landholders in making private land use decisions; and that recognize
the responsibility of governments in influencing how land may be used to
meet public needs.
b. Assure that programs of the agencies within the Department
discourage the unwarranted conversion to other uses of prime and unique
farmlands, farmlands of statewide or local importance, and prime
rangelands, as defined in appendix A; the unwarranted alteration of
wetlands or flood plains; or the unwarranted expansion of the peripheral
boundaries of existing settlements.
c. Manage both its land use-related programs and USDA-administered
land in such manner as to (1) demonstrate leadership in meeting short-
and long-term needs for growth and development, while assuring adequate
supplies of needed food, fiber, and forest products; (2) assure
appropriate levels of environmental quality and adequate supplies of
water; and (3) discourage unwarranted expansion of peripheral boundaries
of existing settlements. Whenever practicable, management of USDA-
administered lands shall be coordinated with the management of adjacent
private and other public lands.
d. Conduct multidisciplinary land use research and education
programs responsive to identified State, local, and national needs and,
when requested, assist State and local governments, citizens groups, and
individual landholders in determining alternative land use values,
thereby enabling local officials to make judicious choices to meet
growth and development needs and to protect the community's farm- and
forest-related economic base.
e. Assist landowners and State and Federal agencies in the
reclamation of abandoned surface-mined lands. This reclamation will help
eliminate safety, health, and environmental problems.
f. Assist in planning for the extraction of coal and other
nonrenewable resources in such manner as to facilitate restoration. This
restoration would reestablish or enhance food, fiber, or forest
productivity or contribute to other beneficial uses of the land as
mining is completed in defined areas as sites.
g. Advocate among Federal agencies:
(1) The retention of important farmlands, rangelands, forest lands,
and wetlands, whenever proposed conversions to other uses (a) are caused
or encouraged by actions or programs of a Federal agency or (b) require
licensing or approval by a Federal agency, unless other needs clearly
override the benefits derived from retention of such lands; and
(2) Actions that reduce the risk of flood loss and soil erosion;
that minimize impacts of floods on human safety, health, and welfare;
that preserve natural flood-control and other beneficial functions and
values of wetlands and flood plains; and that reduce future need for
expensive manmade flood-control systems, disaster-relief assistance, or
Federal rehabilitation assistance in the event of flooding.
4. Abbreviations
USDA--U.S. Department of Agriculture.
NRE--Natural Resources and Environment Committee.
5. Definitions
Complete definitions for the terms farmlands, forest lands,
rangelands, wetlands, and flood plains are found in appendix A.
6. Responsibilities
a. The Office of the Secretary is responsible for (1) encouraging,
assisting, and coordinating efforts of other Federal departments and
agencies to implement policies and procedures supportive of the
objectives of this regulation; (2) resolving issues and acting on
recommendations raised to the Secretary's Policy and Coordination
Council by the Departmental committees; and (3) raising unresolved
issues and recommending actions to the appropriate Cabinet Council.
b. The NRE Committee, created under the Secretary's memorandum dated
July 22, 1981, will provide departmentwide leadership for the
implementation of this policy statement. In implementing this policy,
the NRE Committee will:
(1) Recommend Departmental guidelines to the Secretary and schedule
reviews of each agency's procedures for implementation;
[[Page 52]]
(2) Monitor implementation of this policy;
(3) Encourage, support, and provide guidance to State- and local-
level USDA committees in implementing this policy;
(4) Coordinate the work of USDA agencies in carrying out the
provisions of this regulation; and
(5) Advise the Secretary annually as to progress and problems
encountered.
c. Each USDA agency will review and make the necessary
administrative changes in existing and proposed rules, regulations,
guides, practices, or policies and propose needed legislative changes to
bring agency programs into compliance with the provisions of this
regulation.
d. Each USDA agency having programs that will be affected by this
regulation shall develop implementing procedures, consistent with the
guidelines provided by the NRE Committee, and shall provide to all
offices of the agency copies of this policy statement, Departmental
guidelines, and agency procedures to implement this policy.
e. USDA agencies will encourage State and local governments and
individual landholders to retain important farmlands, rangelands, forest
lands, and wetlands and to avoid encroachments on flood plains when
practicable alternatives exist to meet developmental needs. Appropriate
agencies will assist State and local governments, citizens groups, and
individual landholders in identifying options and determining
alternative land use values as the basis for making judicious choices in
meeting growth and development needs.
f. USDA agencies will encourage other Federal, State, and local
government agencies to exchange information on plans or projects that
may impact on important farmlands, rangelands, forest lands, wetlalds,
or flood plains and to involve appropriate USDA agencies early in the
planning process. USDA agencies will participate in a timely manner at
appropriate stages in the planning process on Federal or federally
assisted projects or activities when requested. Where opportunity for
such participation is not forthcoming, the Department may intercede,
consistent with policy contained in this regulation, at appropriate
stages in the decisionmaking process through review and comments on
plans, as provided for in authorized administrative review procedures
for such projects, activities, or actions.
g. When land held either in public or private ownership will be
directly affected by USDA actions, the implementing agency will notify
the affected landholders at the earliest time practicable of the
proposed action and provide such landholders an opportunity to review
the elements of the action and to comment on the action's feasibility
and alternatives to it.
h. Agencies of USDA will assure that their actions, investments, and
programs on non-Federal lands will conform, to the extent practicable,
with the uses permitted under land use regulations adopted by State or
local governments.
i. When land use regulations or decisions are inconsistent with USDA
policies and procedures for the protection of important farmlands,
rangelands, forest lands, wetlands, or flood plains, USDA agencies shall
not assist in actions that would convert these lands to other uses or
encroach upon flood plains, unless (1) there is a demonstrated,
significant need for the project, program, or facility, and (2) there
are no practicable alternative actions or sites that would avoid the
conversion of these lands or, if conversion is unavoidable, reduce the
number of acres to be converted or encroached upon directly and
indirectly.
7. Appendix A--Definitions
The following definitions apply to this Departmental Regulation.
1. important farmlands \1\
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\1\ 7 CFR 657.5.
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a. Prime Farmlands \1\
(1) General Criteria. Prime farmland is land that has the best
combination of physical and chemical characteristics for producing food,
feed, forage, fiber, and oilseed crops and is also available for these
uses (the land could be cropland, pastureland, rangeland, forest land,
or other land, but not urban built-up land or water). It has the soil
quality, growing season, and moisture supply needed to produce,
economically, sustained high yields of crops when treated and managed,
including water management, according to acceptable farming methods. In
general, prime farmlands have an adequate and dependable water supply
from precipitation or irrigation, a favorable temperature and growing
season, acceptable acidity or alkalinity, acceptable salt and sodium
content, and few or no rocks. They are permeable to water and air. Prime
farmlands are not excessively erodible or saturated with water for a
long period of time, and they either do not flood frequently or are
protected from flooding. Examples of soils that qualify as prime
farmland are Palouse silt loam, 0- to 7-percent slopes; Brookston silty
clay loam, drained; and Tama silty clay loam, 0- to 5-percent slopes.
(2) Specific Criteria. Prime farmlands must meet all the following
criteria. Terms used in this section are defined in these USDA
publications: ``Soil Taxonomy, Agriculture Handbook 436,'' ``Soil Survey
Manual, Agriculture Handbook 18,'' ``Rainfall-Erosion Losses from
Cropland, Agriculture Handbook 282,'' ``Wind Erosion Forces in the
United States and Their Use in Predicting Soil Loss,
[[Page 53]]
Agriculture Handbook 346,'' and ``Saline and Alkali Soils, Agriculture
Handbook 60.''
(a) The soils have:
1. Aquic, udic, ustic, or xeric moisture regimes and sufficient
available water capacity within a depth of 40 inches, or in the root
zone (root zone is the part of the soil that is penetrated by plant
roots) if the root zone is less than 40 inches deep, to produce the
commonly grown cultivated crops (cultivated crops include but are not
limited to grain, forage, fiber, oilseed, sugar beets, sugarcane,
vegetables, tobacco, orchard, vineyard, and bush fruit crops) adapted to
the region in 7 or more years out of 10; or
2. Xeric or ustic moisture regimes in which the available water
capacity is limited, but the area has a developed irrigation water
supply that is dependable (a dependable water supply is one in which
enough water is available for irrigation in 8 out of 10 years for the
crops commonly grown) and of adequate quality; or
3. Acidic or torric moisture regimes, and the area has a developed
irrigation water supply that is dependable and of adequate quality; and
(b) The soils have a temperature regime that is frigid, mesic,
thermic, or hyperthermic (pergelic and cryic regimes are excluded).
These are soils that, at a depth of 20 inches, have a mean annual
temperature higher than 32 degrees Fahrenheit. In addition, the mean
summer temperature at this depth in soils with an 0 horizon is higher
than 47 degrees Fahrenheit; in soils that have no 0 horizon, the mean
summer temperature is higher than 59 degrees Fahrenheit; and
(c) The soils have a pH between 4.5 and 8.4 in all horizons within a
depth of 40 inches or in the root zone if the root zone is less than 40
inches deep; and
(d) The soils either have no water table or have a water table that
is maintained at a sufficient depth during the cropping season to allow
cultivated crops common to the area to be grown; and
(e) The soils can be managed so that in all horizons within a depth
of 40 inches or in the root zone if the root zone is less than 40 inches
deep, during part of each year the conductivity of the saturation
extract is less than 4 mmhoc/cm and the exchangeable sodium percentage
is less than 15; and
(f) The soils are not flooded frequently during the growing season
(less often than once in 2 years); and
(g) The product of K (erodibility factor) times the percent slope is
less than 2.0, and the product of I (soils erodibility) times C
(climatic factor) does not exceed 60; and
(h) The soils have a permeability rate of at least 0.06 inch per
hour in the upper 20 inches, and the mean annual soil temperature at a
depth of 20 inches is less than 59 degrees Fahrenheit or higher; and
(i) Less that 10 percent of the surface layer (upper 6 inches) in
these soils consists of rock fragments coarser than 3 inches.
b. Unique Farmland \1\
---------------------------------------------------------------------------
\1\ See footnote 1 on previous page.
---------------------------------------------------------------------------
(1) General Criteria. Unique farmland is land other than prime
farmland that is used for the production of specific high-value food and
fiber crops. It has the special combination of soil quality, location,
growing season, and moisture supply needed to produce, economically,
sustained high-quality and/or high yields of a specific crop when
treated and managed according to acceptable farming methods. Examples of
such crops are citrus, tree nuts, olives, cranberries, fruit, and
vegetables.
(2) Specific Characteristics. Unique farmland is used for a specific
high-value food or fiber crop. It has a moisture supply that is adequate
for the specific crop; the supply is from stored moisture,
precipitation, or a developed irrigation system. It combines favorable
factors of soil quality, growing season, temperature, humidity, air
drainage, elevation, aspect, or other conditions, such as nearness to
market, that favor the growth of a specific food or fiber crop.
c. Additional Farmland of Statewide Importance \1\
This is land, in addition to prime and unique farmlands, that is of
statewide importance for the production of food, feed, fiber, forage,
and oilseed crops. Criteria for defining and delineating this land are
to be determined by the appropriate State agency or agencies. Generally,
additional farmlands of statewide importance include those that are
nearly prime farmland and that economically produce high yields of crops
when treated and managed according to acceptable farming methods. Some
may produce as high a yield as prime farmlands if conditions are
favorable. In some States, additional farmlands of statewide importance
may include tracts of land that have been designated for agriculture by
State law.
d. Additional Farmland of Local Importance \1\
In some local areas, there is concern for certain additional
farmlands for the production of food, feed, fiber, forage, and oilseed
crops, even though these lands are not identified as having national or
statewide importance. Where appropriate, these lands are to be
identified by the local agency or agencies concerned.
[[Page 54]]
2. prime forest lands \2\
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\2\ Prime Forest Land Definition and Criteria, U.S. Forest Service,
May 26, 1977.
---------------------------------------------------------------------------
Because of the multiple use of forested lands, several categories,
e.g., timber, wildlife, and recreation, may be developed. For purposes
of this regulation only, the following timberland definitions will
apply.
a. Prime Timberland \2\
Prime timberland is land that has soil capable of growing wood at
the rate of 85 cubic feet or more/acre/year (at culmination of mean
annual increment) in natural stands and is not in urban or built-up land
uses or water. Generally speaking, this is land currently in forest, but
does not exclude qualifying lands that could realistically be returned
to forest. Delineation of these lands will be in accordance with
national criteria.
b. Unique Timberland \2\
Unique timberlands are lands that do not qualify as prime timberland
on the basis of producing less than 85 cubic feet/acre/year, but are
growing sustained yields of specific high-value species or species
capable of producing specialized wood products under a silvicultural
system that maintains soil productivity and protects water quality.
Delineation of these lands will be in accordance with national criteria.
c. Timberland of Statewide Importance \2\
This is land, in addition to prime and unique timberlands, that is
of statewide importance for the growing of wood. Criteria for defining
and delineating these lands are to be determined by State forestry
planning committees or appropriate State organizations.
d. Timberlands of Local Importance \2\
In some local areas, there is concern for certain additional forest
lands for the growing of wood, even though these lands are not
identified as having national or statewide importance. Where
appropriate, these lands are to be identified by a local agency or
agencies concerned.
3. wetlands \3\
---------------------------------------------------------------------------
\3\ Definitions contained in Executive Orders 11988 and 11990.
---------------------------------------------------------------------------
Wetlands are those areas that are inundated by surface or ground
water with a frequency sufficient to support and, under normal
circumstances, do or would support a prevalence of vegetative or aquatic
life that requires saturated or seasonally saturated soil conditions for
growth and reproduction. Wetlands generally include swamps, marshes,
bogs, and similar areas, such as sloughs, potholes, wet meadows, river
overflows, mudflats, and natural ponds.
4. flood plains \3\
The term flood plain means the lowland and relatively flat areas
adjoining inland and coastal waters, including floodprone areas of
offshore islands, including, at a minimum, those that are subject to a
1-percent or greater chance of flooding in any given year.
5. prime rangeland \4\
---------------------------------------------------------------------------
\4\ USDA proposed definition for intradepartmental use only.
---------------------------------------------------------------------------
Prime rangeland is rangeland which, because of its soil, climate,
topography, vegetation, and location, has the highest quality or value
for grazing animals. The (potential) natural vegetation is palatable,
nutritious, and available to the kinds of herbivores common to the area.
Sec. Exhibit B to Subpart G of Part 1940--Development and Implementation
of Natural Resource Management Guide
1. The State Director shall complete the natural resource management
guide within 12 months from the effective date of this subpart and issue
the guide as a State supplement after prior approval by the
Administrator. A summary of the basic content, purposes, and uses of the
guide is contained in Sec. 1940.305 of this subpart. The guide shall be
prepared in draft form and be provided for review and comment to USDA
agencies, appropriate Federal and State agencies, State and regional
review agencies assigned the consulation requirements of Executive Order
12372, as well as interested localities, groups, and citizens. Also at
least one public information meeting shall be held on the draft which
shall be followed by a 30-day period for the submission of public
comments. Public notification of this meeting shall be made in the same
manner as the notification process for a scoping meeting. (See Sec.
1940.320(c) of this subpart). Additionally, the public shall be informed
that copies of the draft guide will be made available from the State
Office upon request. After completion of this public review, the draft
will be revised as necessary in light of the comments received and
provided as a final draft State Supplement to the Administrator for
review and approval. Any concerns and comments of the Administrator will
be addressed by the State Director and the guide completed. Upon the
Administrator's approval and the fulfillment of the requirements of
paragraph 4. of this exhibit, the natural resource management guide
shall then become part of any program investment strategies developed by
the State Director for the purpose of addressing the
[[Page 55]]
rural needs of the State. Although a 12-month period has been
established for the completion of a natural resource management guide,
this deadline is not to be construed as curtailing or postponing the
implementation of existing environmental laws, regulations, Executive
orders or the Departmental Regulation 9500-3, Land Use Policy, with
respect to individual project reviews, nor giving anyone any rights or
claims with respect to the completion or content of the guide.
2. The natural resource management guide needs to be developed in
full recognition of its role as an internal Agency planning tool and
with sensitivity to the Agency's mission.
3. After the Administrator approves the natural resource management
guide, it will become effective 4 months from that date. This interim
period shall be used to inform local, State, and Federal agencies,
localities, organizations, and interested citizens of the content of the
guide. In this manner, those parties intending to seek FmHA or its
successor agency under Public Law 103-354 assistance or to coordinate
FmHA or its successor agency under Public Law 103-354 assistance
programs with their own programs will be able to gain for their planning
needs an understanding of our guide.
4. Completed natural resource management guides shall be reviewed
every 2 years and updated by the State Director to reflect newly
identified geographical areas of concern or policy revisions at the
lational, State, regional or local level. They will also be revised, as
necessary, through appropriate guidance from the Administrator.
Revisions shall be transmitted to the Administrator for postapproval and
shall be considered approved if either no comments are raised by the
Administrator within 30 days of receipt of the State Director's
transmittal letter or the administrator specifically approves them
before the 30 days expire. Public review of a revision will not be
required. However, if in the opinion of the State Director the proposed
revision will substantially change the previously adopted natural
resource management guide, a public review shall be conducted of the
revision in the same manner as that described in paragraph 1 of this
exhibit for the development of the original guide. Such review shall
occur prior to the transmittal of the revision to the Administrator. If
the State Director believes that at the expiration of any 2-year review
period there is need to update the guide, a statement to this effect
shall be filed with the Administrator.
5. The foundation for the natural resource management guide is the
identification of the types of land uses or environmental factors
deserving attention and their geographical location within the State. An
inventory or listing shall be developed, therefore, of the important
land uses within the State. This inventory will be accomplished by
assembling existing data and information compiled by those Federal,
State, and local agencies that have jurisdiction or expertise regarding
the land uses or environmental factors. At a minimum, the inventory
shall consist of available documents, listings, maps, or graphic
materials describing the location of the following:
a. National Register of Historic Places to include monthly
supplements as designated by the Department of the Interior (DOI), and
the State Historic Preservation Plans. This list is issued as a State
supplement to subpart F or part 1901 of this chapter;
b. Rivers designated as part of the Wild and Scenic Rivers System
and rivers under study for inclusion in the system, as published by DOI;
c. Important farmlands;
d. Prime rangelands.
e. Prime forestlands;
f. Wetland inventory;
g. Floodplain inventory as issued by the Federal Emergency
Management Administration;
h. Endangered Species and Critical Habitats as listed or proposed
for listing by the Department of Commerce (DOC) and DOI;
i. Sole source aquifer recharge areas as designated by the
Environmental Protection Agency (EPA);
j. Air Quality Control Regions as designated by EPA;
k. National Registry of Natural Landmarks at published by DOI;
l. Coastal Barrier Resources System;
m. State inventories or planning documents identifying important
land uses, particularly those not covered by the above items, such as
wildlife refuges, important habitats, and areas of high water quality,
or scenic or recreational value;
n. Agricultural districts or other similar zoning classifications
for agricultural land protection; and
o. Coastal Zone Management Areas.
6. The Administrator shall be responsible for assisting State
Directors in obtaining listings and inventories of resources protected
by Federal statutes and regulations. The State Director has the
responsibility for assembling documents on important environmental
resources or areas identified in State and substate laws, regulations,
plans, and policies.
7. Development of the inventory by the State Director will require
consultation and assistance from a variety of agencies and experts. This
consultation should begin with Department agencies and be accomplished
through appropriate, State-level USDA committees. The objective should
be to determine the land classification data that has been compiled and
that which is in the process of being compiled either by USDA agencies
or their counterparts at the state level.
[[Page 56]]
The Memorandum of Understanding executed in May 1979 between the Soil
Conservation Service (SCS) and FmHA or its successor agency under Public
Law 103-354 should be utilized as the basis for seeking SCS's assistance
in this data collection effort. (See FmHA Instruction 2000-D, exhibit A,
which is available in any FmHA or its successor agency under Public Law
103-354 Office.) Direct contacts should then be made with State
agencies, in particular with the appropriate office of State planning,
to determine the availability of State inventories and State land use
policies and priorities. Similar discussions should be held with
substate regional planning agencies and clearinghouses with assistance
being provided in this effort by District Directors. County Supervisors
shall contact local officials and shall be responsible for being
familiar with and for assembling similar inventories, land use policies,
or protective requirements developed by the local government agencies
within the supervisor's territorial jurisdiction.
8. Another important element of the natural resource management
guide shall be the examination of any major environmental impacts on the
State or a substate area resulting from the cumulative effects of FmHA
or its successor agency under Public Law 103-354-assisted project over
the last several years. In this examination, particular emphasis should
be given to the cumulative impacts of water resource projects such as
irrigation systems. This should be done in consultation with experts
within the appropriate State agencies and the U.S. Geological Survey.
The housing programs should also be given a particular emphasis with
respect to their cumulative impacts. More detailed guidance on the
accomplishment of this cumulative impact section of the natural resource
management guide, as well as the overall content of the guide, shall be
provided by the Administrator. In preparing the State's natural resource
management guide and in assembling inventories of critical resources,
Agency staff should not lose sight of the basic purposes of this effort.
The development of lengthy and complex guides and the amassing of huge
inventories is not our goal. In the end, the material must be useable
and serve as a tool for better decisionmaking. The basic purposes of
this guide and inventory, then, are to provide a basis for developing
comprehensive, statewide, rural development investment strategies that
(i) do not conflict with Federal, State, and local mandates to preserve
and protect important land and environmental resources, (ii) that do not
create short- or long-term development pressures which would lead to the
unnecessary conversion of these resources, and (iii) which effectively
support and enhance Federal, State, and local plans to preserve these
resources.
Sec. Exhibit C to Subpart G of Part 1940--Implementation Procedures for
the Farmland Protection Policy Act; Executive Order 11988, Floodplain
Management; Executive Order 11990, Protection of Wetlands; and
Departmental Regulation 9500-3, Land Use Policy
1. Background. The Subtitle I of the Agriculture and Food Act of
1981, Pub. L. 97-98, created the Farmland Protection Policy Act. The Act
requires the consideration of alternatives when an applicant's proposal
would result in the conversion of important farmland to nonagricultural
uses. The Act also requires that Federal programs, to the extent
practicable, be compatible with State, local government, and private
programs and policies to protect farmland. The Soil Conservation Service
(SCS), as required by the Act, has promulgated implementation procedures
for the Act at 7 CFR part 658 which are hereafter referred to as the SCS
rule. This rule applies to all federal agencies. The Departmental
Regulation 9500-3, Land Use Policy (the Departmental Regulation), also
requires the consideration of alternatives but is much broader than the
Act in that it addresses the conversion of land resources other than
farmland. The Departmental Regulation is included as exhibit A to this
subpart and affects only USDA agencies. For additional requirements that
apply to some Farmer Program loans and guarantees and loans to an Indian
Tribe or Tribal Corporation and that cover the conservation of wetlands
and highly erodible land, see exhibit M of this subpart.
2. Implementation. Each proposed lease or disposal of real property
by FmHA or its successor agency under Public Law 103-354 and application
for financial assistance or subdivision approval will be reviewed to
determine if it would result in the conversion of a land resource
addressed in the Act, Executive Orders, or Departmental Regulation and
as further specified below. Those actions that are determined to result
in the lease, disposal or financing of an existing farm, residential,
commercial or industrial property with no reasonably foreseeable change
in land use and those actions that solely involve the renovation of
existing structures or facilities would require no further review. \1\
Since these actions have no potential to convert land uses, this finding
would simply be made by the preparer in completing the environmental
assessment for the action.
[[Page 57]]
Also, actions that convert important farmland through the construction
of on-farm structures necessary for farm operations are exempt from the
farmland protection provisions of this exhibit. For other actions, the
following implementation steps must be taken:
---------------------------------------------------------------------------
\1\ See special procedures in item 3 of this exhibit if the existing
structure or real property is located in a floodplain or wetland.
---------------------------------------------------------------------------
a. Determine whether important land resources are involved. The Act
comes into play whenever there is a potential to affect important
farmland. The Departmental Regulation covers important farmland as well
as the following land resources: prime forest land, prime rangeland,
wetlands and floodplains. Hereafter, these land resources are referred
to collectively as important land resources. Definitions for these land
resources are contained in the appendix to the Departmental Regulation.
The SCS rule also defines important farmland for purposes of the Act.
Since the SCS's definition of prime farmland differs from the
Departmental Regulation's definition, both definitions must be used and
if either or both apply, the provisions of this exhibit must be
implemented. It is important to note the definition of important
farmland in both the SCS rule and the Departmental Regulation because it
includes not only prime and unique farmland but additional farmland that
has been designated by a unit of State or local government to be of
statewide or local importance and such designation has been concurred in
by the Secretary acting through SCS. In completing the environmental
assessment or Form FmHA or its successor agency under Public Law 103-354
1940-22, ``Environmental Checklist For Categorical Exclusions,'' the
preparer must determine if the project is either located in or will
affect one or more of the land resources covered by the SCS rule or the
Departmental Regulation. Methods for determining the location of
important land resources on a project-by-project basis are discussed
immediately below. As reflected several times in this discussion, SCS
personnel can be of great assistance in making agricultural land and
natural resource evaluation, particularly when there is no readily
available documentation of important land resources within the project's
area of environmental impact. It should be remembered that FmHA or its
successor agency under Public Law 103-354 and SCS have executed a
Memorandum of Understanding in order to facilitate site review
assistance. (See FmHA Instruction 2000-D, exhibit A, available in any
FmHA or its successor agency under Public Law 103-354 office.)
(1) Important Farmland, Prime Forest Land, Prime Rangeland--The
preparer of the environmental review document will review available SCS
important farmland maps to determine if the general area within which
the project is located contains important farmland. Because of the large
scale of the important farmland maps, the maps should be used for
general review purposes only and not to determine if sites of 40 acres
or less contain important farmland. If the general area contains
important farmland or if no important farmland map exists for the
project area, the preparer of the environmental review will request
SCS's opinion on the presence of important farmland by completing Form
AD-1006, ``Farmland Conversion Impact Rating,'' according to its
instructions, and transmitting it to the SCS local field office having
jurisdiction over the project area. This request will also indicate that
SCS's opinion is needed regarding the application to the project site of
both definitions of prime farmland, the one contained within its rule
and the one contained within the Departmental Regulation. SCS's opinion
is controlling with respect to the former definition and advisory with
respect to the latter. No request need be sent to SCS for an action
meeting one of the exemptions contained in item number 2 of this
exhibit.
(2) Floodplain--Review the most current Flood Insurance Rate Map or
Flood Insurance Study issued for the project area by the Federal
Emergency Management Administration (FEMA). Information on the most
current map available or how to obtain a map free of charge is available
by calling FEMA's toll free number 800-638-6620. When more specific
information is needed on the location of a floodplain, for example, the
project site may be near the boundary of a floodplain; or for assistance
in analyzing floodplain impacts, it is often helpful to contact FEMA's
regional office staff. Exhibit J of this subpart contains a listing of
these regional offices and the appropriate telephone numbers.
If a FEMA floodplain map has not been prepared for a project area,
detailed assistance is normally available from the following agencies:
The U.S. Fish and Wildlife Service (FWS), SCS, Corps of Engineers, U.S.
Geological Survey (USGS), or appropriate regional or State agencies
established for flood prevention purposes.
(3) Wetlands--FWS is presently preparing wetland maps for the
nation. Each FWS regional office has a staff member called a Wetland
Coordinator. These individuals can provide updated information
concerning the status of wetland mapping by FWS and information on State
and local wetland surveys. Exhibit K of this subpart contains a listing
of Wetland Coordinators arranged by FWS regional office and geographical
area of jurisdiction. If the proposed project area has not been
inventoried, information can be obtained by using topographic and soils
maps or aerial photographs. State-specific lists of wetland soils and
wetland vegetation are also available from the FWS Regional Wetland
coordinators. A site visit can disclose evidence of vegetation typically
associated with wetland areas. Also, the assistance of
[[Page 58]]
FWS field staff in reviewing the site can often be the most effective
means. Because of the unique wetland definition used in exhibit M of
this subpart, SCS wetland determinations are required for implementing
the wetland conservation requirements of that exhibit.
b. Findings (1) Scope--Although information on the location and the
classification of important land resources should be gathered from
appropriate expert sources, as well as their views on possible ways to
avoid or reduce the adverse effects of a proposed conversion, it must be
remembered that it is FmHA or its successor agency under Public Law 103-
354's responsibility to weigh and judge the feasibility of alternatives
and to determine whether any proposed land use change is in accordance
with the implementation requirements of the Act and the Departmental
Regulation. Consequently, after reviewing as necessary, the project
site, applicable land classification data, or the results of
consultations with appropriate expert agenices, the FmHA or its
successor agency under Public Law 103-354 preparer must determine, as
the second implementation step, whether the applicant's proposal:
(a) Is compatible with State, unit or local government, and private
programs and policies to protect farmland; and
(b) Either will have no effect on important land resources; or
(c) If there will be a direct or indirect conversion of such a
resource, (i) whether practicable alternatives exist to avoid the
conversion; and
(d) If there are no alternatives, whether there are practicable
measures to reduce the amount of the conversion.
(2) Determination of No Effect-- If the preparer determines that
there is no potential for conversion and that the proposal is
compatible, this determination must be so documented in the
environmental assessment for a Class II action or the appropriate
compliance blocks checked in the Class I assessment or Checklist for
Categorical Exclusions based on whichever document is applicable to the
action being reviewed.
(3) Determination of Effect or Incompatibility-- Whenever the
preparer determines that an applicant's proposal may result in the
direct or indirect conversion of an important land resource or may be
incompatible with State, unit of local government, or private programs
and policies to protect farmland, the following further steps must be
taken.
(a) Search for Practicable Alternatives \2\--In consultation with
the applicant and the interested public, the preparer will carefully
analyze the availability of practicable alternatives that avoid the
conversion or incompatibility Possible alternatives include:
---------------------------------------------------------------------------
\2\ When the action involves the disposal of real property
determined not suitable for disposition to persons eligible for FmHA or
its successor agency under Public Law 103-354's financial assistance
programs, the consideration of alternatives is limited to those that
would result in the best price.
---------------------------------------------------------------------------
(i) The selection of an alternative site;
(ii) The selection of an alternative means to meet the applicant's
objectives; or
(iii) The denial of the application, i.e., the no-action
alternative.
When the resource that may be converted is important farmland, the
preparer will follow the Land Evaluation and Site Assessment (LESA)
point system contained within the SCS rule in order to evaluate the
feasibility of alternatives. When the proposed site receives a total
score of less than 160 points, no additional sites need to be evaluated.
Rather than use the SCS LESA point system, the State Director has the
authority to use State or local LESA systems that have been approved by
the governing body of such jurisdiction and the SCS state
conservationist. After this authority is exercised, it must be used for
all applicable FmHA or its successor agency under Public Law 103-354
actions within the jurisdiction of that approved LESA system.
(b) Inform the Public--The Department Regulation requires us in
section 6, Responsibilities, to notify the affected landholders at the
earliest time practicable of the proposed action and to provide them an
opportunity to review the elements of the action and to comment on the
action's feasibility and alternatives to it. This notification
requirement only applies to Class I and Class II actions and not to
categorical exclusions that lose their status as an exclusion for any of
the reasons stated in Sec. 1940.317(e) of this subpart. The
notification will be published and documented in the manner specified in
Sec. 1940.331 of this subpart and will contain the following
information:
(i) A brief description of the application or proposal and its
location;
(ii) The type(s) and amount of important land resources to be
affected;
(iii) A statement that the application or proposal is available for
review at an FmHA or its successor agency under Public Law 103-354 field
office (specify the one having jurisdiction over the project area); and
(iv) A statement that any person interested in commenting on the
application or proposal's feasibility and alternatives to it may do so
by providing such comments to FmHA or its successor agency under Public
Law 103-354 within 30 days following the date of publication. (Specify
the FmHA or its successor agency under Public Law 103-354 office
processing the application or proposal for receipt of comments.)
[[Page 59]]
Further consideration of the application or proposal must be delayed
until expiration of the public comment period. Consequently, publication
of the notice as early as possible in the review process is both in the
public's and the applicant's interest. Any comments received must be
considered and addressed in the subsequent Agency analysis of
alternatives and mitigation measures. It should be understood that
scheduling a public information meeting is not required but may be
helpful based on the number of comments received and types of issues
raised.
(c) Determine Whether Practicable Alternative Exists--(i)
Alternative exists--If the preparer concludes that a practicable
alternative exists, the preparer will complete step 2b(3)(e)(ii) of this
exhibit and transmit the assessment for the approving official's review
in the manner specified in Sec. 1940.316 of this subpart. If the
findings of this review are similar to the preparer's recommendation,
FmHA or its successor agency under Public Law 103-354 will inform the
applicant of such findings and processing of the application will be
discontinued. Should the applicant still desire to pursue the proposal,
the applicant is certainly free to do so but not with the further
assistance of FmHA or its successor agency under Public Law 103-354.
Should the applicant be interested in amending the application to
reflect the results of the alternative analysis, the preparer will work
closely with the applicant to this end. Upon receipt of the amended
application, the preparer must reinstitute this implementation process
at that point which avoids the duplication of analysis and data
collection undertaken in the original review process.
If the results of the approving official(s) review differs from the
preparer's recommendations, the former will ensure that the findings are
appropriately documented in step 2b(3)(e)(ii) of this exhibit and any
remaining consideration given to mitigation measures, step 2b(3)(d) of
this exhibit.
(ii) No Practicable Alternative Exists--On the other hand, if the
preparer concludes that there is no practicable alternative to the
conversion, the preparer must then continue with step 2b(3)(d) of this
exhibit, immediately below.
(d) Search for Mitigation Measures-- Once the preparer determines
that there is no practicable alternative to avoiding the conversion or
incompatibility, including the no-action alternative, all practicable
measures for reducing the direct and indirect amount of the conversion
must be included in the application. Some examples of mitigation
measures would include reducing the size of the project which thereby
reduces the amount of the important land resource to be converted. This
is a particularly effective mitigation measure when the resource is
present in a small area, as is often the case with wetlands or
floodplains. A corresponding method of mitigation would be to maintain
the project size or number of units but decrease the amount of land
affected by increasing the density of use. Finally, mitigation can go as
far as the selection of an alternative site. For example, in a housing
market area composed almost entirely of important farmland, any new
proposed subdivision site would result in conversion. However, a
proposed site within or contiguous to an existing community has much
less conversion potential, especially indirect potential, than a site a
mile or two from the community. The LESA system can also be used to
identify mitigation measures when the conversion of important farmland
cannot be avoided.
(e) Document Findings-- Upon completion of the above steps, a
written summary of the steps taken and the reasons for the
recommendations reached shall be included in the environmental
assessment along with either one of the following recommendations as
applicable. The following example assumes that important farmland is the
affected resource and that the inappropriate phrase within the brackets
would be deleted.
(i) The application would result in the direct or indirect
conversion of important farmland and (is/is not) compatible with State,
unit of local government, or private programs and policies to protect
farmland. It is recommended that FmHA or its successor agency under
Public Law 103-354 determine, based upon the attached analysis, that
there is no practicable alternative to this and that the application
contains all practicable measures for reducing the amount of conversion
(or limiting the extent of any identified incompatibility.)
(ii) The application would result in direct or indirect conversion
of important farmland and (is/is not) incompatible with State, unit of
local government, or private programs and policies to protect farmland.
It is recommended that FmHA or its successor agency under Public Law
103-354 determine, based upon the attached analysis, that there is a
practicable alternative to this action, and the processing of this
application be discontinued.
(f) Implement findings--The completed environmental assessment and
the Agency's determination of compliance with the Act, the Departmental
Regulation and Executive orders will be processed and made according to
Sec. 1940.316 of this subpart. Whenever this determination is as stated
in step 2b(3)(e)(i) above, the action will be so structured as to ensure
that any recommended mitigation measures are accomplished. See Sec.
1940.318(g) of this subpart. Whenever the determination is as stated in
step 2b(3)(e)(ii) above, the applicant shall be so informed and
processing of the application discontinued. Any further FmHA or its
successor agency under Public
[[Page 60]]
Law 103-354 involvement will be as specified in Item 2b(3)(c)(i) of this
exhibit.
3. Special Procedures and Considerations When a Floodplain or
Wetland Is the Affected Resource Under Executive Order 11988 and 11990.
a. Scope. (1) Geographical Area--The geographical area that must be
considered when a floodplain is affected varies with the type of action
under consideration. Normally the implementation procedures beginning in
Item 2a of this exhibit are required when the action will impact,
directly or indirectly, the 100-year floodplain. However, when the
action is determined by the preparer to be a critical action, the
minimum floodplain of concern is the 500-year floodplain. A critical
action is an action which, if located or carried out within a
floodplain, poses a greater than normal risk for flood-caused loss of
life or property. Critical actions include but are not limited to
actions which create or extend the useful life of the following
facilities:
(a) Those facilities which produce, use, or store highly volatile,
flammable, explosive, toxic or water-reactive materials;
(b) Schools, hospitals, and nursing homes which are likely to
contain occupants who may not be sufficiently mobile to avoid the loss
of life or injury during flood and storm events;
(c) Emergency operation centers or data storage centers which
contain records or services that any become lost or inoperative during
flood and storm events; and
(d) Multi-family housing facilities designed primarily (over 50
percent) for handicapped individuals.
(2) Threshold of Impact--The Executive orders differ from the Act
and the Departmental Regulation in that the Executive orders'
requirements apply not only to the conversion of floodplains or wetlands
but to any impacts upon them. Impacts are defined as changes in the
natural values and functions of a wetland or floodplain. Therefore,
there would be an impact to a floodplain whenever either (a) the action
or its related activities would be located within a floodplain, or (b)
the action through its indirect impacts has the potential to result in
development within a floodplain. The only exception to this statement is
when the preparer determines that the locational impact is minor to the
extent that the floodplain's or wetland's natural values and functions
are not affected.
b. Treatment of Existing Structures. (1) Non-FmHA or its Successor
Agency under Public Law 103-354-Owned Properties--The Executive orders
can apply to actions that are already located in floodplains or
wetlands; that is, where the conversion has already occurred. The
implementation procedures beginning in item 2a of this exhibit must be
accomplished for any action located in a floodplain or wetland and
involving either (a) the purchase of an existing structure or facility
or (b) the rehabilitation, renovation, or adaptive reuse of an existing
structure or facility when the work to be done amounts to a substantial
improvement. A substantial improvement means any repair, reconstruction,
or improvement of a structure the cost of which equals or exceeds 50
percent of the market value of the structure either (a) before the
improvement or repair is started, or (b) if the structure has been
damaged, and is being restored, before the damage occurred. The term
does not include (a) any project for improvement of a structure to
comply with existing State or local health sanitary or safety code
specifications which are solely necessary to assure safe living
conditions or (b) any alteration of a structure listed on the National
Register of Historic Places or a State Inventory of Historic Places.
(2) FmHA or its Successor Agency under Public Law 103-354-Owned Real
Property--The requirement in paragraph 3 b (1) immediately above also
applies to any substantial improvements made to FmHA or its successor
agency under Public Law 103-354-owned real property with the exception
of the public notice requirements of this exhibit. Irrespective of any
improvements, whenever FmHA or its successor agency under Public Law
103-354 real property located in a floodplain or wetland is proposed for
lease or sale, the official responsible for the conveyance must
determine if the property can be safely used. If not, the property
should not be sold or leased. Otherwise, the conveyance must specify
those uses that are restricted under identified Federal, State, and
local floodplains or wetlands regulations as well as other appropriate
restrictions, as determined by the FmHA or its successor agency under
Public Law 103-354 official responsible for the conveyance, to the uses
of the property by the leasee or purchaser and any successors, except
where prohibited by law. Appropriate restrictions will be developed in
consultation with the U.S. Fish and Wildlife Service (FWS) as specified
in the Memorandum of Understanding with FWS contained in subpart LL of
part 2000 of this chapter. Applicable restrictions will be incorporated
into quitclaim deeds with the consent and approval of the Regional
Attorney, Office of the General Counsel. Upon application by the owner
of any property so affected and upon determination by the appropriate
FmHA or its successor agency under Public Law 103-354 official that the
condition for which a deed restriction was imposed no longer exists, the
restriction clause may be released. A listing of any restrictions shall
be included in any notices announcing the proposed sale or lease of the
property. At the time of first inquiry, prospective purchasers must be
informed of the property's location in a floodplain or wetland and the
use restrictions that will apply. A written notification to this effect
must be provided to the
[[Page 61]]
prospective purchaser who must acknowledge the receipt of the notice.
See Item 3 d of this exhibit and subpart C of part 1955 of this chapter
for guidance on the proper formats to be used with respect to notices
and deed restrictions. The steps and analysis conducted to comply with
the requirements of this paragraph must be documented in the
environmental review document for the proposed lease or sale.
c. Mitigation measures. (1) Alternative Sites--As with the Act and
the Departmental Regulation, the main focus of the review process must
be to locate an alternative that avoids the impact to a floodplain or
wetland. When this is not practicable, mitigation measures must be
developed to reduce the impact which in the case of a floodplain or
wetland can include finding another site, i.e., a safer site. The latter
would be a site at a higher elevation within the floodplain and/or
exposed to lower velocity floodflows.
(2) Nonstructural Mitigation Measures--Mitigation measures under the
Executive orders are intended to serve the following three purposes:
reduce the risks to human safety, reduce the possible damage to
structures, and reduce the disruption to the natural values and
functions of floodplains and wetlands. More traditional structural
measures, such as filling in the floodplain, cannot accomplish these
three purposes and, in fact, conflict with the third purpose.
Nonstructural flood protection methods, consequently, must be given
priority consideration. These methods are intended to preserve, restore,
or imitate natural hydrologic conditions and, thereby, eliminate or
reduce the need for structural alteration of water bodies or their
associated floodplains and wetlands. Such methods may be either physical
or managerial in character. Nonstructural flood protection methods are
measures which:
(a) Control the uses and occupancy of floodplains and wetlands,
e.g., floodplain zoning and subdivision regulations;
(b) Preserve floodplain and wetland values and functions through
public ownership; e.g., fee title, easements and development rights;
(c) Delay or reduce the amount of runoff from paved surfaces and
roofed structures discharged into a floodway, e.g., construction of
detention basins and use of flow restricting barriers on roofs;
(d) Maintain natural rates of infiltration in developed or
developing areas, e.g., construction of seepage or recharge basins and
minimization of paved areas;
(e) Protect streambanks and shorelines with vegetative and other
natural cover, e.g., use of aquatic and water-loving woody plants;
(f) Restore and preserve floodplain and wetland values and functions
and protect life and property through regulation, e.g., flood-proofing
building codes which require all structures and installations to be
elevated on stilts above the level of the base flood; and
(g) Control soil erosion and sedimentation, e.g., construction of
sediment basins, stabilization of exposed soils with sod and
minimization of exposed soil.
(3) Avoid Filling in Floodplains--As indicated above, the Executive
orders place a major emphasis on not filling in floodplains in order to
protect their natural values and functions. Executive Order 11988 states
``agencies shall, wherever practicable, elevate structures above the
base flood level rather than filling in the land.''
(d) Additional Notification Requirement. (1) Final Notice--Where it
is not possible to avoid an impact to a floodplain or wetland and after
all practicable mitigation measures have been identified and agreed to
by the prospective applicant, a final notice of the proposed action must
be published. This notice will either be part of the notice required for
the completion of a Class II assessment or a separate notice if a Class
I assessment or an EIS has been completed for the action. The notice
will be published and distributed in the manner specified in Sec.
1940.331 of this subpart and contain the following information.
(a) A description of the proposd action, its location, and the
surrounding area;
(b) A description of the floodplain or wetland impacts and the
mechanisms to be used to mitigate them;
(c) A statement of why the proposed action must be located in a
floodplain or a wetland;
(d) A description of all significant facts considered in making this
determination;
(e) A statement indicating whether the actions conform to applicable
State or local floodplain protection standards; and
(f) A statement listing other involved agencies and individuals.
(2) Private Party Notification--For all actions to be located in
floodplains or wetlands in which a private party is participating as an
applicant, purchaser, or financier, it shall be the responsibility of
the approving official to inform in writing all such parties of the
hazards associated with such locations.
4. The Relationship of the Executive Orders to the National Flood
Insurance Program. The National Flood Insurance Program establishes the
floodplain management criteria for participating communities as well as
the performance standards for building in floodplains so that the
structure is protected against flood risks. As such, flood insurance
should be viewed only as a financial mitigation measure that must be
utilized only after FmHA or its successor agency under Public Law 103-
354 determines that there is no practicable alternative for avoiding
construction in the floodplain and that all practicable mitigation
measures have been included in
[[Page 62]]
the proposal. That is, for a proposal to be located in the floodplain,
it is not sufficient simply to require insurance. The Agency's flood
insurance requirements are explained in subpart B of part 1806 of this
chapter (FmHA Instruction 426.2). It should be understood that an
applicant proposing to build in the floodplain is not even eligible for
FmHA or its successor agency under Public Law 103-354 financial
assistance unless the project area is participating in the National
Flood Insurance Program.
[53 FR 36262, Sept. 19, 1988]
Sec. Exhibit D to Subpart G of Part 1940--Implementation Procedures for
the Endangered Species Act
1. FmHA or its successor agency under Public Law 103-354 shall
implement the consultation procedures required under Section 7 of the
Endangered Species Act as specified in 50 CFR 402. It is important to
note that these consultation procedures apply to the disposal of real
property by FmHA or its successor agency under Public Law 103-354 and to
all FmHA or its successor agency under Public Law 103-354 applications
for financial assistance and subdivision approval, including those
applications which are exempt from environmental assessments. (See Sec.
1940.310.) Unless repeated in this paragraph, the definitions for the
terms utilized are found in 50 CFR 402.02.
2. State Directors shall ensure that State, District, and County
Offices maintain current publications of listed and proposed species as
well as critical habitats found in their respective jurisdictions.
3. When an application to FmHA or its successor agency under Public
Law 103-354 involves financial assistance or permit approval from
another Federal agency(s), the FmHA or its successor agency under Public
Law 103-354 reviewer shall work with the other Agency to determine a
lead Agency for the consultation process. When FmHA or its successor
agency under Public Law 103-354 is not the lead Agency, the reviewer
shall ensure that the lead Agency informs the approporiate Area Manager,
U.S. Fish and Wildlife Service (FWS), or Regional Director, National
Marine Fisheries Service (NMFS), of FmHA or its successor agency under
Public Law 103-354's involvement.
4. Each disposal action, application for financial assistance or
subdivision approval shall be reviewed by the FmHA or its successor
agency under Public Law 103-354 official responsible for completing
environmental assessments in order to determine if the proposal either
may affect a listed species or critical habitat or is likely to
jeopardize the continued existence of a proposed species or result in
the destruction or adverse modification of a proposed critical habitat.
a. For applications subject to environmental assessments, this
review shall be accomplished as part of the assessment.
b. For those applications that are excluded from an environmental
assessment, this review shall be documented as part of Form FmHA or its
successor agency under Public Law 103-354 1940-22, ``Environmental
Checklist For Categorical Exclusions,'' and shall be accomplished as
early as possible after receipt of the application and prior to approval
of the application.
c. For applications subject to an environmental impact statement,
FmHA or its successor agency under Public Law 103-354 shall request from
the Area Manager, FWS, and the Regional Director, NMFS, a list of the
proposed and listed species that may be in the area of the proposal.
Within 30 days, the FWS and NMFS will respond to FmHA or its successor
agency under Public Law 103-354 with this list. FmHA or its successor
agency under Public Law 103-354 shall then conduct, as part of the
process of preparing the draft environmental impact statement, a
biological assessment of these species to determine which species are in
the area of the proposal and how they may be affected. This biological
assessment should be completed within 180 days or a time mutually agreed
upon between FmHA or its successor agency under Public Law 103-354 and
FWS or NMFS. Upon completion of the biological assessment, if FmHA or
its successor agency under Public Law 103-354 determines either that the
proposal may affect a listed species or critical habitat or is likely to
jeopardize the continued existence of proposed species or result in the
destruction or adverse modification of proposed critical habitat, the
formal consultation procedures shall be initiated as specified in
paragraph 7b below. To the extent practical, these procedures shall be
concluded and their results reflected in the draft EIS. For all draft
EISs in which FmHA or its successor agency under Public Law 103-354
determines there will be no effect upon a listed or proposed species or
critical habitat and FWS or NMFS indicated the presence of such species
upon the initial inquiry, a copy of the draft shall be provided to that
agency for review and comment.
5. As indicated in paragraph 4 above, the focus of this review
process is to determine if the proposal will affect a listed species or
critical habitat or is likely to jeopardize the continued existence of a
proposed species or result in the destruction or adverse modification of
a proposed critical habitat. Because this impact terminology is specific
to the Act, it is important to understand its meaning.
a. To jeopardize the continued existence of a species means to
engage in a project which reasonably would be expected to reduce the
[[Page 63]]
reproduction, numbers, or distribution of a listed species to such an
extent as to appreciably reduce the likelihood of the survival and
recovery of that species in the wild. The level of reduction necessary
to constitute jeopardy would be expected to vary among listed species.
b. The destruction or adverse modification of a critical habitat
means a direct or indirect alteration of critical habitat which
appreciably diminishes the value of that habitat for survival and
recovery of a listed species. Such alterations include but are not
limited to those diminishing the following requirements for:
(i) Space for individual and population growth and for normal
behavior;
(ii) Food, water, air, light, minerals, or other nutritional or
physiological requirements;
(iii) Cover or shelter;
(iv) Sites for breeding, reproduction, or rearing of offspring; and
(v) Habitats that are protected from disturbances or are
representative of the geographical distribution of listed species.
6. It is also important to note that the consultation procedures
differ when the subject of the consultation is a listed species or
critical habitat as opposed to a proposed species or critical habitat.
The latter are defined as those that the Secretary of Interior or
Commerce are considering for listing and have so proposed through
notification in the Federal Register. When listed species or critical
habitats are invloved, FmHA or its successor agency under Public Law
103-354 shall initiate formal consultation procedures whenever it
determines that a proposed project may affect them, either beneficially
or adversely. For proposed species or critical habitats, FmHA or its
successor agency under Public Law 103-354 shall first determine if the
proposed project is likely to jeopardize the continued existence of
proposed species or result in the destruction or adverse modification of
proposed critical habitat. Whenever this determination is made, FmHA or
its successor agency under Public Law 103-354 shall confer with the
appropriate agency identified in paragraph 7 of this exhibit and, in so
doing, shall focus on (i) determining the status of the listing process,
and (ii) attempting to cooperatively develop alternatives or measures
for inclusion in the project that avoid or mitigate the identified
adverse impacts. The results of this process shall be documented in the
environmental review being done for the proposed project and, if this
review is an environmental assessment, shall be an important factor in
determining the need for an environmental impact statement. No action
shall be taken by the approving official on the application unitl the
requirement to confer on proposed species or critical habitat has been
completed. Paragraphs 7 through 9 of this exhibit outline the formal
consultation procedure for listed species or critical habitats.
7. In initiating the review process for a project, the list of
species and critical habitats, including proposed, shall be examined to
determine the potential for impacts. Projects planned within established
communities are less likely to affect listed or proposed species or
their critical habitat. Projects to be located in remote areas, heavily
forested areas and/or previously undisturbed areas are more likely to
affect these species. For projects located in such areas, the reviewer
shall, at a minimum, discuss the project's potential impact on listed or
proposed species with officials of the appropriate State wildlife
protection agency or the Area Manager, FWS, or the Regional Director,
NMFS, as appropriate. The latter organization generally has
responsibility for marine species. The specific list of species under
NMFS's jurisdiction can be found at 50 CFR 222.23(a) and 227.4. Such
discussions shall be considered as informal consultations and are not a
substitute for the required consultation process outlined below.
a. Whenever the reviewer, after reviewing the list and contacting
appropriate experts, formally determines that the proposal will have no
effect on a listed or proposed species or its critical habitat, these
review procedures are completed, unless new information comes to light
as discussed in paragraph 9 of this exhibit, or consultation is
requested by the appropriate Area Manager, FWS, or Regional Director,
NMFS.
b. If the reviewer determines there may be an effect on a listed
species or a critical habitat or is unable to make a clear
determination, the reviewer shall so inform the SEC (assuming the
reviewer is not the SEC). The latter shall either (i) convey a written
request for consultation, along with available information to the
appropriate Area Manager, FWS or Regional Director, NMFS, for the
Federal region where the proposal will be carried out, or (ii) request
Program Support Staff (PSS) to perform such consultation. FmHA or its
successor agency under Public Law 103-354 shall initiate this formal
consultation process and not the applicant. See paragraph 4.c. of this
exhibit for initiating consultation where an environmental impact
statement is being done for the application. Until the consultation
process is completed, as outlined in 50 CFR 402.04, FmHA or its
successor agency under Public Law 103-354 shall not approve the
application. Should the need for consultation be identified after
application approval, FmHA or its successor agency under Public Law 103-
354 shall refrain from making any irreversible or irretrievable
commitment of resources which would foreclose the consideration of
modifications or alternatives to the identified activity or program.
[[Page 64]]
8. Several possible responses may result from initiation of the
formal consultation process with each requiring further specific
actions.
a. Whenever the Area Manager, FWS, or Regional Director, NMFS,
informs FmHA or its successor agency under Public Law 103-354 that
insufficient information exists to conclude the consultation process,
the SEC with assistance as feasible from the FWS or NMFS and State
sources of expertise shall then obtain additional information and
conduct, as needed, biological surveys or studies to determine how the
proposal may affect listed species or their critical habitat. The cost
and performance of such studies shall be handled in the same manner as
in the preparation of an Environmental Impact Statement. (See Sec.
1940.336 of this subpart.)
b. Whenever the Area Manager, FWS, or Regional Director, NMFS,
responds that the proposal will either promote the conservation of a
listed species or is not likely to jeopardize the continued existence of
a listed or proposed species or result in the destruction or adverse
modification of its critical habitat, the FmHA or its successor agency
under Public Law 103-354 reviewer shall formally make a similar
determination, attaching the response as documentation. This concludes
the formal consultation process unless new information comes to light as
discussed in paragraph 9 of this exhibit.
c. Whenever the results of the consultation process include
recommendations by the Area Manager, FWS, or Regional Director, NMFS,
for modifications to the project which would enhance the conservation
and protection of a listed species or its critical habitat, the State
Director shall review these recommendations and require that they be
incorporated into the project as either design changes or special
conditions to the offer of assistance. If the State Director does not
believe the recommendations can be so adopted, the Administrator shall
be requested to review the recommendations and to assist in the further
resolution of the matter.
d. Whenever the appropriate Area Manager, FWS, or Regional Director,
NMFS, determines that the proposal is likely to jeopardize the continued
existence of a listed species or result in the destruction or adverse
modification of its critical habitat, the FmHA or its successor agency
under Public Law 103-354 applicant shall be so informed and the project
denied on this basis. However, if the State Director believes that
funding or approval of the application is (i) of national, regional, or
great local significance, and (ii) that there are no reasonable and
prudent alternatives to avoiding the listed species impact, the State
Director can request the Administrator, through PSS, to review the
proposal and the results of the consultation process. Based upon this
review, the Administrator shall either inform the State Director that a
request for an exemption from section 7 of the Endangered Species Act is
not warranted and the application shall be denied or, if the
Administrator believes it is warranted, shall request an exemption from
the Endangered Species Committee established by section 7(e) of the Act.
No action shall be taken by the State Director on the application until
the Administrator informs the State Director of the results of the
exemption request.
9. Once completed, the consultation process shall be reinitiated by
FmHA or its successor agency under Public Law 103-354 or upon request of
the appropriate Area Manager, FWS, or Regional Director, NMFS, if:
a. New information or modification of the proposal reveals impacts
that may affect listed or proposed species or their habitats; or
b. A new species is listed that may be affected by the proposal.
10. In completing the above compliance procedures, particularly when
consulting with the referenced agencies, formally or informally, the
preparer of the environmental review document will request information
on whether any Category I or Category II species may be present within
the project area. These are candidate species; they are presently under
consideration for listing under section 4 of the Endangered Species Act.
Category I species are those for which FWS currently has substantial
date on hand to support the biological appropriateness of proposing to
list the species as endangered or threatened. Currently data are being
gathered concerning essential habitat needs and, for some species, data
concerning the precise boundaries of critical habitat designations.
Development and publication of proposed rules on such species is
anticipated. Category II comprises species for which information now in
the possession of the FWS indicates that proposing to list the species
as endangered or threatened is possibly appropriate but for which
conclusive data on biological vulnerability and threat(s) are not
currently available to presently support proposed rules. Whenever a
Category I or II species may be affected, the preparer of the
environmental review document will determine if the proposed project is
likely to jeopardize the continued existence of the species. Whenever
this determination is made, the same compliance procedures specified in
paragraph 6 of this exhibit for a proposed species will be followed. The
purpose of the requirements of this paragraph is to comply with the
National Environmental Policy Act as well as Departmental Regulation
9500-4, Fish and Wildlife Policy, which specifies that USDA agencies
will avoid actions which may
[[Page 65]]
cause a species to become threatened or endangered.
[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 36266, Sept. 19, 1988]
Sec. Exhibit E to Subpart G of Part 1940--Implementation Procedures for
the Wild and Scenic Rivers Act
1. Each application for financial assistance or subdivision approval
as well as the proposed disposal of real property by FmHA or its
successor agency under Public Law 103-354 shall be reviewed to determine
if it will affect a river or portion of it which is either included in
the National Wild and Scenic Rivers System, designated for potential
addition to the system, or identified in the Nationwide Inventory
prepared by the National Park Service (NPS) in the Department of the
Interior. The Nationwide Inventory identifies those river segments that,
after preliminary review, appear to qualify for inclusion in the system.
(For purposes of this subpart, river segments in the Nationwide
Inventory shall be treated the same as segments within the system with
the exception of paragraph 8.) For applications subject to environmental
assessments, the review shall be accomplished as part of the assessment.
For applications that are excluded from an environmental assessment,
this review shall be documented as part of Form FmHA or its successor
agency under Public Law 103-354 1940-22, ``Environmental Checklist For
Categorical Exclusions,'' within the reviewing office and shall be
accomplished as early as possible after receipt of the application and
prior to approval of the application. The FmHA or its successor agency
under Public Law 103-354 official responsible for completing the
environmental assessment shall accomplish this review. (See Sec.
1940.316 of this subpart.)
2. In order to effectively implement this review, State Directors
shall ensure that State, District and County Offices maintain current
listings of rivers within their respective States that are included in
or designated for potential addition to the system as well as those
identified in the Nationwide Inventory prepared by NPS.
3. For applications for water resources projects, as defined in
Sec. 1940.302(i) of this subpart, the purpose of this review shall be
to determine whether the proposal would have a direct and adverse effect
on the values which served as the basis for the river's inclusion in the
system or designation for potential addition. For other applications,
the purpose of the review shall be to determine if the proposal would
invade the river area or unreasonably diminish the scenic, recreational,
and fish and wildlife values present in the area. To make these
determinations, the reviewer shall consult with the appropriate regional
office of NPS if the proposal (i) would be located within one-quarter
mile of the banks of the river, (ii) involves withdrawing water from the
river or discharging water to the river via a point source, or (iii)
would be visible from the river. The appropriate regional office of the
Forest Service (FS) shall be contacted under similar circumstances when
the effected river is on FS lands. Consultation shall be initiated by a
written request for comments on the potential impacts accompanied by a
description of the project and its location. The reviewer shall consult
in other instances when the likelihood of an impact on a river in the
system is identified as part of the environmental review. When the
reviewer determines there is no potential impact on such a river, the
documentation of this determination concludes the review process, unless
reinitiation is required under paragraph 10 of this exhibit. In all
other cases, the review is completed as specified below in paragraphs 4
through 9 of this exhibit.
4. If the review is at the County or District Office level, the
reviewer can request the State Director (see Sec. 1940.307 of this
subpart) to perform the above consultation. The State Director can in
turn make a similar request of the National Office. If not requested to
perform the consultation for applications approvable at the County and
District Office levels, the SEC shall be informed whenever NPS or FS
advises that there is a potential for an adverse impact on a river
within the system or that protective measures need to be included or
designed into the proposal. In all cases, consultation shall be
initiated by FmHA or its successor agency under Public Law 103-354 and
not the applicant. Until consultation is complete, FmHA or its successor
agency under Public Law 103-354 shall not approve the application.
Should the need for consultation be identified after application
approval, FmHA or its successor agency under Public Law 103-354 shall,
if still within its power at the time of identification, refrain from
making any irreversible or irretrievable commitments of resources which
would foreclose the consideration of modifications or alternatives to
the project.
5. If NPS or FS advises there is no potential for an adverse effect
as described in paragraph 3 of this exhibit, this review process is
concluded, unless the need to reinitiate arises. (See paragraph 10 of
this exhibit.)
6. Whenever the results of the consultation process include
recommendations by NPS or FS to modify the proposal in order to avoid an
adverse effect, as described in paragraph 3 above, the State Director
shall review these recommendations and require that they be incorporated
into the project as either design changes or special conditions to the
offer of assistance. If the State Director does
[[Page 66]]
not believe that the Regional Director's recommendations can be so
adopted, the Administrator shall be requested to review the
recommendations and to assist in the further resolution of the matter.
7. If NPS or FS advises that the proposal will have an unavoidable
adverse effect, as described in paragraph 3 of this exhibit, on a river
segment which is either included in the National Wild and Scenic Rivers
System or designated for potential addition to the system, the FmHA or
its successor agency under Public Law 103-354 applicant will be informed
by the reviewing office and the application denied on this basis.
However, if the State Director disagrees with this determination, the
State Director can request the Administrator to review the proposal and
attempt to further resolve the matter. The specific reasons for
disagreement along with supporting documentation must be included in
such a request. Based upon a review of this request, the Administrator
shall either inform the State Director that no further consultation is
warranted and the application shall be denied or shall request the
headquarters staff of NPS or FS to further review the matter. No action
shall be taken by the State Director on the application until the
Administrator informs the State Director of the results of this further
review and consultation.
8. If NPS or FS advises that the proposal will have an adverse
effect, as described in paragraph 3 of this exhibit, on a river segment
identified in the Nationwide Inventory, the reviewer shall further
consult with NPS or FS in order to formulate adequate measures or
modification to avoid or mitigate the potential adverse effect. The
purposes of such measures or modifications is to ensure that the
proposal does not effectively foreclose the designation of a wild,
scenic, or recreational river segment. Once concurrence is reached and
documented with NPS or FS regarding modifications, the State Director
shall require that they be incorporated into the proposal as either
design changes or special conditions to the offer of assistance. If the
State Director is not able to reach an agreement with NPS or FS on
appropriate modifications, the Administrator shall be requested to
assist in the further resolution of the matter.
9. If an application involves financial assistance or permit
approval from another Federal Agency, the FmHA or its successor agency
under Public Law 103-354 reviewer shall work with the other agency(s) to
determine a lead Agency for the consultation process. When FmHA or its
successor agency under Public Law 103-354 is not the lead Agency, the
reviewer shall ensure that the lead Agency informs NPS or FS of FmHA or
its successor agency under Public Law 103-354's involvement.
10. Once completed, the consultation process shall be reinitiated by
FmHA or its successor agency under Public Law 103-354 if new information
or modification of the proposal reveals impacts to a river within the
System or Nationwide Inventory.
Sec. Exhibit F to Subpart G of Part 1940--Implementation Procedures for
the Coastal Barrier Resources Act
1. The Act applies to barrier islands that Congress has designated
for inclusion in the Coastal Barrier Resources System. Since coastal
barriers are only found in East and Gulf Coast States, no other State
Offices fall under the requirements of the Act and, therefore, need be
concerned with these implementation procedures.
2. On coastal barriers that are included in the system, the Act
prohibits any new expenditures or new financial assistance by the
Federal Government. There are some limited exceptions that are contained
in Section 6 of the Act and listed in exhibit L of this subpart.
Consequently, all of the following actions must be reviewed by the
environmental reviewer to determine if they would be located within the
System: any application for financial assistance, any proposed direct
expenditure of FmHA or its successor agency under Public Law 103-354
funds for construction or maintenance purposes, any request for
subdivision approval, and any proposed disposal of real property that
includes any form of financial assistance or subsidy to the purchaser.
The boundaries of the system can be determined by reviewing a series of
maps passed with the legislation and distributed by the Department of
the Interior. Each State Director is responsible for ensuring that those
field offices having components of the system within their jurisdictions
are aware of the system's boundaries therein.
3. Exhibit L lists the six categories of exceptions, that is, those
actions that may be taken within the system. No exception may be
implemented, however, without first consulting with the Secretary of the
Interior. It should also be noted that the sixth category is more
limited than the first five. Besides meeting the consultation
requirement for this sixth category, the sponsoring Agency must also
determine whether the proposed exception is consistent with the purposes
of the Act.
4. For those actions that are reviewed and determined not to be
within the System, the environmental reviewer must document this result
by checking the appropriate compliance blocks on either Form FmHA or its
successor agency under Public Law 103-354 1940-22, ``Environmental
Checklist for Categorical Exclusions,'' or Form FmHA or its successor
agency under Public Law 103-354 1940-21,
[[Page 67]]
``Environmental Assessment for Class I actions,'' or by so stating this
result in the environmental assessment for Class II Actions (exhibit H),
depending upon whichever format is applicable to the action under
review.
5. For those actions that would be located within the system, one of
the following two steps must be taken:
a. If the environmental reviewer concludes that the action does not
meet the criteria for an exception, as listed in exhibit L, the reviewer
shall so inform the approving official and a final determination made in
the manner indicated in Sec. 1940.316 of this subpart. If this
determination is consistent with the environmental reviewer's
conclusion, the action must be denied by the approving official and the
affected applicant or party informed of the reason for denial. If it is
determined that the action may qualify for an exception, the steps
identified in Item b immediately below must be implemented prior to a
decision on this question.
b. If the environmental reviewer concludes that the proposed action
may meet the exception criteria, the approving official must be so
informed. Whenever the approving official agrees or makes a similar
determination as a result of the review conducted in Item a immediately
above, consultation shall be initiated with the Secretary of the
Interior by either the State Director or the Administrator for a
National Office activity. FmHA or its successor agency under Public Law
103-354 shall request the Secretary's views as to whether the exception
criteria are met and shall provide the Secretary with the following
information:
(1) A detailed description of the action and its location;
(2) A description of the affected environment within the System and
the impacts of the proposed action;
(3) The applicable exception criteria and FmHA or its successor
agency under Public Law 103-354's reasons for believing they apply to
this action; and
(4) If a Section 6(a)(6) exception is claimed, FmHA or its successor
agency under Public Law 103-354's reasons for believing the action to be
consistent with the purposes of the Act.
Should the Secretary concur in the exception criteria being met,
that portion of the environmental assessment relating to compliance with
the Act shall be completed and the corresponding documentation attached.
Should the Secretary not concur, a final decision on the approval or
denial of the action must be made by the Administrator.
Sec. Exhibit G to Subpart G of Part 1940 [Reserved]
Sec. Exhibit H to Subpart G of Part 1940--Environmental Assessment for
Class II Actions
In completing this assessment, it is important to understand the
comprehensive nature of the impacts which must be analyzed.
Consideration must be given to all potential impacts associated with the
construction of the project, its operation and maintenance, the
operation of all identified primary beneficiaries, and the attainment of
the project's major objectives, whether they be an increased housing
stock, community improvement, economic development, or greater
agricultural productivity. This last category, the attainment of the
project's major objectives, often induces or supports changes in
population densities, land uses, community services, transportation
systems and resource consumption. The scope of the assessment is
broadened even further when there are related activities involved. The
impacts of these activities must also be assessed.
The preparer will consult as indicated in Sec. 1940.318(b) of this
subpart with appropriate experts from Federal, State, and local
agencies, universities, and other organizations or groups whose views
could be helpful in the assessment of potential impacts. In so doing,
each discussion which is utilized in reaching a conclusion with respect
to the degree of an impact will be summarized in the assessment as
accurately as possible and include the name, title, phone number, and
organization of the individual contacted, plus the date of contact.
Related correspondence should be attached to the assessment.
The FmHA or its successor agency under Public Law 103-354
environmental assessment shall be prepared in the following format. It
shall address the listed items and questions and contain as attachments
the indicated descriptive materials, as well as the environmental
information submitted by the applicant, Form FmHA or its successor
agency under Public Law 103-354 1940-20, ``Request for Environmental
Information.''
The assessment has been designed to cover the wide variety of
projects and environments with which the Agency deals. Consequently, not
every issue or potential impact raised in the assessment may be relevant
to each project. The purpose of the format is to give the preparer an
understanding of a standard range of impacts, environmental factors, and
issues which may be encountered. In preparing an assessment, each topic
heading identified by a Roman numeral and each environmental factor
listed under topic heading IV, such as air quality, for example, must be
addressed.
The amount of analysis and material that must be provided will
depend upon the type
[[Page 68]]
and size of the project, the environment in which it is located, and the
range and complexity of the potential impacts. The amount of analysis
and detail provided, therefore, must be commensurate with the magnitude
of the expected impact. The analysis of each environmental factor (i.e.,
water quality) must be taken to the point that a conclusion can be
reached and supported concerning the degree of the expected impact with
respect to that factor.
For example, a small community center may not require detailed
information on air emissions or solid waste management, but an
industrial facility would. Similarly, an irrigation project for a
farming operation would concentrate on such factors as water quality and
fish and wildlife, rather than land use changes. The extension of a
water or sewer system or the approval of a subdivision, on the other
hand, would have to give close attention to all factors, with potential
land use changes being a particularly important one.
I. Project Description and Need
Identify the name, project number, location, and specific elements
of the project along with their sizes, and, when applicable, their
design capacities. Indicate the purpose of the project, FmHA or its
successor agency under Public Law 103-354's position regarding the need
for it, and the extent or area of land to be considered as the project
site.
II. Primary Beneficiaries and Related Activities
Identify any existing businesses or major developments that will
benefit from the project and those which will expand or locate in the
area because of the project. Specify by name, product, service, and
operations involved.
Identify any related activities which are defined as interdependent
parts of a FmHA or its successor agency under Public Law 103-354 action.
Such undertakings are considered interdependent parts whenever they
either make possible or support the FmHA or its successor agency under
Public Law 103-354 action or are themselves induced or supported by the
FmHA or its successor agency under Public Law 103-354 action or another
related activity. These activities may have been completed in the very
recent past and are now operational, or they may reasonably be expected
to be accomplished in the near future. Related activities may or may not
be federally permitted or assisted. When they are, identify the involved
Federal Agency(s).
In completing the remainder of the assessment, it must be remembered
that the impacts to be addressed are those which stem from the project,
the primary beneficiaries, and the related activities.
III. Description of Project Area
Describe the project site and its present use. Describe the
surrounding land uses; indicate the directions and distances involved.
The extent of the surrounding land to be considered depends on the
extent of the impacts of the project, its related activities, and the
primary beneficiaries. Unique or sensitive areas must be pointed out.
These include residential, schools, hospitals, recreational, historical
sites, beaches, lakes, rivers, parks, floodplains, wetlands, dunes,
estuaries, barrier islands, natural landmarks, unstable soils, steep
slopes, aquifer recharge areas, important farmlands and forestlands,
prime rangelands, endangered species habitats or other delicate or rare
ecosystems.
Attach adequate location maps of the project area, as well as (1) a
U.S. Geological Survey ``15 minute'' (``7\1/2\ minute,'' if available,)
topographic map which clearly delineates the area and the location of
the project elements, (2) the Department of Housing and Urban
Development's floodplain map(s) for the project area, (3) site photos,
(4), if completed, a standard soil survey for the project, and (5), if
available, an aerial photograph of the site. When necessary for
descriptive purposes or environmental analysis, include land use maps or
other graphic information. All graphic materials shall be of high
quality resolution.
IV. Environmental Impact
1. Air Quality. Discuss, in terms of the amounts and types of
emissions to be produced, all aspects of the project including
beneficiaries' operations and known indirect effects (such as increased
motor vehicle traffic) which will affect air quality. Indicate the
existing air quality in the area. Indicate if topographical or
meteorological conditions hinder or affect the dispersal of air
emissions. Evaluate the impact on air quality given the types and
amounts of projected emissions, the existing air quality, and
topographical and meterological conditions. Discuss the project's
consistency with the State's air quality implementation plan for the
area, the classification of the air quality control region within which
the project is located, and the status of compliance with air quality
standards within that region. Cite any contacts with appropriate experts
and agencies which must issue necessary permits.
2. Water Quality. Discuss, in terms of amounts and types of
effluents, all aspects of the project including primary beneficiaries'
operations and known indirect effects which will affect water quality.
Indicate the existing water quality of surface and/or underground water
to be affected. Evalute the impacts of the project on this existing
water quality. Indicate if an aquifer recharge area
[[Page 69]]
is to be adversely affected. If the project lies within or will affect a
sole source aquifer recharge area as designated by EPA, contact the
appropriate EPA regional office to determine if its review is necessary.
If it is, attach the results of its review.
Indicate the source and available supply of raw water and the extent
to which the additional demand will affect the raw water supply.
Describe the wastewater treatment system(s) to be used and indicate
their capacity and their adequacy in terms of the degree of treatment
provided. Discuss the characteristics and uses of the receiving waters
for any sources of discharge. If the treatment systems are or will be
inadequate or overloaded, describe the steps being taken for necessary
improvements and their completion dates. Compare such dates to the
completion date of the FmHA or its successor agency under Public Law
103-354 project. Analyze the impacts on the receiving water during any
estimated period of inadequate treatment.
Discuss the project's consistency with the water quality planning
for the area, such as EPA's Section 208 area-wide waste treatment
management plan. Discuss the project's consistency with applicable State
water quality standards to include a discussion of whether or not the
project would either impair any such standard or fail to meet
antidegradation requirements for point or nonpoint sources. Describe how
surface runoff is to be handled and the effect of erosion on streams.
Evaluate the extent to which the project may create shortages for or
otherwise adversely affect the withdrawal capabilities of other present
users of the raw water supply, particularly in terms of possible human
health, safety, or welfare problems.
For projects utilizing a groundwater supply, evaluate the potential
for the project to exceed the safe pumping rate for the aquifer to the
extent that it would (1) adversely affect the pumping capability of
present users, (2) increase the likelihood of brackish or saltwater
intrusion, thereby decreasing water quality, or (3) substantially
increase surface subsidence risks.
For projects utilizing a surface water supply, evaluate the
potential for the project to (1) reduce flows below the minimum required
for the protection of fish and wildlife or (2) reduce water quality
standards below those established for the stream classification at the
point of withdrawal or the adjacent downstream section.
Cite contacts with appropriate experts and agencies that must issue
necessary permits.
3. Solid Waste Management. Indicate all aspects of the project
including primary beneficiaries' operations, and known indirect effects
which will necessitate the disposal of solid wastes. Indicate the kinds
and expected quantities of solid wastes involved and the disposal
techniques to be used. Evaluate the adequacy of these techniques
especially in relationship to air and water quality. Indicate if
recycling or resource recovery programs are or will be used. Cite any
contacts with appropriate experts and agencies that must issue necessary
permits.
4. Land Use. Given the description of land uses as previously
indicated, evaluate (a) the effect of changing the land use of the
project site and (b) how this change in land use will affect the
surrounding land uses and those within the project's area of
environmental impact. Particularly address the potential impacts to
those unique or sensitive areas discussed under Section III, Description
of Project Area, which are not covered by the specific analyses required
in Sections V-XI. Describe the existing land use plan and zoning
restrictions for the project area. Evaluate the consistency of the
project and its impacts on these plans. For all actions subject to the
requirements of exhibit M of this subpart indicate (a) whether or not
highly erodible land, wetland or converted wetland is present, (b) if
any exemption(s) applies to the requirements of exhibit M, (c) the
status of the applicant's eligibility for an FmHA or its successor
agency under Public Law 103-354 loan under exhibit M and (d) any steps
the applicant must take prior to loan approval to retain or retain its
eligibility. Attach a completed copy of Form SCS-CPA-26, ``Highly
Erodible Land and Wetland Conservation Determination,'' for the action.
5. Transportation. Describe available facilities such as highways
and rail. Discuss whether the project will result in an increase in
motor vehicle traffic and the existing roads' ability to safely
accommodate this increase. Indicate if additional traffic control
devices are to be installed. Describe new traffic patterns which will
arise because of the project. Discuss how these new traffic patterns
will affect the land uses described above, especially residential,
hospitals, schools, and recreational. Describe the consistency of the
project's transportation impacts with the transportation plans for the
area and any air quality control plans. Cite any contact with
appropriate experts.
6. Natural Environment. Indicate all aspects of the project
including construction, beneficiaries' operations, and known indirect
effects which will affect the natural environment including wildlife,
their habitats, and unique natural features. Cite contacts with
appropriate experts. If an area listed on the National Registry of
Natural Landmarks may be affected, consult with the Department of
Interior and document these consultations and any agreements reached
regarding avoidance or mitigation of potential adverse impacts.
7. Human Population. Indicate the number of people to be relocated
and arrangements being made for this relocation. Discuss how impacts
resulting from the project such as
[[Page 70]]
changes in land use, transportation changes, air emissions, noise, odor,
etc. will affect nearby residents and users of the project area and
surrounding areas. Discuss whether the proposal will accommodate any
population increases and, if so, describe the potential impacts of these
increases on the area's public and community services such as schools,
health care, social services, and fire protection. Cite contacts with
appropriate experts.
8. Construction. Indicate the potential effects of construction of
the project on air quality, water quality, noise levels, solid waste
disposal, soil erosion and siltation. Describe the measures that will be
employed to limit adverse effects. Give particular consideration to
erosion, stream siltation, and clearing operations.
9. Energy Impacts. Indicate the project's and its primary
beneficiaries' effects on the area's existing energy supplies. This
discussion should address not only the direct energy utilization, but
any major indirect utilization resulting from the siting of the project.
Describe the availability of these supplies to the project site. Discuss
whether the project will utilize a large share of the remaining capacity
of an energy supply or will create a shortage of such supply. Discuss
any steps to be taken to conserve energy.
10. Discuss any of the following areas which may be relevant: noise,
vibrations, safety, seismic conditions, fire-prone locations, radiation,
and aesthetic considerations. Cite any disucssion with appropriate
experts.
V. Coastal Zone Management Act*
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* Complete only if coastal or Great Lakes State.
---------------------------------------------------------------------------
Indicate if the project is within or will impact a coastal area
defined as such by the State's approved Coastal Zone Management Program.
If so, consult with the State agency responsible for the Program to
determine the project's consistency with it. The results of this
coordination shall be included in the assessment and considered in
completing the environmental impact determination and environmental
findings (Item XXI below).
VI. Compliance With Advisory Council on Historic Preservation's
Regulations
In this Section, the environmental reviewer shall detail the steps
taken to comply with the above regulations as specified in subpart F of
part 1901 of this chapter. First, indicate that the National Register of
Historic Places, including its monthly supplements, has been reviewed
and whether there are any listed properties located within the area to
be affected by the project. Second, indicate the steps taken such as
historical/archeological surveys to determine if there are any
properties eligible for listing located within the affected area.
Summarize the results of the consultation with the State Historic
Preservation Officer (SHPO) and attach appropriate documentation of the
SHPO's views. Discuss the views of any other experts contacted. Based
upon the above review process and the views of the SHPO, state whether
or not an eligible or listed property will be affected.
If there will be an effect, discuss all of the steps and protective
measures taken to complete the advisory Council's regulations. Describe
the affected property and the nature of the effect. Attach to the
assessment the results of the coordination process with the Advisory
Council on Historic Preservation.
VII. Compliance With the Wild and Scenic Rivers Act
Indicate whether the project will affect a river or portion of it
which is either included in the National Wild and Scenic Rivers System
or designated for potential addition to the system. This analysis shall
be conducted through discussions with the appropriate regional office of
the National Park Service or the Forest Service when its lands are
involved, as well as the appropriate State agencies having
implementation authorities. See exhibit E for specific implementation
instructions for this Act. A summary of discussions held or any required
formal coordination shall be included in the assessment and considered
in completing the environmental impact determination and environmental
findings (Item XXI below).
VIII. Compliance With the Endangered Species Act
Indicate whether the project will either (1) affect a listed
endangered or threatened species or critical habitat or (2) adversely
affect a proposed critical habitat for an endangered or threatened
species or jeopardize the continued existence of a proposed endangered
or threatened species. This analysis will be conducted in consultation
with the Fish and Wildlife Service and the National Marine Fisheries
Service, when appropriate. Any formal or informal consultations
conducted with these agencies as well as any State wildlife protection
agency will also address impacts to Category I and Category II species.
See exhibit D of this subpart for specific implementation instructions.
The results of any required coordination shall be included in the
assessment along with any completed biological opinion and mitigation
measures to be required for the project. These factors shall be
considered in completing the environmental impact determination.
[[Page 71]]
IX. Compliance With Farmland Protection Policy Act and Departmental
Regulation 9500-3, Land Use Policy
Indicate whether the project will either directly or indirectly
convert an important land resource(s) identified in the Act or
Departmental Regulation, other than floodplains or wetlands which should
be addressed below in Item X of this exhibit. If a conversion may
result, determine if there is a practicable alternative to avoiding it.
If there is no such alternative, determine whether all practicable
mitigation measures are included in the project. Document as an
attachment these determinations and the steps taken to inform the
public, locate alternatives, and mitigate potential adverse impacts. See
exhibit C of this subpart for specific implementation guidance.
X. Compliance With Executive Order 11988, Floodplain Management, and
Executive Order 11990, Protection of Wetlands
Indicate whether the project is either located within a 100-year
floodplain (500-year floodplain for a critical action) or a wetland or
will impact a floodplain or wetland. If so, determine if there is a
practicable alternative project or location. If there is no such
alternative, determine whether all practicable mitigation measures are
included in the project and document as an attachment these
determinations and the steps taken to inform the public, locate
alternatives, and mitigate potential adverse impacts. See the U.S. Water
Resources Council's Floodplain Management Guidelines for more specific
guidance as well as exhibit C of this subpart.
XI. Compliance With Coastal Barrier Resources Act
Indicate whether the project is located within the Coastal Barrier
Resources System. If so, indicate whether or not the project meets an
exception criteria under the Act and the results of any consultation
with the Secretary of the Interior regarding its qualification as an
exception. See exhibit F of this subpart for specific implementation
instructions as well as exhibit L for a listing of the exception
criteria. (Those States not having any components of the system within
their jurisdiction need not reference this item in their assessments.)
XII. State Environmental Policy Act
Indicate if the proposed project is subject to a State environmental
policy act or similar regulation. Summarize the results of compliance
with these requirements and attach available documentation. (See Sec.
1940.328 of this subpart for further guidance.)
XIII. Consultation Requirements of Executive Order 12372,
Intergovernmental Review of Federal Programs
Attach the comments of State, regional, or local agencies (if this
review process is required for the project) and respond to all comments
that deal with the subject matters discussed in this assessment format
or are otherwise of an environmental nature.
XIV. Environmental Analysis of Participating Federal Agency
Indicate if another Federal Agency is participating in the project
either through the provision of additional funds, a companion project,
or a permit review authority. Summarize the results of the involved
Agency's environmental impact analysis and attach available
documentation. (See Sec. 1940.318(d) of this subpart for further
guidance.)
XV. Reaction to Project
Discuss any negative comments or public views raised about the
project and the consideration given to these comments. Indicate whether
a public hearing or public information meeting has been held either by
the applicant or FmHA or its successor agency under Public Law 103-354
to include a summary of the results and any objections raised. Indicate
any other examples of the community's awareness of the project, such as
newspaper articles or public notifications.
XVI. Cumulative Impacts
Summarize the cumulative impacts of this project and the related
activities. Give particular attention to land use changes and air and
water quality impacts. Summarize the results of the environmental impact
analysis done for any of these related activities and/or your discussion
with the sponsoring agencies. Attach available documentation of the
analysis.
XVII. Adverse Impact
Summarize the potential adverse impacts of the proposal as pointed
out in the above analysis.
XVIII. Alternatives
Discuss the feasibility of alternatives to the project and their
environmental impacts. These alternatives should include (a) alternative
locations, (b) alternative designs, (c) alternative projects having
similar benefits, and (d) no project. If alternatives have been fully
discussed above in any of Items VI through X, simply reference that
discussion.
XIX. Mitigation Measures
Describe any measures which will be taken or required by FmHA or its
successor agency under Public Law 103-354 to avoid or mitigate the
identified adverse impacts. Analyze
[[Page 72]]
the environmental impacts and potential effectiveness of the mitigation
measures. Such measures shall be included as special requirements or
provisions to the offer of financial assistance or other appropriate
approval document, if this action does not involve financial assistance.
XX. Consistency With FmHA or Its Successor Agency Under Public Law 103-
354 Environmental Policies
Discuss the project's consistencies and inconsistencies with the
Agency's environmental policies and the State Office's Natural Resource
Management Guide. See Sec. Sec. 1940.304 and 1940.305 for a discussion
of these policies and exhibit B for a discussion of the guide.
XXI. Environmental Determinations
The following recommendations shall be completed:
a. Based on an examination and review of the foregoing information
and such supplemental information attached hereto, I recommend that the
approving official determine that this project will have () a
significant effect on the quality of the human environment and an
Environmental Impact Statement must be prepared; will not have () a
significant effect on the quality of the human environment.
b. I recommend that the approving official make the following
compliance determinations for the below-listed environmental
requirements.
Not in compliance In compliance
. ................... . Clean Air Act.
. ................... . Federal Water Pollution
Control Act.
. ................... . Safe Drinking Water Act--
Section 1424(e).
. ................... . Endangered Species Act.
. ................... . Coastal Barrier
Resources Act.
. ................... . Coastal Zone Management
Act--Section 307(c) (1)
and (2).
. ................... . Wild and Scenic Rivers
Act.
. ................... . National Historic
Preservation Act.
. ................... . Archeological and
Historic Preservation
Act.
. ................... . Subpart B, Highly
Erodible Land
Conservation
. ................... . Subpart C, Wetland
Conservation, of the
Food Security Act.
. ................... . Executive Order 11988,
Floodplain Management.
. ................... . Executive Order 11990,
Protection of Wetlands.
. ................... . Farmland Protection
Policy Act.
. ................... . Departmental Regulation
9500-3, Land Use
Policy.
. ................... . State Office Natural
Resource Management
Guide.
c. I have reviewed and considered the types and degrees of adverse
environmental impacts identified by this assessment. I have also
analyzed the proposal for its consistency with FmHA or its successor
agency under Public Law 103-354 environmental policies, particularly
those related to important farmland protection, and have considered the
potential benefits of the proposal. Based upon a consideration and
balancing of these factors, I recommend from an environmental standpoint
that the project
___ be approved.
___ not be approved because of the attached reasons.
Signature of preparer*__________________________________________________
---------------------------------------------------------------------------
*See Sec. 1940.316 of this subpart for listing of officials
responsible for preparing assessment.
---------------------------------------------------------------------------
Date____________________________________________________________________
Title___________________________________________________________________
State Environmental Coordinator's Review (When required by Sec.
1940.316 of this subpart)
I have reviewed this environmental assessment and supporting
documentation. Following are my positions regarding its adequacy and the
recommendations reached by the preparer. For any matter in which I do
not concur, my reasons are attached as exhibit __.
Do not concur Concur
. ................... . Adequate Assessment.
. ................... . Environmental Impact
Determination.
. ................... . Compliance
Determinations.
. ................... . Project Recommendation.
Signature of State Environmental Coordinator____________________________
Date____________________________________________________________________
[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 36266, Sept. 19, 1988]
[[Page 73]]
Sec. Exhibit I to Subpart G of Part 1940--Finding of No Significant
Environmental Impact
SUBJECT: Finding of No Significant Environmental Impact and Necessary
Environmental Findings for (insert name, location, and any
identification number of project).
TO: Project File.
The attached environmental assessment has been completed for the
subject proposal by the FmHA or its successor agency under Public Law
103-354 environmental reviewer. After reviewing the assessment and the
supporting materials attached to it, I find that the subject proposal
will not significantly affect the quality of the human environment.
Therefore, the preparation of an environmental impact statement is not
necessary.
I also find that the assessment properly documents the proposal's
status of compliance with the environmental laws and requirements listed
therein.
Insert signature and title of approving official as specified in
Sec. 1940.316 of this subpart. ____(Date).
[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 36266, Sept. 19, 1988]
Sec. Exhibit J to Subpart G of Part 1940--Locations and Telephone
Numbers of Federal Emergency Management Administration's Regional
Offices
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Federal region Location FTS No.* Commercial No.
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I................ Boston, MA.............. 223-4741 (617) 223-4741
II............... New York, NY............ 264-8980 (212) 264-8980
III.............. Philadelphia, PA........ 597-9416 (215) 597-9416
IV............... Atlanta, GA............. 257-2400 (404) 881-2400
V................ Chicago, IL............. 353-1500 (312) 353-1500
VI............... Dallas, TX.............. 749-9201 (817) 387-5811
VII.............. Kansas City, MO......... 758-5912 (816) 374-5912
VIII............. Denver, CO.............. 234-2553 (303) 234-2553
IX............... San Francisco, CA....... 556-8794 (415) 556-8794
X................ Seattle, WA............. 396-0284 (206) 481-8800
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*This is the main number for the regional office. For floodplain
information, ask for the Natural and Technological Hazards Division.
Sec. Exhibit K to Subpart G of Part 1940--Locations and Telephone
Numbers of U.S. Fish and Wildlife Service's Wetland Coordinators
The U.S. Fish and Wildlife Service (FWS) is presently preparing the
National Wetlands Inventory. Each regional office of the FWS has named a
staff member as a Wetland Coordinator. These individuals can provide
updated information concerning existing State and local wetland surveys
and Federal inventories. Listed below are the FWS regional offices and
their areas of responsibility.
Region I
Portland, OR--FTS 429-6154; Commercial (503) 231-6154.
Areas Covered: California, Hawaii, Idaho, Nevada, Oregon, Washington,
U.S. Pacific Trust, Territories and Possessions.
Region II
Albuquerque, NM--FTS 474-3152; Commercial (505) 766-2914.
Areas Covered: Arizona, New Mexico, Oklahoma, Texas.
Region III
Twin Cities, MN--FTS 725-3593; Commercial (612) 725-3593.
Areas Covered: Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin.
Region IV
Atlanta, GA--FTS 242-6343; Commercial (404) 221-6343.
Areas Covered: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana,
Mississippi, North Carolina, Panama Canal Zone, Puerto Rico, South
Carolina, Tennessee, Virgin Islands.
Region V
Newton Corner, MA--FTS 829-9379; Commercial (617) 965-5100, Ext. 379.
Areas Covered: Connecticut, Delaware, District of Columbia, Maine,
Maryland, Massachusetts, New Hampshire, New Jersey, New York,
Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia.
Region VI
Denver, CO--FTS 234-5586; Commercial (303) 234-5586.
Areas Covered: Colorado, Iowa, Kansas, Missouri, Montana, Nebraska,
North Dakota, South Dakota, Utah, Wyoming.
Alaska Area Office
Anchorage, AK--Commercial (907) 263-3403.
National Office
St. Petersburg, FL--FTS 826-3624; Commercial (813) 893-3624.
[[Page 74]]
Sec. Exhibit L to Subpart G of Part 1940--Exceptions to Restrictions of
Coastal Barrier Resources Act
Section 6 Exceptions*
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*Quoted from section 6 of the Act, Pub. L. 97-348.
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(a) Notwithstanding section 5, the appropriate Federal officer,
after consultation with the Secretary, may make Federal expenditures or
financial assistance available within the Coastal Barrier Resources
System for--
(1) Any use or facility necessary for the exploration, extraction,
or transportation of energy resources which can be carried out only on,
in, or adjacent to coastal water areas because the use or facility
requires access to the coastal water body;
(2) The maintenance of existing channel improvements and related
structures, such as jetties, and including the disposal of dredge
materials related to such improvements;
(3) The maintenance, replacement, reconstruction, or repair, but not
the expansion, of publicly owned or publicly operated roads, structures,
or facilities that are essential links in a larger network or system;
(4) Military activities essential to national security;
(5) The construction, operation, maintenance, and rehabilitation of
Coast Guard facilities and access thereto; and
(6) Any of the following actions or projects, but only if the making
available of expenditures or assistance therefor is consistent with the
purposes of this Act:
(A) Projects for the study, management, protection and enhancement
of fish and wildlife resources and habitats, including, but not limited
to, acquisition of fish and wildlife habitats and related lands,
stabilization projects for fish and wildlife habitats, and recreational
projects.
(B) The establishment, operation, and maintenance of air and water
navigation aids and devices, and for access thereto.
(C) Projects under the Land and Water Conservation Fund Act of 1965
(16 U.S.C. 4601-4 through 11) and the Coastal Zone Management Act of
1972 (16 U.S.C. 1452 et seq.).
(D) Scientific research, including but not limited to aeronautical,
atmospheric, space, geologic, marine, fish and wildlife and other
research, development and applications.
(E) Assistance for emergency actions essential to the saving of
lives and the protection of property and the public health and safety,
if such actions are performed pursuant to sections 305 and 306 of the
Disaster Relief Act of 1974 (42 U.S.C. 5145 and 5146) and section 1362
of the National Flood Insurance Act of 1968 (42 U.S.C. 4103) and are
limited to actions that are necessary to alleviate the emergency.
(F) The maintenance, replacement, reconstruction, or repair, but not
the expansion, of publicly owned or publicly operated roads, structures,
or facilities.
(G) Nonstructural projects for shoreline stabilization that are
designed to mimic, enhance, or restore natural stabilization systems.
(b) For purposes of subsection (a)(2), a channel improvement or a
related structure shall be treated as an existing improvement or an
existing related structure only if all, or a portion, of the moneys for
such improvement or structure was appropriated before the date of the
enactment of this Act.
Sec. Exhibit M to Subpart G of Part 1940--Implementation Procedures for
the Conservation of Wetlands and Highly Erodible Land Affecting Farmer
Program Loans and Loans to Indian Tribes and Tribal Corporations
1. Background. This exhibit implements the requirements of Subtitle
B, Highly Erodible Land Conservation, and Subtitle C, Wetland
Conservation, of Title XII of the Food Security Act of 1985, Pub. L. 99-
198. The purposes of these Subtitles are to: Reduce soil loss due to
wind and water erosion; protect the Nation's long term capability to
produce food and fiber; reduce sedimentation; improve water quality;
assist in preserving the Nation's wetlands; create better habitat for
fish and wildlife through improved food and cover; and curb production
of surplus commodities by removing certain incentives for persons to
produce agricultural commodities on highly erodible land or converted
wetland.
2. Applicability. The provisions of this exhibit apply to insured
and guaranteed Farmer Program loans and loans to Indian Tribes and
Tribal Corporations, subordinations, transfers and assumptions of such
loans and leases and credit sales of inventory property. For the purpose
of this exhibit, ``Farmer Program loans'' means Farm Operating Loans,
Farm Ownership Loans, Emergency Loans, and Soil and Water Loans. As used
in this exhibit, the word loan is meant to include guarantee as well.
Applicant means an applicant for either an insured or guaranteed loan
and borrower means a recipient of either an insured or guaranteed loan.
3. FmHA or its successor agency under Public Law 103-354 prohibited
activities. Unless otherwise exempted by the provisions of this exhibit,
the proceeds of any Farmer Program loan or loan to an Indian Tribe or
Tribal Corporation made or guaranteed by FmHA or its successor agency
under Public Law 103-354 will not be used either (a) for a purpose that
[[Page 75]]
will contribute to excessive erosion of highly erodible land, or (b) for
a purpose that will contribute to conversion of wetlands to produce an
agricultural commodity. (See Sec. 12.2(a)(1) of subpart A of part 12 of
subtitle A of title 7, which is attachment 1 of this exhibit and is
available in any FmHA or its successor agency under Public Law 103-354
office, for the definition of an agricultural commodity.) Consequently,
any applicant proposing to use loan proceeds for an activity
contributing to either such purpose, will not be eligible for the
requested loan. Any borrower that uses loan proceeds in a manner that
contributes to either such purpose will be in default on the loan.
a. U.S. Department of Agriculture (USDA) definitions. In
implementing this exhibit, FmHA or its successor agency under Public Law
103-354 will use the USDA's definitions of the terms found at Sec. 12.2
of subpart A of part 12 of subtitle A of title 7 (attachment 1 of this
exhibit which is available in any FmHA or its successor agency under
Public Law 103-354 office).
b. Highly erodible land conservation. FmHA or its successor agency
under Public Law 103-354 will conclude that excessive erosion of highly
erodible land results or would result whenever (1) a field on which
highly erodible land is predominant, as determined by the Soil
Conservation Service (SCS), is or would be used to produce an
agricultural commodity without conformance to a conservation system
approved either by SCS or the appropriate conservation district, as
evidenced by a statement from SCS, and (2) such field is not exempt from
the provisions of this exhibit.
c. Wetland conservation. FmHA or its successor agency under Public
Law 103-354 will conclude that a conversion of wetlands to produce an
agricultural commodity has occurred or will occur whenever, as
determined by SCS, (1) a wetland has or will be drained, dredged,
filled, leveled, or otherwise manipulated (including any activity that
results in impairing or reducing the flow, circulation, or reach of
water) that makes possible the production of an agricultural commodity
without further application of the manipulations described herein if (a)
such production would not have been possible but for such action and (b)
before such action such land was wetland and was neither highly erodible
land nor highly erodible cropland; and (2) neither the affected wetland
nor the activity affecting the wetland is exempt from the provisions of
this exhibit.
d. Use of loan proceeds. To use loan proceeds for a purpose that
contributes to either the excessive erosion of highly erodible land or
the conversion of wetlands to produce an agricultural commodity means
that loan proceeds will or have been used in a way that contributes to
either excessive erosion of highly erodible land or the conversion of
wetlands to produce an agricultural commodity by paying the costs of any
of the following:
(1) The purchase of the affected land;
(2) Necessary planning, feasibility, or design studies;
(3) Obtaining any necessary permits;
(4) The purchase, contract, lease or renting of any equipment or
materials necessary to carry out the land modification or conversion to
include all associated operational costs such as fuel and equipment
maintenance costs;
(5) Any labor costs;
(6) The planting, cultivating, harvesting, or marketing of any
agricultural commodity produced on nonexempt highly erodible land to
include any associated operational or material costs such as fuel, seed,
fertilizer, and pesticide costs;
(7) Within the crop year in which the wetland conversion was
completed plus the next ten crop years thereafter, the planting,
cultivating, harvesting, or marketing of any agricultural commodity
produced on the affected land to include any associated operational or
materials costs such as fuel, seed, fertilizer and pesticide costs; or
(8) For the same time period as in subparagraph 3d(7) above, any
costs associated with using for on-farm purposes an agricultural
commodity grown on the affected land.
(9) Additionally, if loan proceeds will be or have been substituted
to pay other costs at anytime during the life of the loan so that non-
loan funds can be used to pay any of the above costs, it is deemed that
loan proceeds will be or have been used for a purpose that contributes
to the prohibited activities described in this paragraph.
4. Prohibited activities under other USDA financial assistance
programs. Unless otherwise exempted, a person becomes ineligible for a
variety of USDA financial assistance programs if that person produces in
any crop year an agricultural commodity on either a field on which
highly erodible land is predominant or a converted wetland. This
ineligibility extends to any commodity produced during the crop year
that the prohibited action occurs. The programs for which the person
would be ineligible include price support payments, farm storage
facility loans, disaster payments, crop insurance, payments made for the
storage of an agricultural commodity, and payments received under a
Conservation Reserve Program Contract. Farmer Program applicants and
borrowers and applicants for, and borrowers of, loans to Indian Tribes
and Tribal Corporations, therefore, can be affected not only by the FmHA
or its successor agency under Public Law 103-354 prohibited activities
but also by the broad USDA sweep of the Subtitles B and C restrictions.
Should such an applicant rely or plan to rely on any of these other USDA
financial assistance programs as a source of
[[Page 76]]
funds to repay its FmHA or its successor agency under Public Law 103-354
loan(s) and then fail to meet the other program(s)' eligibility criteria
related to wetland or highly erodible land conservation, repayment
ability to FmHA or its successor agency under Public Law 103-354 or the
lender of and FmHA or its successor agency under Public Law 103-354
guaranteed loan may be jeopardized. Consequently, those applicants who
are applying for a loan and those borrowers who receive a loan after the
effective date of Subtitles B and C, as designated in part 12 of
subtitle A of title 7, and who include in their projected sources of
repayment, potential funds from any USDA program subject to some form of
Subtitle B or C restrictions will have to demonstrate as part of their
applications, and for borrowers, as part of their farm plan of
operation, their ability to meet the other program(s)' eligibility
criteria. Failure to meet the criteria will require the applicant or
borrower either to document an alternative, equivalent source of
revenues or, if possible, agree to undertake any steps necessary to gain
eligibility for the other program(s). See paragraph 6 of this exhibit
for a discussion of such steps.
5. Applicant's responsibilities.
a. Required information. Every applicant for a Farmer Program loan
or a loan to an Indian Tribe or Tribal Corporation will be required to
provide the following information and, as applicable, certification as
part of the application for financial assistance. An application will
not be considered to be complete until this information and
certification are provided to FmHA or its successor agency under Public
Law 103-354. Once an applicant has provided FmHA or its successor agency
under Public Law 103-354 with information from SCS on the presence of
any highly erodible land, wetland, or converted wetland this information
need not be provided again for a subsequent loan unless there is either
a change in the property upon which FmHA or its successor agency under
Public Law 103-354 loan proceeds will be applied or a change in the
previous information, such as a change in the status of an exemption.
There is a continuing responsibility on FmHA or its successor agency
under Public Law 103-354 borrowers using other USDA financial assistance
programs for repayment purposes to provide the County Supervisor with an
executed copy of any similar certification required by the other USDA
agency at the time of each required certification.
(1) A statement from the SCS indicating whether or not the
applicant's farm property or properties contain either highly erodible
land, wetland, or converted wetland and, if so, whether or not the
applicant qualifies for a particular exemption to the provisions of this
exhibit and as further detailed in paragraph 11 below. The property or
properties will be listed and described in accordance with the
Agriculture Stabilization and Conservation Service's (ASCS) farm records
system. SCS's execution of Form SCS-CPA-26, ``Highly Erodible Land and
Wetland Conservation Determination,'' is necessary to meet this
information requirement.
(2) If either highly erodible land, wetland, or converted wetland is
present, the applicant's properly executed original or carbon copy of
Form AD-1026, ``Highly Erodible Land and Wetland Conservation
Certification.''
b. Required actions. If at any time during the application review
process any of the information or basis for an applicant's certification
changes, the applicant (or the lender in the case of a guaranteed loan)
must immediately notify FmHA or its successor agency under Public Law
103-354. If an applicant intends to produce an agricultural commodity on
a nonexempt field on which highly erodible land is predominant, the
applicant must develop a conservation system approved by SCS or the
appropriate conservation district, demonstrate that it is or will be in
compliance with the system at the time the field is to be used, and
provide SCS's concurrence with this position.
6. FmHA or its successor agency under Public Law 103-354's
application review. The FmHA or its successor agency under Public Law
103-354 County Supervisor will review the information provided by the
applicant from SCS regarding the presence of any highly erodible land,
wetland, or converted wetland and any possible exemptions and take the
actions warranted by the presence of one or more of the circumstances
described below. In carrying out these actions, FmHA or its successor
agency under Public Law 103-354 will consider the technical decisions
rendered by the SCS and the ASCS, as assigned to these agencies by
subparts A, B, and C of part 12 of subtitle A of title 7 and further
explained in this exhibit, to be final and controlling in the remaining
FmHA or its successor agency under Public Law 103-354 decisionmaking
process for this exhibit. It must also be understood that the definition
of a wetland used by SCS in implementing this exhibit applies only to
this exhibit and not to other wetland protection provisions of subpart G
of part 1940.
a. No highly erodible land, wetland, or converted wetland present.
The requested loan can be approved under the provisions of this exhibit
and, except for documenting this result in accordance with paragraph 8
of this exhibit, no further action is required.
b. Converted wetland present. The County Supervisor will consult
with the applicant (and lender, in the case of a guaranteed loan) and
the appropriate local office of the ASCS in order to determine if the
converted wetland qualifies for the exemption specified in subparagraph
c (1) of paragraph 11 of this exhibit. If so, no further action is
necessary
[[Page 77]]
with respect to the converted wetland except for documenting the result.
If the converted wetland does not qualify for an exemption, the County
Supervisor will complete one or both of the following steps as the
identified circumstances dictate.
(1) Step one. Review both the date that the wetland was converted
and the proposed use of loan proceeds in order to determine if loan
proceeds will be used for a prohibited activity as defined in
subparagraph d of paragraph 3 of this exhibit. If not, the County
Supervisor will so document this as specified in paragraph 8 of this
exhibit; complete step two immediately below; and, if an insured loan
will be approved, notify the applicant in writing, coincident with the
transmittal of Form FmHA or its successor agency under Public Law 103-
354 1940-1, ``Request For Obligation of Funds,'' and by using Form
Letter 1940-G-1, ``Notification of The Requirements of exhibit M of FmHA
Instruction 1940-G,'' that the loan approval instruments will contain
compliance requirements affecting the applicant's converted wetland. If
loan proceeds will be used for a prohibited activity, the applicant (and
lender, in the case of a guaranteed loan) will be advised of the
applicant's ineligibility for the FmHA or its successor agency under
Public Law 103-354 loan being requested. The applicant (and lender, in
the case of a guaranteed loan) will be advised of any modifications to
the application that could cure the ineligibility. Not growing an
agricultural commodity on the converted wetland would cure the
ineligibility, but the substitution of non-FmHA or its successor agency
under Public Law 103-354 funds to grow an agricultural commodity on the
converted wetland would not.
(2) Step two. The County Supervisor will review the applicant's
sources of loan repayment to determine if they include funds from a USDA
financial assistance program(s) subject to wetland conservation
restrictions. If so, the County Supervisor will implement the actions in
subparagraph e of this paragraph.
c. Highly erodible land or wetland present. The County Supervisor
will discuss with the applicant (and lender, in the case of a guaranteed
loan) and review the intended uses of the FmHA or its successor agency
under Public Law 103-354 loan proceeds as evidenced in any relevant
application materials.
(1) Proceeds to be used for prohibited activity. If proceeds would
be used for a prohibited activity, the applicant (and lender, in the
case of a guaranteed loan) will be advised of its ineligibility for the
FmHA or its successor agency under Public Law 103-354 loan. The
applicant (and lender, in the case of a guaranteed loan) will be
informed of any modifications to its application that could cure the
ineligibility, including financially feasible eligible loan purposes
that could be helpful in implementing a conservation plan or installing
a conservation system, should either be an appropriate cure.
Substitution of non-FmHA or its successor agency under Public Law 103-
354 monies to accomplish the prohibited activity would not cure the
ineligibility, but actual elimination of the activity from the
applicant's farm plan of operation would.
(2) Proceeds not to be used for a prohibited activity. If loan
proceeds are not planned to be used for a prohibited activity, the
County Supervisor will perform the following tasks:
(a) Document the above determination in the applicant's file as
specified in paragraph 8 of this exhibit.
(b) If an insured loan will be approved and the requirements of
subparagraph c (2)(c) of this paragraph do not apply, notify the
applicant in writing, coincident with the transmittal of Form FmHA or
its successor agency under Public Law 103-354 1940-1, ``Request For
Obligation of Funds,'' and by using Form Letter 1940-G-1, ``Notification
of The Requirements of Exhibit M of FmHA Instruction 1940-G,'' that the
loan approval instruments will contain compliance requirements affecting
the applicant's highly erodible land and/or wetland.
(c) Review the term of the proposed loan and take the following
actions, as applicable.
(i) Loan term exceeds January 1, 1990, but not January 1, 1995. If
the term of the proposed loan expires within this period and the
applicant intends to produce an agricultural commodity on highly
erodible land that is exempt from the restrictions of this exhibit until
either 1990 or two years after the SCS has completed a soil survey for
the borrower's land, whichever is later, the County Supervisor will
determine if it is financially feasible for the applicant, prior to loss
of the exemption, to actively apply a conservation plan approved by SCS
or the appropriate conservation district. See Sec. 12.23 of subpart A
of part 12 of subtitle A of title 7, which is attachment 1 of this
exhibit and is available in any FmHA or its successor agency under
Public Law 103-354 office, for a definition of actively applying a
conservation plan. Prior to loan approval, the applicant, the lender,
(if a guaranteed loan is involved), FmHA or its successor agency under
Public Law 103-354 and SCS will resolve any doubts as to what extent
production would be able to continue under application of a conservation
plan and as to the financial implications on loan repayment ability from
both the potential costs of actively applying the conservation plan and
the potential loss of revenues from any reduced acreage production base.
The loan approval official will determine the financial implications of
actively applying a conservation plan to the applicant's highly erodible
land by developing a projected farm plan of operation or other farm
financial projections that reflect adequate repayment on
[[Page 78]]
the full scheduled installments for all debt obligations at the time the
conservation plan is being actively applied. If in making this
determination, loan repayment ability cannot be demonstrated, FmHA or
its successor agency under Public Law 103-354 will deny the loan
application. If loan repayament ability can be demonstrated and an
insured loan will be approved, the applicant will be advised in writing,
coincident with the transmittal of Form FmHA or its successor agency
under Public Law 103-354 1940-1, ``Request For Obligation of Funds,''
and using Form Letter 1940-G-1, ``Notification of The Requirements of
Exhibit M of FmHA Instruction 1940-G,'' that the loan approval
instruments will contain compliance requirements affecting the
applicant's highly erodible land. The applicant will also be advised
that a statement from the SCS issued prior to either January 1, 1990, or
two years after the SCS has completed a soil survey of the applicant's
land (whichever is later) and stating that the applicant is actively
applying an approved conservation plan will be considered adequate
demonstration of compliance on the highly erodible land affected by the
1990 deadline.
(ii) Loan term exceeds January 1, 1995. If the term of the proposed
loan would exceed this date and the borrower intends to produce an
agricultural commodity on highly erodible land that is exempt from the
restrictions of the exhibit up until that date (see subparagraph b (4)
of paragraph 11 of this exhibit) the County Supervisor will determine if
it is financially feasible for the applicant, after January 1, 1985, to
produce an agricultural commodity on the highly erodible land in
compliance with a conservation system approved by SCS or the appropriate
conservation district. Prior to loan approval, the applicant, the lender
(if a guaranteed loan is involved), FmHA or its successor agency under
Public Law 103-354 and SCS will resolve any doubts as to what extent
production would be able to continue under a conservation system and as
to the financial implications on loan repayment ability from both the
potential costs of the conservation system and the potential loss of
revenues from any reduced acreage production base. The loan approval
official will determine the financial implications of compliance with a
conservation system using the financial projection method(s) indicated
in subparagraph c (2)(c)(i) of this paragraph. If loan repayment ability
cannot be demonstrated, the application will be denied. If loan
repayment ability can be demonstrated and an insured loan will be
approved, the applicant will be advised in writing, coincident with the
transmittal of Form 1940-1, ``Request for Obligation of Funds,'' and
using Form Letter 1940-G-1, ``Notification of The Requirements of
Exhibit M of FmHA Instruction 1940-G,'' that the loan approval
instruments will contain compliance requirements affecting the
applicant's highly erodible land. The applicant will also be advised
that a statement from SCS issued prior to January 1, 1995, and stating
that the applicant is in compliance with an approved conservation system
will be considered adequate demonstration of compliance.
(d) Implement the actions in subparagraph e of this paragraph if the
applicant plans to repay a portion of the loan with funds from a USDA
financial assistance program subject to wetland or highly erodible land
conservation restrictions.
d. Highly erodible land present that was or is planted in alfalfa.
If the applicant plans to cultivate highly erodible land for the purpose
of producing an agricultural commodity and that highly erodible land
during each of the 1981 to 1985 crop years was planted in alfalfa in a
crop rotation determined by SCS to be adequate for the protection of
highly erodible land, the applicant is exempt until June 1, 1988, from
the requirement to fully implement an approved conservation system on
the highly erodible land. The County Supervisor, following procedures
similar to those indicated in subparagraph c (2)(c)(i) of this
paragraph, will determine if it is financially feasible for the
applicant to apply a conservation system to the highly erodible land
prior to the loss of the exemption on June 1, 1988. If loan repayment
ability cannot be demonstrated, the application will be denied. If loan
repayment ability can be demonstrated and an insured loan will be
approved, the applicant will be advised in writing that the loan
approval instruments will contain compliance requirements affecting the
applicant's highly erodible land. The applicant will also be advised
that a statement from SCS issued prior to June 1, 1988 and stating that
the applicant is in compliance with an approved conservation system will
be considered adequate demonstration of compliance with this
requirement.
e. Highly erodible land, wetland, or converted wetland present and
applicant intends to use the USDA financial assistance program(s),
including crop insurance, to repay FmHA or its successor agency under
Public Law 103-354 loan. The County Supervisor will consult with the
applicant (and lender, in the case of a guaranteed loan) and the other
USDA agency(s) to determine if the applicant is eligible for the
latter's financial assistance. If not eligible, the applicant will have
to demonstrate that an alternative source(s) of repayment will be
available in order for further processing of the application to proceed.
7. Required provisions in loan approval documents.
a. Insured loans.
(1) Promissory Notes. For all loans to which this exhibit applies,
all promissory notes must contain the provision indicated below: (Form
FmHA or its successor agency under
[[Page 79]]
Public Law 103-354 1940-17, ``Promissory Note,'' has been revised so
that the language will no longer be inserted as an addendum, but the
following provision must be inserted as an addendum to Form FmHA or its
successor agency under Public Law 103-354 440-22, ``Promissory Note
(Association or Organization),'' if the loan is being made to an Indian
Tribe or a Tribal Corporation.)
``Addendum for Highly Erodible Land and Wetland Conservation''
Addendum to promissory note dated ________ in the amount of $______
at an annual interest rate of __ percent. This agreement supplements and
attaches to the above note.
Borrower recognizes that the loan described in this note will be in
default should any loan proceeds be used for a purpose that will
contribute to excessive erosion of highly erodible land or to the
conversion of wetlands to produce an agricultural commodity, as further
explained in 7 CFR part 1940, subpart G, exhibit M. If (1) the term of
the loan exceeds January 1, 1990, but not January 1, 1995, and (2)
Borrower intends to produce an agricultural commodity on highly erodible
land that is exempt from the restrictions of exhibit M until either
January 1, 1990 or two years after the U.S. Soil Conservation Service
(SCS) has completed a soil survey for the Borrower's land, whichever is
later, the Borrower further agrees that, prior to the loss of the
exemption from the highly erodible land conservation restrictions found
in 7 CFR part 12, Borrower must demonstrate that Borrower is actively
applying on that land which has been determined to be highly erodible a
conservation plan approved by the SCS or the appropriate conservation
district in accordance with SCS's requirements. Furthermore, if the term
of the loan exceeds January 1, 1995, Borrower further agrees that
Borrower must demonstrate prior to January 1, 1995, that any production
after that date of an agricultural commodity on highly erodible land
will be done in compliance with a conservation system approved by SCS or
the appropriate conservation district in accordance with SCS's
requirements.
________________________________________________________________________
(Name of Borrower)
________________________________________________________________________
(Signature of Executive Official)
________________________________________________________________________
(Signature of Attesting Official)
(2) Mortgages, deeds of trust and security agreements. State
Directors will consult with the Office of General Counsel and ensure
that for all loans to which this exhibit applies a covenant is included
in all mortgages, deeds of trust, and security agreements which reads as
indicated below. Form FmHA or its successor agency under Public Law 103-
354 440-15, ``Security Agreement (Insured Loans to Individuals),'' and
Form FmHA or its successor agency under Public Law 103-354 440-4,
``Security Agreement (Chattels and Crops),'' have been revised
accordingly. Equivalent forms required in State supplements must be
similarly revised.
[For mortgages or deeds of trust:]
``Borrower further agrees that the loan(s) secured by this
instrument will be in default should any loan proceeds be used for a
purpose that will contribute to excessive erosion of highly erodible
land or to the conversion of wetlands to produce an agricultural
commodity, as further explained in 7 CFR part 1940, subpart G, exhibit
M.''
[For security agreements:]
``Default shall also exist if any loan proceeds are used for a
purpose that will contribute to excessive erosion of highly erodible
land or to the conversion of wetlands to produce an agricultural
commodity, as further explained in 7 CFR part 1940, subpart G, exhibit
M.''
b. Guaranteed loans.
(1) Form FmHA or its successor agency under Public Law 103-354 449-
14, ``Conditional Commitment for Guarantee,'' and Form FmHA or its
successor agency under Public Law 103-354 1980-15, ``Conditional
Commitment for Contract of Guarantee (Line of Credit).'' These forms
must contain a condition that includes the following provisions:
(a) Informs the lender that FmHA or its successor agency under
Public Law 103-354's commitment is conditioned upon loan proceeds not
being used for a purpose that will contribute to excessive erosion of
highly erodible land or to the conversion of wetlands to produce an
agricultural commodity, as explained in this exhibit;
(b) Informs the lender of the lender's monitoring responsibilities
under paragraph 10 of this exhibit; and;
(c) Requires the lender, for all borrowers having highly erodible
land, wetland, or converted on their farm properties, to include
provisions in its loan instruments similar to those contained in
subparagraphs a (1) and (2) of this paragraph.
(2) Lender's loan and security instruments. These instruments must
be modified as specified in subparagraph b(1)(c) of this paragraph.
8. Required FmHA or its successor agency under Public Law 103-354
documentation. The actions taken and determinations made by FmHA or its
successor agency under Public Law 103-354 to comply with the provisions
of this exhibit will be documented as part of the environmental review
of the application. All actions subject to this exhibit will undergo at
a minimum the completion of Form FmHA or its successor agency under
Public
[[Page 80]]
Law 103-354 1940-22, ``Environmental Checklist for Categorical
Exclusions.'' On the reverse of this form, the preparer will document as
applicable (a) whether or not highly erodible land, wetland, or
converted wetland is present, (b) if any exemption(s) applies, (c) the
status of the applicant's eligibility for an FmHA or its successor
agency under Public Law 103-354 loan under this exhibit, and (d) any
steps the applicant must take prior to loan approval to retain or regain
its eligibility. If the application under review meets the definition of
a Class I action as defined in Sec. 1940.311 of this subpart, the above
documentation will be included as an exhibit to Form FmHA or its
successor agency under Public Law 103-354 1940-21, ``Environmental
Assessment for Class I Action.'' If the application meets the definition
of a Class II action as defined in Sec. 1940.312 of this subpart, the
required documentation will be included within the Class II assessment
under the discussion of land use impacts. See paragraph IV.4. of exhibit
H of this subpart. Once an applicant's farm property has undergone an
environmental review covering the provisions of this exhibit, the County
Supervisor reviewing a subsequent loan request need not require the
applicant to obtain further site information from SCS as long as there
is no change in the farm property to be affected or any applicable
exemptions.
9. Borrowers' responsibilities. In addition to complying with any
loan requirements resulting from FmHA or its successor agency under
Public Law 103-354's implementation of this exhibit, a borrower must
within ten days of receipt inform, in writing, the lender of a
guaranteed loan and the County Supervisor for an insured loan of any
ineligibility determinations received from other USDA agencies for
violations of wetland or highly erodible land conservation restrictions.
A borrower also has the responsibility to consult with the lender or
County Supervisor, as applicable, if at any time the borrower is
uncertain as to the borrower's duties and responsibility under the loan
provisions.
10. FmHA or its successor agency under Public Law 103-354 and lender
monitoring. As an element of insured loan servicing, to include
development of a farm plan of operation for an upcoming crop year,
scheduled farm visits, or other contracts with borrowers, FmHA or its
successor agency under Public Law 103-354 staff will review and analyze
the borrower's compliance with the provisions of this exhibit and any
related loan requirements. If at anytime FmHA or its successor agency
under Public Law 103-354 becomes aware of the borrower's violation of
these provisions or related loan requirements, the borrower will be
informed that the affected loan(s) is in default. In addition to
directly monitoring borrowers, the County Supervisor will receive and
review the monitoring results of other USDA agencies having restrictions
on wetland and highly erodible land conservation. Whenever these results
indicate that a borrower may have violated the loan conditions, the
County Supervisor will further analyze the matter and respond, as
indicated in this paragraph, should a violation be determined. Lenders
of FmHA or its successor agency under Public Law 103-354 guaranteed
loans must also monitor compliance as part of their servicing
responsibilities.
11. Exemptions and determining their applicability. Following is a
list of exemptions from the provisions of this exhibit as well a
description of how FmHA or its successor agency under Public Law 103-354
will apply the exemptions to a proposed loan or activity under a loan.
This list is intended to provide guidance on implementing the exemptions
contained in subparts A, B, and C of part 12 of subtitle A of title 7
(attachment 1 of this exhibit which is available in any FmHA or its
successor agency under Public Law 103-354 office) and does not modify or
limit any of those exemptions.
a. Exemption from wetland and highly erodible land conservation. Any
loan which was closed prior to December 23, 1985, or any loan for which
either Form FmHA or its successor agency under Public Law 103-354 1940-
1, ``Request for Obligation of Funds,'' Form FmHA or its successor
agency under Public Law 103-354 449-14, ``Conditional Commitment for
Guarantee,'' or Form FmHA or its successor agency under Public Law 103-
354 1980-15, ``Conditional Commitment for Contract of Guarantee (Line of
Credit),'' was executed prior to December 23, 1985, is exempt from the
provisions of this exhibit.
b. Exemptions from highly erodible land conservation. The following
exemptions exist from the restrictions on highly erodible land
conservation. Whenever the County Supervisor is required to consult with
another USDA agency in applying these exemptions, the County
Supervisor's review of a properly completed Form SCS-CPA-26 will be
considered adequate consultation if the needed information is presented
on the form and no questions are raised by the FmHA or its successor
agency under Public Law 103-354 review.
(1) Any land upon which an agricultural commodity was planted before
December 23, 1985, is exempt for that particular planting. The County
Supervisor will consult with the appropriate local ASCS office in
applying this exemption and the ASCS determination is controlling for
purposes of this exhibit.
(2) Any land planted with an agricultural commodity during a crop
year beginning before December 23, 1985, is exempt for that particular
planting. FmHA or its successor agency under Public Law 103-354 will
consult with the ASCS State Executive Director and the latter's position
will be controlling in determining the date that the crop year began.
[[Page 81]]
(3) Any land that during any one of the crop years of 1981 through
1985 was either (a) cultivated to produce an agricultural commodity, or
(b) set aside, diverted or otherwise not cropped under a program
administered by USDA to reduce production of an agricultural commodity,
is exempt until the later of January 1, 1990, or the date that is two
years after the date that the SCS has completed a soil survey of the
land. To apply this exemption, the County Supervisor will consult with
ASCS to determine from the latter's records whether or not the land was
cultivated or set aside during the required period. The ASCS
determination will be controlling. However, the date of completion for
any SCS soil survey will be determined by SCS and used by the County
Supervisor.
(4) Beginning on January 1, 1990, or two years after SCS has
completed a soil survey for the land, whichever is later, and extending
to January 1, 1995, any land that qualified for the exemption in
subparagraph b (3) of this paragraph is further exempt if a person is
actively applying to it a conservation plan that is based on the local
SCS technical guide and properly approved by the appropriate SCS
conservation district or the SCS. To apply this exemption as well as the
exemptions specified in subparagraphs b (5), (6), (7), and (8) of this
paragraph, the County Supervisor will consult with the appropriate local
SCS office and the SCS position will be controlling.
(5) Highly erodible land within a conservation district and under a
conservation system that has been approved by a conservation district
after the district has determined that the conservation system is in
conformity with technical standards set forth in the SCS technical guide
for such district is exempt.
(6) Highly erodible land not within a conservation district but
under a conservation system determined by SCS to be adequate for the
production of a specific agricultural commodity or commodities on any
highly erodible land is exempt for the production of that commodity or
commodities.
(7) Highly erodible land that is planted in reliance on a SCS
determination that such land was not highly erodible is exempt. The
exemption is lost, however, for any agricultural commodity planted after
SCS determines that such land is highly erodible land.
(8) Highly erodible land planted or to be planted in an agricultural
commodity that was planted in alfalfa during each of the 1981 and 1985
crop years in a crop rotation determined by SCS to be adequate for the
protection of highly erodible land is exempt until June 1, 1988, from
the requirement that the highly erodible land be planted in compliance
with an approved conservation system.
c. Exemptions from wetland conservation. The following exemptions
exist from the restrictions on wetland conservation. Whenever the County
Supervisor is required to consult with another USDA agency in applying
these exemptions, the County Supervisor's review of a properly completed
Form SCS-CPA-26 will be considered adequate consultation if the needed
information is presented on the form and no questions are raised by the
FmHA or its successor agency under Public Law 103-354 review.
(1) A converted wetland is exempt if the conversion of such wetland
was completed or commenced before December 23, 1985. The County
Supervisor will consult with ASCS whose determination as to when
conversion of a wetland commenced will be final for FmHA or its
successor agency under Public Law 103-354 purposes. Additionally, the
County Supervisor will request evidence of ASCS's consultation with the
U.S. Fish and Wildlife Service on each commenced determination reached
for an FmHA or its successor agency under Public Law 103-354 applicant
or borrower. SCS will determine if a wetland is a converted wetland
using the criteria contained in Sec. 12.32 of subpart C of part 12 of
subtitle A of title 7 (attachment 1 of this exhibit which is available
in any FmHA or its successor agency under Public Law 103-354 office).
Under these criteria, however, a converted wetland determined to be
exempt may not always remain exempt. The criteria include the provision
that if crop production is abandoned on a converted wetland and the land
again meets the wetland criteria, that land has reverted to a wetland
and is no longer exempt. For purposes of FmHA or its successor agency
under Public Law 103-354 inventory farm properties, crop production will
be considered to have been abandoned on a converted wetland either at
the earlier of the time the former owner so abandoned crop production or
at the time FmHA or its successor agency under Public Law 103-354 caused
crop production to be abandoned after the property came into FmHA or its
successor agency under Public Law 103-354's inventory. While in its
inventory FmHA or its successor agency under Public Law 103-354 will not
lease the converted wetland for the purpose of producing an agricultural
commodity. Whether or not the wetland criteria are met on the abandoned
land will be determined by SCS immediately before FmHA or its successor
agency under Public Law 103-354's lease or sale of the property.
(2) The following are not considered to be a wetland under the
provisions of this exhibit: (a) An artificial lake, pond, or wetland
created by excavating or diking non-wetland to collect and retain water
for purposes such as water for livestock, fish production, irrigation
(including subsurface irrigation), a settling basin, colling, rice
production, or flood control; (b) a wet area created by a water delivery
system, irrigation, irrigation system, or application of water for
irrigation
[[Page 82]]
and (c) lands in Alaska identified by SCS as having a predominance of
permafrost soils. The County Supervisor will consult with SCS regarding
the application of this exemption as well as the remaining exemptions in
this paragraph and the SCS position will be controlling.
(3) A wetland is exempt if the production of an agricultural
commodity is possible (a) as a result of a natural condition, such as
drought, and (b) without action by the producer that destroys a natural
wetland characteristic. This exemption is lost whenever condition (a) or
(b) no longer exists.
(4) Production of an agricultural commodity on a converted wetland
is exempt is SCS determines that the effect of such action, individually
and in connection with all other similar actions authorized in the area
by USDA agencies, on the hydrological and biological aspect of wetland
is minimal.
12. Appeals. Any applicant or borrower that is directly and
adversely affected by an administrative decision made by FmHA or its
successor agency under Public Law 103-354 under this exhibit may appeal
that decision under the provisions of subpart B of part 1900 of this
chapter (see especially Sec. 1900.55).
13. Working with other USDA agencies.
a. Coordination. FmHA or its successor agency under Public Law 103-
354 State Directors will consult with SCS State Conservationists and
ASCS State Executive Directors to assess and coordinate loan processing
workloads in order to minimize delays in responding to FmHA or its
successor agency under Public Law 103-354 requests for site information
or for the application of the exemptions contained in paragraph 11 of
this exhibit. State Directors will ensure that FmHA or its successor
agency under Public Law 103-354 field staff understand and can use the
ASCS farm records system and will request ASCS training as needed. Also,
management systems for sharing the information discussed in subparagraph
b of this paragraph will be established.
b. Information exchange. FmHA or its successor agency under Public
Law 103-354 State Directors will develop with ASCS State Executive
Directors a system for FmHA or its successor agency under Public Law
103-354 to routinely receive notification whenever a violation has
occurred under ASCS's wetland and highly erodible land conservation
restrictions. FmHA or its successor agency under Public Law 103-354
State Directors will in turn provide to any interested USDA agency the
following information:
(1) Upon request, copies of site information or exemption decision
made by SCS for FmHA or its successor agency under Public Law 103-354
application reviews;
(2) Upon request, copies of exemption decisions made by FmHA or its
successor agency under Public Law 103-354; and
(3) Notice of any violations of the provisions of this exhibit
identified by FmHA or its successor agency under Public Law 103-354 as a
result of the monitoring activities identified in paragraph 10 of this
exhibit.
14. Relationship of the requirements of this exhibit to the wetland
protection requirements of exhibit C of this subpart. The provisions of
this exhibit determine (a) whether or not an applicant for a Farmer
Program insured or guaranteed loan or a loan to an Indian Tribe or
Tribal Corporation is eligible to be considered for such a loan, and (b)
whether or not a recipient of such a loan is properly using the loan
proceeds with respect to the requirements of this exhibit. On the other
hand, the requirements in exhibit C of this subpart regarding wetland
protection cover all FmHA or its successor agency under Public Law 103-
354 loan and grant programs and address not questions of eligibility but
the potential environmental impacts of a proposed action on a wetland
and alternatives to the action. Consequently, those applications covered
by this exhibit and which may be approved under this exhibit must also
meet the requirements of exhibit C of this subpart. For example, an
application covered by this exhibit (M) that proposed to convert a
wetland into a tree farm would be exempt from this exhibit (M) because
trees are not an agricultural commodity, i.e., there is no conversion in
order to produce an agricultural commodity. However, before FmHA or its
successor agency under Public Law 103-354 could make the loan, the
requirements of exhibit C of this subpart would have to be met to
include an FmHA or its successor agency under Public Law 103-354 finding
that no practicable alternative exists to the conversion of the wetland.
In summary, any proposed wetland conversion that is not prohibited by
this exhibit (M) must next meet the requirements of exhibit C of this
subpart before FmHA or its successor agency under Public Law 103-354
approval of the requested financial assistance could be provided.
[53 FR 7333, Mar. 8, 1988, as amended at 53 FR 14778, Apr. 26, 1988]
Subpart H [Reserved]
Subpart I_Truth in Lending_Real Estate Settlement Procedures
Source: 48 FR 4, Jan. 3, 1983, unless otherwise noted.
Sec. 1940.401 Truth in lending.
(a) General. This section provides instructions for compliance with
the Truth in Lending Act, as implemented by Regulation Z of the Federal
Reserve
[[Page 83]]
System, to assure that individual Rural Housing (RH) applicants are
informed of:
(1) The cost and terms of credit, and
(2) Their right to cancel certain credit transactions resulting in a
lien or mortgage on their home.
(b) Scope. This section applies to all individuals who apply for
loans, assumptions, or credit sales (hereafter described as
transactions) for household purposes.
(1) Special rules for the right to cancel transactions not for
purchase, acquisition or initial construction of a home broaden the
scope of this section to include individuals who have an ownership
interest in, and reside in as a principal dwelling, property which will
be security for a mortgage, even though they may not execute the
promissory note or assumption agreement. Such persons have the right to
receive credit disclosures and the notice of the right to cancel and may
cancel the transaction.
(2) This section does not apply to:
(i) Applicants who are corporations, associations, cooperatives,
public bodies, partnerships, or other organizations;
(ii) Individual applicants for multiple family housing transactions
(rural rental or labor housing), unless for a two-family dwelling in
which the applicants will reside, and other business and commercial type
loans; or
(iii) Applicants involved in credit transactions primarily for
agricultural purposes.
(c) Disclosure of the cost and terms of credit--(1) Form and
content. Form RD 1940-41, ``Truth in Lending Disclosure Statement,''
will be used to provide the following required disclosures:
(i) Annual percentage rate;
(ii) Finance charge;
(iii) Amount financed;
(iv) Total of payments;
(v) Total sale price (required for credit sales only);
(vi) Payment schedule;
(vii) A separate itemization of the amount financed, if the
applicant requests it. Normally this required disclosure will have been
met in transactions subject to the Real Estate Settlement Procedures Act
(RESPA) by providing the applicant with Form RD 440-58, ``Estimate of
Settlement Costs'';
(viii) The lender's identity;
(ix) Prepayment or late payment penalties;
(x) Security interest;
(xi) Insurance requirements;
(xii) Assumption policy; and
(xiii) Referral to other loan documents.
(2) Timing, use of estimates and required redisclosure. (i) In
transactions for the purchase or construction of a home subject to
RESPA, Form RD 1940-41, completed using ``good faith'' estimates based
on the best information available, will be delivered or placed in the
mail to the applicant no later than three (3) business days after
receipt of a written application in the County Office.
(ii) In transactions not subject to RESPA, such as RH Section 502
transactions for repairs or refinancing or RH Section 504 transactions,
Form RD 1940-41, completed using the actual terms of the transaction,
will be delivered to each applicant (and in transactions which are
subject to cancellation, each non-applicant with the right to cancel) at
the time of loan approval.
(iii) In the event of a change in rates and terms between the time
of initial disclosure and closing, whereby the annual percentage rate
varies by more than one-eighth of one percent, redisclosure must be
made. This may be done by entering the changes on all copies of the
initial Form RD 1940-41, or by preparing a new Form RD 1940-41. When
required, redisclosure may be made at the time the transaction is
approved or at the time of the change, but the form must be delivered to
the applicant before the signing of the promissory note or assumption
agreement.
(3) Special instructions for assumption, reamortization, refinancing
and multiple transactions. (i) Assumptions, within the scope of
paragraph (b) of this section, at new rates and terms or of existing
obligations which were for purchase, acquisition or initial construction
of a residence, require new credit disclosure before the assumption
occurs. Since assumptions are not subject to RESPA, early disclosure is
not required.
[[Page 84]]
(ii) Reamortization, as described in 7 CFR part 3550, when the
borrower is in default or delinquent, does not require new credit
disclosure. In all other cases reamortization requires new credit
disclosure.
(iii) Refinancing of debts in accordance with 7 CFR part 3550,
though not subject to RESPA or early disclosure, does require credit
disclosure at the time the transaction is approved.
(iv) Multiple transactions.
(A) When a subsequent loan is financed along with another
transaction and both transactions require credit disclosure, a separate
Form RD 1940-41 will be prepared for each transaction.
(B) Transactions with multiple advances will be treated as one
transaction for the purpose of credit disclosure, in accordance with the
Forms Manual Insert (FMI) for Form RD 1940-41.
(d) Notice of the right to cancel. The right to cancel applies only
to transactions within the scope of paragraph (b) of this section, which
are not for purchase, acquisition or initial construction of and which
result in a mortgage on an individual's principal residence, such as RH
Section 502 transactions for refinancing, repairs or rehabilitation or
RH Section 504 transactions.
(1) Form and Content. Form RD 1940-43, ``Notice of Right to
Cancel'', will be used to notify individuals of their right to cancel
those transactions, within the scope of paragraphs (b) and (d) of this
section, which result in a mortgage on their principal residence except
when the transaction is for its purchase or initial construction. This
notice will identify the transaction and disclose the following:
(i) The acquisition of a security interest in the individual's
principal residence.
(ii) The individual's right to cancel the transaction.
(iii) How to exercise the right to cancel the transaction, with a
form for that purpose.
(iv) The effects of cancellation.
(v) The date the cancellation period expires.
(2) Timing. (i) Two copies of Form RD 1940-43, and one copy of Form
RD 1940-41, in accordance with the FMI's, will be given to each
individual entitled to cancel, not later than loan closing.
(ii) Any entitled individual may cancel the transaction until
midnight of the third business day following whichever of the following
events occurs last:
(A) The date the transaction is closed.
(B) The date Truth in Lending credit disclosures were made.
(C) The date notice of the right to cancel was received.
(3) Disbursement of funds. In a transaction subject to cancellation
funds will not be disbursed, other than to a designated attorney or
title insurance company preparatory to closing, until:
(i) Forms FmHA 1940-43 have been given to the appropriate
individuals,
(ii) The three-day cancellation period has expired, and
(iii) The loan approval official is reasonably assured that the
transaction has not been cancelled. This assurance may be obtained by:
(A) Waiting a reasonable period of time after the expiration of the
cancellation period to allow for the delivery of a mailed notice, or
(B) Obtaining a written statement from each individual entitled to
cancel that the right has not been exercised.
(iv) This delay in disbursing funds may be waived in cases of a
bonafide personal financial emergency, which must be met within the
cancellation period, when the individual submits a signed and dated
statement describing the nature of the emergency and waiving the right
to cancel. Such a statement must be signed by all individuals entitled
to cancel.
(4) Effects of cancellation. (i) When an individual cancels a
transaction, the mortgage securing the transaction becomes void and the
borrower will not be liable for any amount, including any finance
charge.
(ii) Within twenty (20) calendar days after receipt of a notice of
cancellation the loan approval official will:
(A) Notify all interested parties of the cancellation;
(B) Return, and/or request the return of any money or property given
to anyone in connection with the transaction; and
[[Page 85]]
(C) Take the necessary action to terminate the mortgage.
(iii) Once evidence has been presented to the borrower that the
mortgage has been terminated, the borrower must return any funds
advanced by Rural Development to the Rural Development County Office or
surrender any property at his/her residence within twenty (20) calendar
days.
(e) Advertisements. An advertisement is defined as a commercial
message in any medium that promotes, directly or indirectly, a credit
transaction. Advertisements for credit sales of Government inventory
property, within the scope of paragraph (b) of this section, are subject
to the following requirements.
(1) If an advertisement states specific credit terms, it shall state
only those terms that actually are or will be arranged or offered.
(2) If an advertisement states a rate of finance charge, it shall
state the rate as an annual percentage rate, using that term.
(3) Terms requiring additional disclosures.
(i) If any of the following terms is set forth in an advertisement:
(A) The amount or percentage of any down payment,
(B) The number of payments or period of repayment,
(C) The amount of any payment, or
(D) The amount of any finance charge,
(ii) The advertisement must also state:
(A) The amount or percentage of down payment,
(B) The terms of repayment, and
(C) The annual percentage rate, using that term.
[48 FR 4, Jan. 3, 1983, as amended at 60 FR 55123, Oct. 27, 1995; 67 FR
78328, Dec. 24, 2002]
Sec. Sec. 1940.402-1940.405 [Reserved]
Sec. 1940.406 Real estate settlement procedures.
(a) General. This section provides the instructions for compliance
with the Real Estate Settlement Procedures Act (RESPA), as amended, and
Regulation X of the Department of Housing and Urban Development.
(b) Scope. (1) This section applies to loans and credit sales,
including Section 502 Rural Housing, 1-4 family Rural Rental Housing, 1-
4 family Labor Housing, and Farm Ownership involving tracts of less than
25 acres, whether made to an individual, corporation, partnership,
association or other entity, which meet the following requirements:
(i) The proceeds of the loan or the credit extended are used in
whole or in part to finance the purchase and transfer of title of the
property to be mortgaged by the borrower, and
(ii) The loan or credit sale is secured by a first lien covering
real estate on which is located a structure designed principally for the
occupancy of from 1-4 families, or on which a structure designed
principally for the occupancy of from 1-4 families is to be constructed
using proceeds of the loan.
(2) Exempt transactions include:
(i) Loans for repairs, improvements, or refinancing if the proceeds
are not used to finance the purchase of the property.
(ii) Loans to finance the construction of a 1-4 family structure if
the tract of land is already owned by the applicant/borrower.
(iii) Assumptions or transfers.
(c) Action required. (1) The information booklet entitled
``Settlement Costs'' will either be given to the applicant at the time
the completed application is received, or mailed to the applicant no
later than three (3) business days after receipt of the application in
the County Office.
(i) Form RD 440-58, ``Estimate of Settlement Costs,'' is to be used
to provide a ``good faith'' statement of estimated closing costs. Form
RD 440-58 will be completed by the County Supervisor and mailed or
delivered to the applicant with the Settlement Costs booklet. Costs will
vary between geographic areas; therefore, information supplied on this
form must be based upon (A) the County Supervisor's best estimate of
charges the borrower will pay for each service in connection with the
transaction, or (B) a range of charges at which such service is
available to the borrower from all providers in the area.
[[Page 86]]
(ii) Form RD 440-58 does not replace Truth in Lending forms.
Appropriate forms listed in Sec. 1940.401 will be used for Truth in
Lending purposes.
(2) Form RD 1940-59, ``Settlement Statement,'' will be completed as
indicated in the form and FMI by the designated attorney or title
company for all transactions described in paragraph (b) of this section.
The purpose of this form is to provide a uniform settlement statement
prescribed by RESPA.
(i) During the business day immediately preceding the date of
settlement, the closing agent, if requested by the applicant, must
permit the applicant to inspect the settlement statement, completed for
those items which are then known to the closing agent.
(ii) A copy will be given to both the borrower and seller at the
time of closing or settlement or will be mailed as soon as practicable
if the borrower or seller are not present at closing.
Subparts J-K [Reserved]
Subpart L_Methodology and Formulas for Allocation of Loan and Grant
Program Funds
Source: 50 FR 24180, June 10, 1985, unless otherwise noted.
Sec. 1940.551 Purpose and general policy.
(a) The purpose of this subpart is to set forth the methodology and
formulas by which the Administrator for the Rural Business-Cooperative
Service or the Administrator for the Rural Housing Service, as
applicable, allocates program funds to the States. (The term State means
any of the States of the United States, the Commonwealth of Puerto Rico,
any territory or possession of the United States, or the Western Pacific
Areas.) This subpart is inapplicable to Farm Service Agency, Farm Loan
Programs.
(b) The formulas in this subpart are used to allocate program loan
and grant funds to State Offices so that the overall mission of the
Agency can be carried out. Considerations used when developing the
formulas include enabling legislation, congressional direction, and
administration policies. Allocation formulas ensure that program
resources are available on an equal basis to all eligible individuals
and organizations.
(c) The actual amounts of funds, as computed by the methodology and
formulas contained herein, allocated to a State for a funding period are
distributed to each State Office by an exhibit to this subpart. The
exhibit is available for review in any Rural Development State Office.
The exhibit also contains clarifications of allocation policies and
provides further guidance to the State Directors on any suballocation
within the State. Rural Development will publish a Notice of
Availability of Rural Housing funds in the Federal Register each year.
[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 26229, July 12, 1988; 55
FR 29560, July 20, 1990; 56 FR 66960, Dec. 27, 1991; 72 FR 64122, Nov.
15, 2007]
Sec. 1940.552 Definitions.
(a) Amount available for allocation. Funds appropriated or otherwise
made availiable to the Agency for use in authorized programs. On
occasion, the allocation of funds to States may not be practical for a
particular program due to funding or administrative constraints. In
these cases, funds will be controlled by the National Office.
(b) Basic formula criteria, data source and weight. Basic formulas
are used to calculate a basic state factor as a part of the methodology
for allocating funds to the States. The formulas take a number of
criteria that reflect the funding needs for a particular program and
through a normalization and weighting process for each of the criteria
calculate the basic State Factor (SF). The data sources used for each
criteria is believed to be the most current and reliable information
that adequately quantifies the criterion. The weight, expressed as a
percentage, gives a relative value to the importance of each of the
criteria.
(c) Basic formula allocation. The result of multiplying the amount
available for allocation less the total of any amounts held in reserve
or distributed by base or administrative allocation times the basic
State factor for each State. The basic formula allocation (BFA) for an
individual State is equal to:
[[Page 87]]
BFA = (Amount available for allocation - NO reserve - Total base and
administrative allocations) x SF.
(d) Transition formula. A formula based on a proportional amount of
previous year allocation used to maintain program continuity by
preventing large fluctuations in individual State allocations. The
transition formula limits allocation shifts to any particular State in
the event of changes from year to year of the basic formula, the basic
criteria, or the weights given the criteria. The transition formula
first checks whether the current year's basic formula allocation is
within the transition range (+ or -percentage points of the proportional
amount of the previous year's BFA).
[GRAPHIC] [TIFF OMITTED] TC14NO91.000
If the current year's State BFA is not within this transition range, the
State formula allocation is changed to the amount of the transition
range limit closest to the BFA amount. After having performed this
transition adjustment for each State, the sum of the funds allocated to
all States will differ from the amount of funds available for BFA. This
difference, whether a positive or negative amount, is distributed to all
States receiving a formula allocation by multiplying the difference by
the SF. The end result is the transition formula allocation. The
transition range will not exceed 40% (20%), but
when a smaller range is used it will be stated in the individual program
section.
(e) Base allocation. An amount that may be allocated to each State
dependent upon the particular program to provide the opportunity for
funding at least one typical loan or grant in each Rural Development
State, District, or County Office. The amount of the base allocation may
be determined by criteria other than that used in the basic formula
allocation such as agency historic data.
(f) Administrative allocations. Allocations made by the
Administrator in cases where basic formula criteria information is not
available. This form of allocation may be used when the Administrator
determines the program objectives cannot be adequately met with a
formula allocation.
(g) Reserve. An amount retained under the National Office control
for each loan and grant program to provide flexibility in meeting
situations of unexpected or justifiable need occurring during the fiscal
year. The Administrator may make distributions from this reserve to any
State when it determined necessary to meet a program need or agency
objective. The Administrator may retain additional amounts to fund
authorized demonstration programs. When such demonstration programs
exist, the information is outlined in exhibit A of this subpart
(available in any FmFA State Office).
(h) Pooling of funds. A technique used to ensure that available
funds are used in an effective, timely and efficient manner. At the time
of pooling those funds within a State's allocation for the fiscal year
or portion of the fiscal year, depending on the type of pooling, that
have not been obligatedf by the State are placed in the National Office
reserve. The Administrator will establish the pooling dates for each
affected program.
(1) Mid-year: This pooling addresses the need to partially
redistribute funds based on use/demand. Mid-year pooling occurs near the
midpoint of the fiscal year.
(2) Year-end: This pooling is used to ensure maximum use of program
funds
[[Page 88]]
on a national basis. Year-end pooling usually occurs near the first of
August.
(3) Emergency: The Administrator may pool funds at any time that it
is determined the conditions upon which the initial allocation was based
have changed to such a degree that it is necessary to pool funds in
order to efficiently carry out the Agency mission.
(i) Availability of the allocation. Program funds are made available
to the Agency on a quarterly basis. In the high demand programs, it is
necessary that specific instructions by given to the State Offices
regarding the amount which is available for obligation during each
quarter.
(j) Suballocation by the State Director. Dependent upon the
individual program for which funds are being allocated, the State
Director may be directed or given the option of suballocating the State
allocation to District or County Offices. When suballocating the State
Director may retain a portion of the funds in a State Office reserve to
provide flexibility in situations of unexpected or justified need. When
performing a suballocation the State Director will use the same formula,
criteria and weights as used by the National Office.
(k) Other documentation. Additional instructions given to field
offices regarding allocations.
[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 26229, July 12, 1988]
Sec. Sec. 1940.553-1940.559 [Reserved]
Sec. 1940.560 Guarantee Rural Rental Housing Program.
When funding levels are under $100,000,000, all funds will be held
in a National Office reserve and made available administratively in
accordance with the Notice of Funding Availability (NOFA) and program
regulations. When program levels are sufficient for a nationwide
program, funds are allocated based upon the following criteria and
weights.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart .
Each factor will receive a weight respectively of 40%, 40% and 20%.
The criteria used in the basic formula are:
(1) State's percentage of National rural population,
(2) State's percentage of the National number of rural households
between 50 and 115 percent of the area median income, and
(3) State's percentage of National average cost per unit. The data
source for the criterion specified in paragraph (b)(1) of this section
is the most recent decennial Census of the United States (decennial
Census). The data source for the criterion specified in paragraph (b)(2)
of this section is 5-year income data from the American Community Survey
(ACS) or, if needed, other Census Bureau data. The data source for the
criterion specified in paragraph (b)(3) of this section is the cost per
unit data using the applicable maximum per unit dollar amount
limitations under section 207(c) of the National Housing Act, which can
be obtained from the Department of Housing and Urban Development. The
percentage representing each criterion is multiplied by the weight
assigned and totaled to arrive at a State factor.
State Factor = (criterion No. 1 x weight of 40%) + (criterion No. 1
x weight of 40%) + (criterion No. 1 x weight of 20%)
(c) Basic formula allocation. See Sec. 1940.552(c).
(d) Transition formula. See Sec. 1940.552(d).
(e) Base allocation. See Sec. 1940.552(e). Jurisdictions receiving
administrative allocations do not receive base allocations.
(f) Administrative allocations. See Sec. 1940.552(f). Jurisdictions
receiving formula allocations do not receive administrative allocations.
(g) Reserve. See Sec. 1940.552(g).
(h) Pooling of funds. See Sec. 1940.552(h).
(i) Availability of the allocation. See Sec. 1940.552(i).
(j) Suballocation by the State Director. See Sec. 1940.552(j).
(k) Other documentation. Not applicable.
[63 FR 39458, July 22, 1998, as amended at 80 FR 9876, Feb. 24, 2015]
[[Page 89]]
Sec. Sec. 1940.561-1940.562 [Reserved]
Sec. 1940.563 Section 502 non-subsidized guaranteed Rural
Housing (RH) loans.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552 (b) of this subpart. The criteria used in the basic formula
are:
(1) State's percentage of the National number of rural occupied
substandard units,
(2) State's percentage of the National rural population in places of
less than 2,500 population,
(3) State's percentage of the national number of rural households
between 80 and 100 percent of the area median income, and
(4) State's percentage of the national number of rural renter
households paying more than 35 percent of income for rent. The data
source for each criterion is specified in paragraph (b)(5) of this
section. Each criterion is assigned a specific weight according to its
relevance in determining need. The percentage representing each
criterion is multiplied by the weight factor and summed to arrive at a
basic State factor (SF) as follows:
SF = (criterion 1 x weight of 30%) + (criterion 2 x weight of 10%) +
(criterion 3 x weight of 30%) + (criterion 4 x weight of 30%)
(5) The data source for the criteria specified in paragraphs (b)(1)
and (b)(2) of this section is the most recent decennial Census. The data
source for the criteria specified in paragraph (b)(3) and (b)(4) of this
section is 5-year income data from the American Community Survey (ACS)
or, if needed, other Census Bureau data.
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. The
percentage range used for Section 502 guaranteed RH loans is plus or
minus 15.
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
Jurisdictions receiving administrative allocations do not receive base
allocations.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(1) Mid-year: If used in a particular fiscal year, available funds
unobligated as of the pooling date are pooled and redistributed based on
the formula used to allocate funds initially.
(2) Year-end: Pooled funds are placed in a National Office reserve
and are available as determined administratively.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart. Annually, the Administrator will advise State Director's
whether or not suballocation within the State Office jurisdiction will
be required for the guaranteed Housing program.
(k) Other documentation. Not applicable.
[56 FR 10509, Mar. 13, 1991, as amended at 80 FR 9876, Feb. 24, 2015]
Sec. 1940.564 Section 502 subsidized guaranteed Rural Housing loans.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart. The criteria used in the basic formula are:
(1) State's percentage of the National number of rural occupied
substandard units,
(2) State's percentage of the National rural population in places of
less than 2,500 population,
(3) State's percentage of the national number of rural households
below 80 percent of the area median income, and
(4) State's percentage of the national number of rural renter
households paying more than 35 percent of income for rent. The data
source for each criterion is specified in paragraph (b)(5) of this
section. Each criterion is assigned a specific weight according to its
relevance in determining need. The percentage representing each
criterion is multiplied by the weight factor and summed to arrive at a
basic State factor (SF) as follows:
[[Page 90]]
SF = (criterion 1 x weight of 30%) + (criterion 2 x weight of 10%) +
(criterion 3 x weight of 30%) + (criterion 4 x weight of 30%)
(5) The data source for the criteria specified in paragraphs (b)(1),
(b)(2), and (b)(4) of this section is the most recent decennial Census.
The data source for the criterion specified in paragraph (b)(3) of this
section is 5-year income data from the American Community Survey (ACS)
or, if needed, other Census Bureau data.
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. The
percentage range used for section 502 guaranteed RH loans is plus or
minus 15.
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
Jurisdictions receiving administrative allocations do not receive base
allocations.
(f) Administration allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(1) Mid-year: If used in a particular fiscal year, available funds
unobligated as of the pooling date are pooled and redistributed based on
the formula used to allocate funds initially.
(2) Year-end: Pooled funds are placed in a National Office reserve
and are available as determined administratively.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart. Annually, the Administrator will advise State Director's
whether or not suballocation within the State Office jurisdiction will
be required for the guaranteed Housing program.
(k) Other documentation. Not applicable.
[56 FR 10509, Mar. 13, 1991, as amended at 80 FR 9877, Feb. 24, 2015]
Sec. 1940.565 Section 502 subsidized Rural Housing loans.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart. The criteria used in the basic formula are:
(1) State's percentage of the National number of rural occupied
substandard units,
(2) State's percentage of the National rural population,
(3) State's percentage of the National rural population in places of
less than 2,500 population,
(4) State's percentage of the National number of rural households
between 50 and 80 percent of the area median income, and
(5) State's percentage of the National number of rural households
below 50 percent of the area median income.
Data source for each of these criteria is based on the latest census
data available. Each criterion is assigned a specific weight according
to its relevance in determining need. The percentage representing each
criterion is multiplied by the weight factor and summed to arrive at a
basic State factor (SF)
SF = (criterion 1 x weight of 25%) + (criterion 2 x weight of 10%) +
(criterion 3 x weight of 15%) + (criterion 4 x weight of 30%) +
(criterion 5 x weight of 20%)
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. The
percentage range used for Section 502 subsidized RH loans is plus or
minus 15.
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
Jurisdictions receiving administrative allocations do not receive base
allocations.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(1) Mid-year: If used in a particular fiscal year, available funds
unobligated as of the pooling date are pooled and redistributed based on
the formula used to allocate funds initially.
(2) Year-end: Pooled funds are placed in a National Office reserve
and are
[[Page 91]]
available as determined administratively.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart. The State Director will suballocate funds to the District
Offices and may, at his/her option, suballocate to the County Offices.
The State Director will use the same basic formula criteria, data source
and weight for suballocating funds within the State as used by the
National Office in allocating to the States as described in Sec.
1940.565 (b) and (c) of this section. The suballocations to District or
County Offices will not be reduced or restricted unless written approval
is received from the National Office in response to a written request
from the State Director. The State Director's request must include the
reasons for the requested action (e.g., high housing inventory and/or
high housing delinquency).
(k) Other documentation. The percentage distribution of funds to the
States by income levels is based on prevailing legislation.
Sec. 1940.566 Section 504 Housing Repair loans.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b). The criteria used in the basic formula are:
(1) State's percentage of the National number of rural occupied
substandard units, and
(2) State's percentage of the National number of rural households
below 50 percent of area median income. The data source for the first
criterion is the most recent decennial Census data. The data source for
the second criterion is 5-year income data from the American Community
Survey (ACS) or, if needed, other Census Bureau data. Each criterion is
assigned a specific weight according to its relevance in determining
need. The percentage representing each criterion is multiplied by the
weight factor and summed to arrive at a basic State factor (SF).
SF = (criterion No. 1 x weight of 50%) + (criterion No. 2 x weight
of 50%)
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. The
percentage range used for section 504 Housing Repair Loans is plus or
minus 15.
(e) Base allocation. Not used.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(1) Mid-year: If used in a particular fiscal year, available funds
unobligated as of the pooling date are pooled and redistributed based on
the formula used to allocate funds initially.
(2) Year-end: Pooled funds are placed in a National Office reserve
and are available as determined administratively.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart. At the option of the State Director, section 504 loan
funds may be suballocated to the District Offices. When performing a
suballocation, the State Director will use the same basic formula
criteria, data source and weight for suballocating funds within the
State as used by the National Office in allocating to the States as
described in Sec. 1940.566 (b) and (c) of this section.
(k) Other documentation. Not applicable.
[50 FR 24180, June 10, 1985, as amended at 80 FR 9877, Feb. 24, 2015]
Sec. 1940.567 Section 504 Housing Repair grants.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart. The criteria used in the basic formula are:
(1) State's percentage of the National number of rural occupied
substandard units,
(2) State's percentage of the National rural population 62 years and
older, and
(3) State's percentage of the National number of rural households
below 50 percent of area median income. The data source for the first
two of these
[[Page 92]]
criteria is the most recent decennial Census data. The data source for
the third criterion is the 5-year data from the American Community
Survey (ACS) or, if needed, other Census Bureau data. Each criterion is
assigned a specific weight according to its relevance in determining
need. The percentage representing each criterion is multiplied by the
weight factor and summed to arrive at a basic State factor (SF).
SF = (criterion No. 1 x weight of 33 1/3%) + (criterion No. 2 x
weight of 33 1/3%) + (criterion No. 3 x weight of 33 1/3%)
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. The
percentage range used for section 504 Housing Repair grants is plus or
minus 15.
(e) Base allocation. Not used.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(1) Mid-year: If used in a particular fiscal year, available funds
unobligated as of the pooling date are pooled and redistributed based on
the formula used to allocate funds initially.
(2) Year-end: Pooled funds are placed in a National Office reserve
and are available as determined administratively.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart. At the option of the State Director, section 504 grant
funds may be suballocated to the District Offices. When performing a
suballocation, the State Director will use the same basic formula
criteria, data source and weight for suballocating funds within the
State as used by the National Office in allocating to the States as
described in Sec. 1940.567 (b) and (c) of this section.
(k) Other documentation. Not applicable.
[50 FR 24180, June 10, 1985, as amended at 80 FR 9877, Feb. 24, 2015]
Sec. 1940.568 Single Family Housing programs appropriations not
allocated by State.
The following program funds are kept in a National Office reserve
and are available as determined administratively:
(a) Section 523 Self-Help Technical Assistance Grants.
(b) Section 523 Land Development Fund.
(c) Section 524 Rural Housing Site Loans.
(d) Section 509 Compensation for Construction Defects.
(e) Section 502 Nonsubsidized Funds.
Sec. Sec. 1940.569-1940.574 [Reserved]
Sec. 1940.575 Section 515 Rural Rental Housing (RRH) loans.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart.
The criteria used in the basic formula area:
(1) State's percentage of National rural population,
(2) State's percentage of National number of rural occupied
substandard units, and
(3) State's percentage of National rural families with incomes below
the poverty level. The data source for the first two of these criterion
is the most recent decennial Census data. The data source for the third
criterion is the 5-year data from the American Community Survey (ACS)
or, if needed, other Census Bureau data. Each criterion is assigned a
specific weight according to its relevance in determining need. The
percentage representing each criterion is multiplied by the weight
assigned and summed to arrive at a State factor (SF).
SF = (criterion No. 1 x weight of 33 1/3%) + (criterion No. 2 x
weight of 33 1/3%) + (criterion No. 3 x weight of 33 1/3%)
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.522(d) of this subpart.
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
Jurisdictions receiving
[[Page 93]]
administrative allocations do not receive base allocations.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart.
(k) Other documentation. Not applicable.
[53 FR 26229, July 12, 1988, as amended at 80 FR 9877, Feb. 24, 2015]
Sec. 1940.576 Rental Assistance (RA) for new construction.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.575(b) of this subpart.
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart.
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart.
(k) Other documentation. Not applicable.
[53 FR 26229, July 12, 1988]
Sec. 1940.577 Rental Assistance (RA) for existing projects.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart. RA appropriated for existing projects will first be used to
replace contracts expiring each fiscal year and for the first few months
of the following fiscal year. This is done to assure continued RA
funding. RA units not needed for replacement purposes will be used for
existing multiple family housing projects experiencing servicing
problems.
(b) Basic formula criteria, data source and weight. No formula or
weighted criteria is used to allocate replacement RA. The basic
allocation for replacement RA will be made based on the following:
(1) Criteria. This allocation is based on the estimated need to
replace RA contracts expiring from the depletion of funds.
(2) Date source. The most accurate and current information available
from Rural Development computerized data sources.
(c) Basic formula allocation. While no formula will be used, the
basic allocation will be made to each State according to the need
determined using the basic criteria.
(d) Transition formula. Not applicable.
(e) Base allocation. Not applicable.
(f) Administrative allocation. Not applicable.
(g) Reserve. See Sec. 1940.552(g) of this subpart. The National
Office maintains a reserve adequate to compensate for the differences
between actual and projected replacement activity. Units will be
administratively distributed for existing housing to either satisfy
previously unidentified replacement needs or address servicing
situations. Units will be distributed to any State when the
Administrator determines that additional allocations are necessary and
appropriate.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart. Units
will be pooled at the Administrator's discretion.
(i) Obligation of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart.
(k) Other documentation. Not applicable.
[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 26229, July 12, 1988]
Sec. 1940.578 Housing Preservation Grant (HPG) program.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.575(b) of this subpart.
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
[[Page 94]]
(d) Transition formula. See Sec. 1940.552(d) of this subpart.
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart. Funds
may be pooled after all HPG applications have been received and HPG fund
demand by State has been determined. Pooled funds will be combined with
the National Office reserve to fund eligible projects. Remaining HPG
funds will be available for distribution for use under the Section 504
program.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. Not applicable.
(k) Other documentation. Funds for the HPG program will be available
for a limited period each fiscal year. Due to the requirements by law to
allocate funds on a formula basis to all States and to have a
competitive selection process for HPG project selection, Rural
Development will announce opening and closing dates for receipt of HPG
applications. After the closing date, Rural Development will review and
evaluate the proposals, adjust State allocations as necessary to comply
with the law and program demand, and redistribute remaining unused HPG
resources for use under Section 504 (as required by statute).
[53 FR 26229, July 12, 1988]
Sec. 1940.579 Multiple Family Housing appropriations not allocated
by State.
Funds are not allocated to States. The following program funds are
kept in a National Office reserve and are available as determined
administratively:
(a) Section 514 Farm Labor Housing Loans.
(b) Section 516 Farm Labor Housing Grants.
[64 FR 24480, May 6, 1999]
Sec. Sec. 1940.580-1940.584 [Reserved]
Sec. 1940.585 Community Facility loans.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart.
(1) The criteria used in the basic formula are:
(i) State's percentage of national rural population--50 percent.
(ii) State's percentage of national rural population with incomes
below the poverty level--25 percent.
(iii) State's percentage of national nonmetropolitan unemployment--
25 percent.
(2) The data source for the first criterion is the most recent
decennial Census data. The data source for the second criterion is the
5-year data from the American Community Survey (ACS) or, if needed,
other Census Bureau data. The data source for the third criterion is the
most recent Bureau of Labor Statistics data. Each criterion is assigned
a specific weight according to its relevance in determining need. The
percentage representing each criterion is multiplied by the weight
factor and summed to arrive at a State factor (SF). The SF cannot exceed
0.05.
SF = (criterion (b)(1)(i) x 50 percent) + (criterion (b)(1)(ii) x 25
percent) + (criterion (b)(1)(iii) x 25 percent)
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
States receiving administrative allocations do not receive formula
allocations.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. The
percentage range for the transition formula equals 30 percent (15%).
(e) Base allocation. See Sec. 1940.552(e) of this subpart. States
receiving administrative allocations do not receive base allocations.
(f) Administrative allocation. See Sec. 1940.552(f) of this
subpart. States participating in the formula base allocation procedures
do not receive administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart. States may
request funds by forwarding a completed copy of guide 26 of subpart A of
part 1942 of this chapter (available in any Rural Development office),
to the National Office. Generally, a request for additional funds will
not be honored unless the State has insufficient funds to obligate the
loan requested.
[[Page 95]]
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart. Funds
are generally pooled at mid-year and year-end. Pooled funds will be
placed in the National Office reserve and will be made available
administratively.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart. The allocation of funds is made available for States to
obligate on an annual basis although the Office of Management and Budget
apportions it to the Agency on a quarterly basis.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart. State Director has the option to suballocate to District
Offices.
(k) Other documentation. Not applicable.
[50 FR 24180, June 10, 1985, as amended at 58 FR 54485, Oct. 22, 1993;
80 FR 9877, Feb. 24, 2015]
Sec. Sec. 1940.586-1940.587 [Reserved]
Sec. 1940.588 Business and Industry Guaranteed and Direct Loans,
Rural Business Enterprise Grants, Rural Business Opportunity Grants,
and Intermediary Relending Program.
The Agency will allocate funds to the States each Federal fiscal
year for the programs identified in this section using the procedures
specified in paragraph (a) of this section. If the Agency determines
that it will not allocate funds to the States for a program identified
in this section in a particular Federal fiscal year, the Agency will
announce this decision in a notice published in the Federal Register.
The conditions under which the Agency will not allocate a program's
funds to the States are identified in paragraph (b) of this section.
(a) Procedures for allocating funds to the States. Each Federal
fiscal year, the Agency will use the amount available to the program and
the procedures identified in paragraphs (a)(2) through (10) of this
section to determine the amount of program funds to allocate to each of
the States. The Agency will make the allocation calculation each Federal
fiscal year.
(1) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(2) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart.
(i) The criteria used in the basic formula are:
(A) State's percentage of national rural population.
(B) State's percentage of national rural population with incomes
below the poverty level.
(C) State's percentage of national nonmetropolitan unemployment.
(ii) The data sources for each of the criteria identified in
paragraph (a) of this section are:
(A) For the criterion specified in paragraph (a)(2)(i)(A), the most
recent decennial Census data.
(B) For the criterion specified in paragraph (a)(2)(i)(B), 5-year
income data from the American Community Survey (ACS) or, if needed,
other Census Bureau data.
(C) For the criterion specified in paragraph (a)(2)(i)(C), the most
recent Bureau of Labor Statistics data.
(iii) Each criterion is assigned a specific weight factor according
to its relevance in determining need. The percentage representing each
criterion is multiplied by the weight factor and summed to arrive at
State Factor (SF). The SF cannot exceed 0.05. The Agency may elect to
use different weight factors than those identified in this paragraph by
publishing a timely notice in the Federal Register.
SF = (criterion (a)(2)(i)(A) x 25 percent) + (criterion (a)(2)(i)(B) x
50 percent) + (criterion (a)(2)(i)(C) x 25 percent)
(iv) The Agency will recalculate, as necessary, each criterion
specified in paragraph (a)(2)(i) of this section each year. In making
these recalculations, the Agency will use the most recent data available
to the Agency as of October 1 of the fiscal year for which the Agency is
making State allocations. Each criterion's value determined at the
beginning of a fiscal year for a program will be used for that entire
fiscal year, regardless of when that fiscal year's funding becomes
available for the program.
(3) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(4) Transition formula. The transition provisions specified in Sec.
1940.552(d) of
[[Page 96]]
this subpart apply to the programs identified in this section except as
follows:
(i) The transition formula will be used only when the weight factors
identified in paragraph (a)(2)(iii) of this section are modified; and
(ii) When the transition formula is used, there will be no upper
limitation on the amount that a State's allocation can increase over its
previous year's allocation and the maximum percentage that funding will
be allowed to decrease for a State will be 10 percent from its previous
year's allocation.
(5) Base allocations. See Sec. 1940.552(e) of this subpart.
(6) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
administrative allocations.
(7) Reserve. See Sec. 1940.552(g) of this subpart.
(8) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(9) Availability of allocation. See Sec. 1940.552(i) of this
subpart.
(10) Suballocation by the State Director. Suballocation by the State
Director is authorized for each program covered by this section.
(b) Conditions for not allocating program funds to the States. The
Agency may elect to not allocate program funds to the States whenever
one of the conditions identified in paragraphs (b)(1) or (b)(2) of this
section occurs.
(1) Funds allocated in a fiscal year to a program identified in this
section are insufficient, as provided for in Sec. 1940.552(a) of this
subpart.
(2) The Agency determines that it is in the best financial interest
of the Federal Government not to make a State allocation for any program
identified in this section and that the exercise of this determination
is not in conflict with applicable law.
[79 FR 56218, Sept. 19, 2014]
Editorial Note: At 79 FR 55967, September 18, 2014, Sec. 1940.588
was amended by revising paragraph (i); however, paragraph (i) was not
found in the section.
Sec. 1940.589 Rural Energy for America Program.
The Agency will allocate funds to the States each Federal fiscal
year for renewable energy system and energy efficiency improvement
projects under the Rural Energy for America Program (REAP) using the
procedures specified in paragraph (a) of this section. If the Agency
determines that it will not allocate funds to the States for REAP in a
particular Federal fiscal year, the Agency will announce this decision
in a notice published in the Federal Register. The conditions under
which the Agency will not allocate the program's funds to the States are
identified in paragraph (b) of this section.
(a) Procedures for allocating funds to the States. Each Federal
fiscal year, the Agency will use the amount available to the program and
the procedures identified in paragraphs (a)(2) through (10) of this
section to determine the amount of program funds to allocate to each of
the States. The Agency will make this calculation each Federal fiscal
year.
(1) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(2) Basic formula criteria, data source, and weight. See Sec.
1940.552(b) of this subpart.
(i) The criteria used in the basic formula are:
(A) State's percentage of national rural population.
(B) State's percentage of national rural population with incomes
below the poverty level.
(C) State's percentage of energy cost.
(ii) The data sources for each of the criteria identified in
paragraph (a)(2)(i) of this section are:
(A) For the criterion specified in paragraph (a)(2)(i)(A), the most
recent decennial Census data.
(B) For the criterion specified in paragraph (a)(2)(i)(B), 5-year
income data from the American Community Survey (ACS) or, if needed,
other Census Bureau data.
(C) For the criterion specified in paragraph (a)(2)(i)(C), the most
recent U.S. Energy Information Administration data.
(iii) Each criterion is assigned a specific weight factor according
to its relevance in determining need. The percentage representing each
criterion is multiplied by the weight factor and summed to arrive at
State Factor (SF). The SF cannot exceed 0.05. The Agency
[[Page 97]]
may elect to use different weight factors than those identified in this
paragraph by publishing a timely notice in the Federal Register.
SF = (criterion (a)(2)(i)(A) x 25 percent) + (criterion (a)(2)(i)(B) x
50 percent) + (criterion (a)(2)(i)(C) x 25 percent)
(iv) The Agency will recalculate, as necessary, each criterion
specified in paragraph (a)(2)(i) of this section each year. In making
these recalculations, the Agency will use the most recent data available
to the Agency as of October 1 of the fiscal year for which the Agency is
making State allocations. Each criterion's value determined at the
beginning of a fiscal year for a program will be used for that entire
fiscal year, regardless of when that fiscal year's funding becomes
available for the program.
(3) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(4) Transition formula. The transition provisions specified in Sec.
1940.552(d) of this subpart apply to the program(s) identified in this
section except as follows:
(i) The transition formula will be used only when the weight factors
identified in paragraph (a)(2)(iii) of this section are modified; and
(ii) When the transition formula is used, there will be no upper
limitation on the amount that a State's allocation can increase over its
previous year's allocation and the maximum percentage that funding will
be allowed to decrease for a State will be 10 percent from its previous
year's allocation.
(5) Base allocations. See Sec. 1940.552(e) of this subpart.
(6) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
initial administrative allocations.
(7) Reserve. See Sec. 1940.552(g) of this subpart.
(8) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(9) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(10) Suballocation by the State Director. Suballocation by the State
Director is authorized for this program.
(b) Conditions for not allocating program funds to the States. The
Agency may elect to not allocate REAP program funds to the States
whenever one of the conditions identified in paragraphs (b)(1) or (b)(2)
of this section occurs.
(1) Funds allocated in a fiscal year to REAP are insufficient, as
provided for in Sec. 1940.552(a) of this subpart.
(2) The Agency determines that it is in the best financial interest
of the Federal Government not to make a State allocation for REAP and
that the exercise of this determination is not in conflict with
applicable law.
[79 FR 56219, Sept. 19, 2014]
Sec. 1940.590 [Reserved]
Sec. 1940.591 Community Program Guaranteed loans.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart.
(1) The criteria used in the basic formula are:
(i) State's percentage of national rural population--50 percent.
(ii) State's percentage of national rural population with incomes
below the poverty level--25 percent.
(iii) State's percentage of national nonmetropolitan unemployment--
25 percent.
(2) The data source for the first criterion is the most recent
decennial Census data. The data source for the second criterion is the
5-year data from the American Community Survey (ACS) or, if needed,
other Census Bureau data. The data source for the third criterion is the
most recent Bureau of Labor Statistics data. Each criterion is assigned
a specific weight according to its relevance in determining need. The
percentage representing each criterion is multiplied by the weight
factor and summed to arrive at a State factor (SF). The SF cannot exceed
0.05.
SF = (criterion (b)(1)(i) x 50 percent) + (criterion (b)(1)(ii) x 25
percent) + (criterion (b)(1)(iii) x 25 percent)
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
States receiving administrative allocations do not receive formula
allocations.
[[Page 98]]
(d) Transition formula. The transition formula for Community Program
Guaranteed loans is not used.
(e) Base allocation. See Sec. 1940.552(e) of this subpart. States
receiving administrative allocations do not receive base allocations.
(f) Administrative allocation. See 1940.552(f) of this subpart.
States participating in the formula base allocation procedures do not
receive administrative allocations.
(g) Reserve. See Sec. 1940.522(g) of this subpart. States may
request funds by forwarding a request following the format found in
guide 26 of subpart A of part 1942 of this chapter to the National
Office. Generally, a request for additional funds will not be honored
unless the State has insufficient funds from the State's allocation to
obligate the loan requested.
(h) Pooling of funds. See Sec. 1940.522(h) of this subpart. Funds
are generally pooled at mid-year and year-end. Pooled funds will be
placed in the National Office reserve and will be made available
administratively.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart. The allocation of funds is made available for States to
obligate on an annual basis although the Office of Management and Budget
apportions it to the Agency on a quarterly basis.
(j) Suballocation by State Director. See Sec. 1940.552(j) of this
subpart. State Director has the option to suballocate to District
Offices.
(k) Other documentation. Not applicable.
[55 FR 11134, Mar. 27, 1990, as amended at 58 FR 54486, Oct. 22, 1993;
80 FR 9877, Feb. 24, 2015]
Sec. 1940.592 Community facilities grants.
(a) Amount available for allocations. See Sec. 1940.552(a).
(b) Basic formula criteria, data source, and weight. See Sec.
1940.552(b).
(1) The criteria used in the basic formula are:
(i) State's percentage of National rural population--50 percent.
(ii) State's percentage of National rural population with income
below the poverty level--50 percent.
(2) The data source for the first criterion is the most recent
decennial Census data. The data source for the second criterion is the
5-year data from the American Community Survey (ACS) or, if needed,
other Census Bureau data. Each criterion is assigned a specific weight
according to its relevance in determining need. The percentage
representing each criterion is multiplied by the weight factor and
summed to arrive at a State factor (SF).
SF (criterion (b)(1)(i) x 50 percent) + (criterion (b)(1)(ii) x 50
percent)
(c) Basic formula allocation. See Sec. 1940.552(c). States
receiving administrative allocations do not receive formula allocations.
(d) Transition formula. The transition formula for Community
Facilities Grants is not used.
(e) Base allocation. See Sec. 1940.552(e). States receiving
administrative allocations do not receive base allocations.
(f) Administrative allocation. See Sec. 1940.552(f). States
participating in the formula base allocation procedures do not receive
administrative allocations.
(g) Reserve. See Sec. 1940.552(g).
(h) Pooling of funds. See Sec. 1940.522(h). Funds will be pooled at
midyear and yearend. Pooled funds will be placed in the National Office
reserve and will be made available administratively.
(i) Availability of the allocation. See Sec. 1940.552(i).
(j) Suballocation by State Director. See Sec. 1940.552(j).
(k) Other documentation. Not applicable.
[62 FR 16468, Apr. 7, 1997, as amended at 80 FR 9877, Feb. 24, 2015]
Sec. 1940.593 Other Rural Business-Cooperative Service programs.
If the Agency determines that it is in the best interest of the
Federal government to allocate funds to States for existing RBS programs
other than those identified in Sec. Sec. 1940.588 and 1940.589 of this
subpart and for programs new to RBS (e.g., through new legislation), the
Agency will use the process identified in paragraph (a) or (b) of this
section.
(a) If the Agency determines that one of the State allocation
procedures in Sec. 1940.588 and Sec. 1940.589 is appropriate for the
program, the Agency will publish a Federal Register notice identifying
[[Page 99]]
the program and which State allocation procedure will be used for the
program.
(b) If the Agency determines that none of the procedures specified
in Sec. 1940.588 and Sec. 1940.589 is appropriate for the program, the
Agency will implement the following steps:
(1) The Agency will either develop a preliminary state allocation
formula and administrative procedures specific to the requirements of
the new program or use whichever of the procedures in Sec. 1940.588 and
Sec. 1940.589 the Agency determines most closely matches the purpose of
the program. The Agency will publish in the Federal Register the State
allocation formula and adminstrative procedures that it will use
initially for the new program.
(2) The Agency will develop a State allocation formula and
administrative provisions specific to the new program and publish them
as a proposed rule change to this part in the Federal Register for
public comment.
(3) Until the program's State allocation formula and administrative
requirements are finalized, the Agency will use the preliminary State
allocation formula established under paragraph (b)(1) of this section to
make State allocations and administer the new program.
[79 FR 56220, Sept. 19, 2014]
Sec. Sec. 1940.594-1940.600 [Reserved]
Sec. Exhibit A to Subpart L of Part 1940 [Reserved]
Sec. Exhibit B to Subpart L of Part 1940--Section 515 Nonprofit Set
Aside (NPSA)
I. Objective: To provide eligible nonprofit entities with a
reasonable opportunity to utilize section 515 funds.
II. Background: The Cranston-Gonzalez National Affordable Housing
Act of 1990 established the statutory authority for the section 515 NPSA
funds.
III. Eligible entities. Amounts set aside shall be available only
for nonprofit entities in the State, which may not be wholly or
partially owned or controlled by a for-profit entity. An eligible entity
may include a partnership, including a limited partnership, that has as
its general partner a nonprofit entity or the nonprofit entity's for-
profit subsidiary which will be receiving low-income housing tax credits
authorized under section 42 of the Internal Revenue Code of 1986. For
the purposes of this exhibit, a nonprofit entity is an organization
that:
A. Will own an interest in a project to be financed under this
section and will materially participate in the development and the
operations of the project; and
B. Is a private organization that has nonprofit, tax exempt status
under section 501(c)(3) or section 501(c)(4) of the Internal Revenue
Code of 1986; and
C. Has among its purposes the planning, development, or management
of low-income housing or community development projects; and
D. Is not affiliated with or controlled by a for-profit
organization; and
E. May be a consumer cooperative, Indian tribe or tribal housing
authority.
IV. Nondiscrimination. Rural Development reemphasizes the
nondiscrimination in use and occupancy and location requirements of 7
CFR 3560.104.
V. Amount of Set Aside. See Attachment 1 of this exhibit (available
in any FmHA or its successor agency under Public Law 103-354 State
Office):
A. Small State Allocation Set Aside (SSASA). The allocation for
small States has been reserved and combined to form the SSASA, as shown
in Attachment 1 of this exhibit (available in any FmHA or its successor
agency under Public Law 103-354 State Office). The definition of small
State is included in Attachment 1 of this exhibit (available in any FmHA
or its successor agency under Public Law 103-354 State Office).
B. Large State Allocation Set Aside (LSASA). The allocation for
large States has been reserved in the amounts shown in Attachment 1 of
this exhibit (available in any FmHA or its successor agency under Public
Law 103-354 State Office). The definition of large State is included in
Attachment 1 of this exhibit (available in any FmHA or its successor
agency under Public Law 103-354 State Office).
C. NPSA Rental Assistance (RA). NPSA RA has been reserved in the
National Office as shown in Attachment 1 of this exhibit (available in
any FmHA or its successor agency under Public Law 103-354 State Office).
VI. Access to NPSA funds and RA. RA is available and may be
requested, as needed, with eligible loan requests. NPSA funds and RA
should be requested by the State Director using a format similar to
Attachment 2 of this exhibit (available in any FmHA or its successor
agency under Public Law 103-354 State Office). Funds are available as
follows:
A. SSASA: The SSASA is available to any SSASA State on a first-come-
first-served basis until pooling. See Attachment 3 of this exhibit
(available in any FmHA or its successor agency under Public Law 103-354
State Office) for information regarding pooling.
[[Page 100]]
B. LSASA: LSASA states may request LSASA funds up to the amount the
state contributed to LSASA until pooling. See Attachment 3 of this
exhibit (available in any FmHA or its successor agency under Public Law
103-354 State Office) for information regarding pooling.
VII. General Information on priority/processing of Preapplications.
A. Preapplications/applications for assistance from eligible
nonprofit entities under this subpart must continue to meet all loan
making requirements of 7 CFR part 3560, subpart B.
B. A separate processing list will be maintained for NPSA loan
requests.
C. The State Director may issue Form AD-622, ``Notice of
Preapplication Review Action'', requesting a formal application to the
highest ranking preapplication(s) from eligible nonprofit entities
defined in paragraph III of this exhibit as follows:
1. LSASA. In LSASA States, AD-622s may not exceed 150 percent of the
amount the State contributed to the LSASA. No single Form AD-622 may
exceed the amount of funds the State contributed to LSASA.
2. SSASA. In SSASA States, AD-622s should not exceed the greater of
$750,000 or 150 percent of the amount the State contributed to the
SSASA; except that the State Director in a SSASA State may request
authorization to issue a Form AD-622, in an amount in excess of $750,000
if additional funds are necessary to finance an average-size proposal
based upon average construction costs in the state. For example, if the
average size proposal currently being funded in the state is 24 units,
and the average construction cost in the state is $35,000 per unit, the
state may request authorization to issue an AD-622 for $840,000. The
State Director will submit such requests to the National Office
including data reflecting average size/cost projects in the State. No
single Form AD-622 may exceed the amount of funds the State may receive
from SSASA.
D. All AD-622s issued for proposals to be funded from NPSA will be
subject to the availability of NPSA funds. Form AD-622 should contain
the following or similar language: ``This Form AD-622 is issued subject
to the availability of Nonprofit Set-Aside (NPSA) funds.''
E. If a preapplication requesting NPSA funds has sufficient priority
points to compete with non-NPSA loan requests based upon the District or
State allocation (as applicable), the preapplication will be maintained
on both the NPSA and non-NPSA rating/ranking lists.
F. Provisions for providing preference to loan requests from
nonprofit organizations is contained in 7 CFR 3560.56. Limited
partnerships, with a nonprofit general partner, do not qualify for
nonprofit preference.
VIII. Exception authority. The Administrator, or his/her designee,
may, in individual cases, make an exception to any requirements of this
exhibit which are not inconsistent with the authorizing statute, if he/
she finds that application of such requirement would adversely affect
the interest of the Government or adversely affect the intent of the
authorizing statute and/or Rural Rental Housing program or result in an
undue hardship by applying the requirement. The Administrator, or his/
her designee, may exercise this authority upon the request of the State
Director, Assistant Administrator for Housing, or Director of the Multi-
Family Housing Processing Division. The request must be supported by
information that demonstrates the adverse impact or effect on the
program. The Administrator, or his/her designee, also reserves the right
to change pooling dates, establish/change minimum and maximum fund usage
from NPSA, or restrict participation in the set aside.
[58 FR 38950, July 21, 1993, as amended at 69 FR 69104, Nov. 26, 2004]
Sec. Exhibit C to Subpart L of Part 1940--Housing in Underserved Areas
I. Objective
A. To improve the quality of affordable housing by targeting funds
under Rural Housing Targeting Set Aside (RHTSA) to designated areas that
have extremely high concentrations of poverty and substandard housing
and have severe, unmet rural housing needs.
B. To provide for the eligibility of certain colonias for rural
housing funds.
II. Background
The Cranston-Gonzalez National Affordable Housing Act of 1990
(herein referred to as the ``Act'') requires that Farmers Home
Administration (FmHA) or its successor agency under Public Law 103-354
set aside section 502, 504, 514, 515, and 524 funds for assistance in
targeted, underserved areas. An appropriate amount of section 521 new
construction rental assistance (RA) is set aside for use with section
514 and 515 loan programs. Under the Act, certain colonias are now
eligible for FmHA or its successor agency under Public Law 103-354
housing assistance.
III. Colonias
A. Colonia is defined as any identifiable community that:
1. Is in the State of Arizona, California, New Mexico or Texas;
2. Is in the area of the United States within 150 miles of the
border between the United States and Mexico, except that the term does
[[Page 101]]
not include any standard metropolitan statistical area that has a
population exceeding 1 million;
3. Is designated by the State or county in which it is located as a
colonia;
4. Is determined to be a colonia on the basis of objective criteria,
including lack of potable water supply, lack of adequate sewage systems,
and lack of decent, safe, and sanitary housing; and
5. Was in existence and generally recognized as a colonia before
November 28, 1990.
B. Requests for housing assistance in colonias have priority as
follows:
1. When the State did not obligate its allocation in one or more of
its housing programs during the previous 2 fiscal years (FYs), priority
will be given to requests for assistance, in the affected program(s),
from regularly allocated funds, until an amount equal to 5 percent of
the current FY program(s) allocation is obligated in colonias. This
priority takes precedence over other processing priority methods.
2. When the State did obligate its allocation in one or more of its
housing programs during the previous 2 FYs, priority will be given to
requests for assistance, in the affected program(s), from RHTSA funds,
until an amount equal to 5 percent of the current FY program(s)
allocation is obligated in colonias. This priority takes precedence over
other processing priority methods.
C. Colonias may access pooled RHTSA funds as provided in paragraph
IV G of this exhibit.
IV. RHTSA
A. Amount of Set Aside. Set asides for RHTSA, from the current FY
allocations, are established in attachment 1 of this exhibit (available
in any FmHA or its successor agency under Public Law 103-354 State
Office).
B. Selection of Targeted Counties--1. Eligibility. Eligible counties
met the following criteria: (1) 20 percent or more of the county
population is at, or below, poverty level; (2) 10 percent or more of the
occupied housing units are substandard; and (3) the average funds
received on a per capita basis in the county, during the previous 5 FYs,
were more than 40 percent below the State per capita average during the
same period. Data from the most recent available Census was used for all
three criteria, with criteria (2) and (3) based on the FmHA or its
successor agency under Public Law 103-354 rural area definition.
2. Selection. The Act requires that 100 of the most underserved
counties be initially targeted for RHTSA funds. In establishing the 100
counties, those with 28 percent or more of their population at, or
below, poverty level and 13 percent or more of their occupied housing
units substandard, have preference. If less than 100 counties meet this
criteria, the remaining counties meeting the criteria in paragraph IV B
1 of this exhibit will be ranked, based upon a total of their
substandard housing and poverty level percentages. The highest-ranking
counties are then selected until the list reaches 100. The remaining
counties are eligible for pool funds only.
C. State RHTSA Levels. In the section 502, 504, and 515 programs,
each State's RHTSA level will be based on its number of eligible
counties, with each county receiving a pro rata share of the total funds
available. In order to ensure that a meaningful amount of assistance is
available to each State, minimum funding levels may be established. When
minimum levels are established, they are set forth on Attachment 1 of
this exhibit (available in any FmHA or its successor agency under Public
Law 103-354 State Office).
D. Use of Funds. To maximize the assistance to targeted counties,
allocated program funds should be used in addition to RHTSA funds, where
possible. The State Director has the discretion to determine the most
effective delivery of RHTSA funds among the targeted counties within
his/her jurisdiction. The 100 counties listed in attachment 2 of this
exhibit (available in any FmHA or its successor agency under Public Law
103-354 State Office) are eligible for RHTSA funding consideration
immediately. Colonias are also eligible for RHTSA funds as described in
paragraph III of this exhibit.
E. National Office RHTSA Reserve. A limited National Office reserve
is available on an individual case basis when the State is unable to
fund a request from its regular or RHTSA allocation. The amount of the
reserve, and the date it can be accessed and any conditions thereof, if
applicable, are contained in attachment 1 of this exhibit (available in
any FmHA or its successor agency under Public Law 103-354 State Office).
F. Requests for Funds and RA. All RHTSA funds are reserved in the
National Office and requests for these funds and/or RA units must be
submitted by the State Director, using the applicable format shown on
attachment 4 or 5 of this exhibit (available in any FmHA or its
successor agency under Public Law 103-354 State Office). The State
Director is responsible for notifying the Director of Single Family
Housing Processing Division (SFHPD) or Multi-Family Housing Processing
Division (MFHPD) of any RHTSA funds and RA units authorized, but not
obligated, by RHTSA pooling date.
G. Pooling. Unused RHTSA funds and RA will be pooled. Pooling dates
and any pertinent information thereof are available on attachment 1 of
this exhibit (available in any FmHA or its successor agency under Public
Law 103-354 State Office). Pooled funds will be available on a first-
come, first-served basis to all eligible colonias and all counties
[[Page 102]]
listed on attachments 2 and 3 of this exhibit (available in any FmHA or
its successor agency under Public Law 103-354 State Office). Pooled
RHTSA funds will remain available until the year-end pooling date.
H.-I. [Reserved]
J. Requests for Assistance. Requests for assistance in targeted
counties must meet all loan making requirements of the applicable
program Instructions, except as modified for colonias in paragraph III
of this exhibit. For section 515, States may:
1. Issue Form AD-622, ``Notice of Preapplication Review Action,'' up
to 150 percent of the amount shown in attachment 1 of this exhibit
(available in any FmHA or its successor agency under Public Law 103-354
State Office).
2. All AD-622s issued for applicants in targeted counties will be
annotated, in Item 7, under ``Other Remarks,'' with the following:
``Issuance of this AD-622 is contingent upon receiving funds from the
Rural Housing Targeting Set Aside (RHTSA). Should RHTSA funds be
unavailable, or the county in which this project will be located is no
longer considered a targeted county, this AD-622 will no longer be
valid. In these cases, the request for assistance will need to compete
with other preapplications in non-targeted counties, based upon its
priority point score.''
V. [Reserved]
[57 FR 3924, Feb. 3, 1992]
Subparts M-S [Reserved]
Subpart T_System for Delivery of Certain Rural Development Programs
Source: 57 FR 11559, Apr. 6, 1992, unless otherwise noted.
Sec. 1940.951 General.
This subpart sets forth Rural Development policies and procedures
for the delivery of certain rural development programs under a rural
economic development review panel established in eligible States
authorized under sections 365, 366, 367, and 368 of the Consolidated
Farm and Rural Development Act (7 U.S.C. 1921 et seq.), as amended.
(a) If a State desires to participate in this pilot program, the
Governor of the State may submit an application to the Under Secretary
for Small Community and Rural Development, U.S. Department of
Agriculture, room 219-A, Administration Building, Washington, DC 20250
in accordance with Sec. 1940.954 of this subpart.
(b) The Under Secretary shall designate not more than five States in
which to make rural economic development review panels applicable during
any established time period for the purpose of reviewing and ranking
applications submitted for funding under certain rural development
programs. The following time periods have been established for
participation in this pilot program:
First period--Balance of fiscal year (FY) 1992 to September 30, 1993;
Second period--October 1, 1993 to September 30, 1994;
Third period--October 1, 1994 to September 30, 1995; and
Fourth period--October 1, 1995 to September 30, 1996.
The State will be bound by the provisions of this pilot program only
during the established time period(s) for which the State is designated.
If a designated State does not remain an eligible State during the
established time period(s) for which the State was designated, the State
will not be eligible to participate in this program and cannot revert to
the old ranking and applicant selection process.
(c) Assistance under each designated rural development program shall
be provided to eligible designated States for qualified projects in
accordance with this subpart.
(d) Federal statutes provide for extending Rural Development
financially supported programs without regard to race, color, religion,
sex, national origin, marital status, age, familial status, or physical/
mental handicap (provided the participant possesses the capacity to
enter into legal contracts.)
Sec. 1940.952 [Reserved]
Sec. 1940.953 Definitions.
For the purpose of this subpart:
Administrator. The Administrator of Rural Business--Cooperative
Service, Rural Housing Service, or Rural Utilities Service.
Area plan. The long-range development plan developed for a local or
regional area in a State.
Designated agency. An agency selected by the Governor of the State
to
[[Page 103]]
provide the panel and the State Coordinator with support for the daily
operation of the panel.
Designated rural development program. A program carried out under
sections 304(b), 306(a), or subsections (a) through (f) and (h) of
section 310B of the Consolidated Farm and Rural Development Act (7
U.S.C. 1926(a)), as amended, or under section 1323 of the Food Security
Act of 1985, for which funds are available at any time during the FY
under such section, including, but not limited to, the following:
(1) Water and Waste Disposal Insured or Guaranteed Loans;
(2) Development Grants for Community Domestic Water and Waste
Disposal Systems;
(3) Technical Assistance and Training Grants;
(4) Emergency Community Water Assistance Grants;
(5) Community Facilities Insured and Guaranteed Loans;
(6) Business and Industry Guaranteed Loans;
(7) Industrial Development Grants;
(8) Intermediary Relending Program;
(9) Drought and Disaster Relief Guaranteed Loans;
(10) Disaster Assistance for Rural Business Enterprises;
(11) Nonprofit National Rural Development and Finance Corporations.
Designated State. A State selected by the Under Secretary, in
accordance with Sec. 1940.954 of this subpart, to participate in this
program.
Eligible State. With respect to a FY, a State that has been
determined eligible in accordance with Sec. 1940.954 (e) of this
subpart.
Nondesignated State. A State that has not been selected to
participate in this pilot program.
Qualified project. Any project: (1) For which the designated agency
has identified alternative Federal, State, local or private sources of
assistance and has identified related activities in the State; and
(2) To which the Administrator is required to provide assistance.
State. Any of the fifty States.
State coordinator. The officer or employee of the State appointed by
the Governor to carry out the activities described in Sec. 1940.957 of
this subpart.
State Director. The head of Rural Development at the local level
charged with administering designated rural development programs.
State rural economic development review panel or ``panel''. An
advisory panel that meets the requirements of Sec. 1940.956 of this
subpart.
Under Secretary. In the U.S. Department of Agriculture, the Under
Secretary for Small Community and Rural Development.
Sec. 1940.954 State participation.
(a) Application. If a State desires to participate in this pilot
program, the Governor may submit an original and one copy of Standard
Form (SF) 424.1, ``Application for Federal Assistance (For Non-
construction),'' to the Under Secretary. The five States designated by
the Under Secretary to participate in the first established time period
will be selected from among applications received not later than 60
calendar days from the effective date of this subpart. If a designated
State desires to participate in additional time periods, applications
are not required to be resubmitted; however, the Governor must notify
the Under Secretary, in writing, no later than July 31 of each FY, and
the State must submit evidence of eligibility requirements each FY in
accordance with Sec. 1940.954 (e)(2) of this subpart. Beginning in FY
1993, applications must be submitted to the Under Secretary no later
than July 31 if a State desires to be selected to fill vacancies that
occur when designated States do not roll over into another established
time period. States should include the following information with SF
424.1:
(1) A narrative signed by the Governor including reasons for State
participation in this program and reasons why a project review and
ranking process by a State panel will improve the economic and social
conditions of rural areas in the State. The narrative will also include
the time period(s) for which the State wishes to participate.
(2) A proposal outlining the method for meeting all the following
eligibility requirements and the timeframes established for meeting each
requirement:
[[Page 104]]
(i) Establishing a rural economic development review panel in
accordance with Sec. 1940.956 of this subpart. When established, the
name, title, and address of each proposed member should be included and
the chairperson and vice chairperson should be identified.
(ii) Governor's proposed designation of a State agency to support
the State coordinator and the panel. The name, address, and telephone
number of the proposed agency's contact person should be included.
(iii) Governor's proposed selection of a State coordinator in
accordance with Sec. 1940.957 of this subpart, including the title,
address, and telephone number.
(iv) Development of area development plans for all areas of the
State that are eligible to receive assistance from designated rural
development programs.
(v) The review and evaluation of area development plans by the panel
in accordance with Sec. 1940.956 of this subpart.
(vi) Development of written policy and criteria used by the panel to
review and evaluate area plans in accordance with Sec. 1940.956 of this
subpart.
(vii) Development of written policy and criteria the panel will use
to evaluate and rank applications in accordance with Sec. 1940.956 of
this subpart.
(3) Preparation of a proposed budget that includes 3 years
projections of income and expenses associated with panel operations. If
funds from other sources are anticipated, sources and amounts should be
identified.
(4) Development of a financial management system that will provide
for effective control and accountability of all funds and assets
associated with the panel.
(5) A schedule to coordinate the submission, review, and ranking
process of preapplications/applications in accordance with Sec.
1940.956(a) of this subpart.
(6) Other information provided by the State in support of its
application.
(b) Selecting States. The Under Secretary will review the
application and other information submitted by the State and designate
not more than five States to participate during any established time
period.
(c) Notification of selection. (1) The Under Secretary will notify
the Governor of each State whether or not the State has been selected
for further consideration in this program. If a State has been selected,
the notification will include the additional information that the
Governor must submit to the Under Secretary in order for the State to
meet eligibility requirements in accordance with paragraph (d) of this
section.
(2) A copy of the notification to the Governor will be submitted to
the Administrator along with a copy of the State's application and other
material submitted in support of the application.
(d) Determining State eligibility. (1) The Governor will provide the
Under Secretary with evidence that the State has complied with the
eligibility requirements of paragraph (a)(2) of this section not later
than September 1, 1992, for the first established time period and not
later than September 1 for each of the remaining established time
periods.
(2) The Under Secretary will review the material submitted by the
Governor in sufficient detail to determine if a State has complied with
all eligibility requirements of this subpart. The panel will not begin
reviewing and ranking applications until the Governor has been notified
in writing by the Under Secretary that the State has been determined
eligible and is designated to participate in this program. A copy of the
notification will be sent to the Administrator. The Under Secretary's
decision is not appealable.
(e) Eligibility requirements. (1) With respect to this subpart, the
Under Secretary may determine a State to be an eligible State provided
all of the following apply not later than October 1 of each FY:
(i) The State has established a rural economic development review
panel that meets the requirements of Sec. 1940.956 of this subpart;
(ii) The Governor has appointed an officer or employee of the State
government to serve as State coordinator to carry out the
responsibilities set forth in Sec. 1940.957 of this subpart; and
(iii) The Governor has designated an agency of the State government
to provide the panel and State coordinator with support for the daily
operation of the panel.
[[Page 105]]
(2) If a State is determined eligible initially and desires to
participate in additional time periods established for this program, the
Governor will submit documents and information not later than September
1 of each subsequent FY in sufficient detail for the Under Secretary to
determine, prior to the beginning of the additional time period, that
the State is still in compliance with all eligibility requirements of
this subpart.
Sec. 1940.955 Distribution of program funds to designated States.
(a) States selected to participate in the first established time
period will receive funds from designated rural development programs
according to applicable program regulations until the end of FY 1992, if
necessary for States to have sufficient time to meet the eligibility
requirements of this subpart, and to be designated to participate in
this program. No funds will be administered under this subpart to an
ineligible State.
(b) If a State becomes an eligible State any time prior to the end
of FY 1992, any funds remaining unobligated from a State's FY 1992
allocation, may be administered under this subpart.
(c) Beginning in FY 1993 and for each established time period
thereafter, all designated rural development program funds received by a
designated State will be administered in accordance with Sec. Sec.
1940.961 through 1940.965 of this subpart, provided the State is
determined eligible prior to the beginning of each FY in accordance with
Sec. 1940.954 of this subpart. No assistance will be provided under any
designated rural development program in any designated State that is not
an eligible State.
Sec. 1940.956 State rural economic development review panel.
(a) General. In order for a State to become or remain an eligible
State, the State must have a rural economic development panel that meets
all requirements of this subpart. Each designated State will establish a
schedule whereby the panel and Rural Development will coordinate the
submission, review, and ranking process of preapplications/applications.
The schedule will be submitted to the Under Secretary for concurrence
and should consider the following:
(1) Timeframes should assure that applications selected for funding
from the current FY's allocation of funds can be processed by Rural
Development and funds obligated prior to the July 15 pooling established
in Sec. 1940.961(c) of this subpart;
(2) Initial submission of preapplications/applications from Rural
Development to the panel and any subsequent submissions during the first
year;
(3) How often during each FY thereafter should Rural Development
submit preapplications/applications to the panel for review and ranking;
(4) Number of working days needed by the panel to review and rank
preapplications/applications;
(5) Number of times during the FY the panel will submit a list of
ranked preapplications/applications to Rural Development for funding
consideration;
(6) Consider the matching of available loan and grant funds to
assure that all allocated funds will be used;
(7) How to consider ranked preapplications/applications at the end
of the FY that have not been funded; and
(8) How to consider requests for additional funds needed by an
applicant to complete a project that already has funds approved; i.e.,
construction bid cost overrun.
(b) Duties and responsibilities. The panel is required to advise the
State Director on the desirability of funding applications from funds
available to the State from designated rural development programs. In
relation to this advice, the panel will have the following duties and
responsibilities:
(1) Establish policy and criteria to review and evaluate area plans
and to review and rank preapplications/applications. (i) Area plan. The
panel will develop a written policy and criteria to use when evaluating
area plans. The criteria to be used when evaluating area plans will
assure that the plan includes, as a minimum, the technical information
included in Sec. 1940.959 of this subpart. The criteria will be in
sufficient detail for the panel to determine
[[Page 106]]
that the plan is technically and economically adequate, feasible, and
likely to succeed in meeting the stated goals of the plan. The panel
will give weight to area-wide or regional plans and comments submitted
by intergovernmental development councils or similar organizations made
up of local elected officials charged with the responsibility for rural
area or regional development. A copy of the policy and evaluating
criteria will be provided to Rural Development.
(ii) Applications. The panel will annually review the policy and
criteria used by the panel to evaluate and rank preapplications/
applications in accordance with this subpart. The panel will assure that
the policy and criteria are consistent with current rural development
needs, and that the public has an opportunity to provide input during
the development of the initial policy and criteria. The Governor will
provide a copy of the initial policy and criteria established by the
panel when submitting evidence of eligibility in accordance with Sec.
1940.954 of this subpart. Annually, thereafter, and not later than
September 1 of each FY, the State coordinator will send the Under
Secretary evidence that the panel has reviewed the established policy
and criteria. The State coordinator will also send the Under Secretary a
copy of all revisions.
(A) The policy and criteria used to rank applications for business
related projects will include the following, which are not necessarily
in rank order:
(1) The extent to which a project stimulate rural development by
creating new jobs of a permanent nature or retaining existing jobs by
enabling new small businesses to be started, or existing businesses to
be expanded by local or regional area residents who own and operate the
businesses.
(2) The extent to which a project will contribute to the enhancement
and the diversification of the local or regional area economy.
(3) The extent to which a project will generate or retain jobs for
local or regional area residents.
(4) The extent to which a project will be carried out by persons
with sufficient management capabilities.
(5) The extent to which a project is likely to become successful.
(6) The extent to which a project will assist a local or regional
area overcome severe economic distress.
(7) The distribution of assistance to projects in as many areas as
possible in the State with sensitivity to geographic distribution.
(8) The technical aspects of the project.
(9) The market potential and marketing arrangement for the projects.
(10) The potential of such project to promote the growth of a rural
community by improving the ability of the community to increase the
number of persons residing in the community and by improving the quality
of life for these persons.
(B) The policy and criteria used to rank preapplications/
applications for infrastructure and all other community facility-type
projects will include the following which are not necessarily in rank
order:
(1) The extent to which the project will have the potential to
promote the growth of a rural community by improving the quality of life
for local or regional residents.
(2) The extent to which the project will affect the health and
safety of local or regional area residents.
(3) The extent to which the project will improve or enhance cultural
activities, public service, education, or transportation.
(4) The extent to which the project will affect business
productivity and efficiency.
(5) The extent to which the project will enhance commercial business
activity.
(6) The extent to which the project will address a severe loss or
lack of water quality or quantity.
(7) The extent to which the project will correct a waste collection
or disposal problem.
(8) The extent to which the project will bring a community into
compliance with Federal or State water or waste water standards.
(9) The extent to which the project will consolidate water and waste
systems and utilize management efficiencies in the new system.
[[Page 107]]
(2) Review and evaluate area plans. Each area plan submitted for a
local or regional area will be reviewed and evaluated by the panel.
After an area plan has been reviewed and evaluated in accordance with
established policy and criteria:
(i) The panel will accept any area plan that meets established
criteria unless the plan is incompatible with any other area plan for
that area that has been accepted by the panel; or
(ii) The panel will return any area plan that is technically or
economically inadequate, not feasible, is unlikely to be successful, or
is not compatible with other panel-accepted area plans for that area.
When an area plan is returned, the panel will include an explanation of
the reasons for the return and suggest alternative proposals.
(iii) The State coordinator will notify the State Director, in
writing, of the panel's decision on each area plan reviewed.
(3) Review and rank preapplications/applications. The panel will
review, rank, and transmit a ranked list of preapplications/applications
according to the schedule prepared in accordance with paragraph (a) of
this section, and the following:
(i) Review preapplications/applications. The panel will review each
preapplication/application for assistance to determine if the project to
be carried out is compatible with the area plan in which the project
described in the preapplication/application is proposed, and either:
(A) Accept any preapplication/application determined to be
compatible with such area plan; or
(B) Return to the State Director any preapplication/application
determined not to be compatible with such area plan. The panel will
notify the applicant when preapplication/applications are returned to
the State Director.
(ii) Rank preapplications/applications. The panel will rank only
those preapplications/applications that have been accepted in accordance
with paragraph (b)(3)(i)(A) of this section. The panel will consider the
sources of assistance and related activities in the State identified by
the designated agency. Applications will be ranked in accordance with
the written policy and criteria established in accordance with paragraph
(b)(1)(ii) of this section and the following:
(A) Priority ranking for projects addressing health emergencies. In
addition to the criteria established in paragraph (b)(1)(ii) of this
section, preapplications/applications for projects designed to address a
health emergency declared so by the appropriate Federal or State agency,
will be given priority by the panel.
(B) Priority based on need. If two or more preapplications/
applications ranked in accordance with this subpart are determined to
have comparable strengths in their feasibility and potential for growth,
the panel will give priority to the applications for projects with the
greatest need.
(C) If additional ranking criteria for use by a panel are required
in any designated rural development program regulation, the panel will
give consideration to the criteria when ranking preapplications/
applications submitted under that program.
(iii) Transmit list of ranked preapplications/applications. After
the preapplications/applications have been ranked, the panel will submit
a list of all preapplications/applications received to the State
coordinator. The list will clearly indicate each preapplication/
application accepted for funding and will list preapplications/
applications in the order established for funding according to priority
ranking by the panel. The list will not include a preapplication/
application that is to be returned to the applicant in accordance with
paragraph (b)(3)(i)(B) of this section. The State coordinator will send
a copy of the list to the State Director for further processing of the
preapplication/application in accordance with Sec. 1940.965 of this
subpart. Once the panel has ranked and submitted the list to Rural
Development and the State Director has selected a preapplication/
application for funding, the preapplication/application selected will
not be replaced with a preapplication/application received at a later
date that may have a higher ranking.
(4) Public availability of list. If requested, the State coordinator
will make the list of ranked
[[Page 108]]
preapplications/applications available to the public and will include a
brief explanation and justification of why the project preapplications/
applications received their priority ranking.
(c) Membership--(1) Voting members. The panel will be composed of
not more than 16 voting members who are representatives of rural areas.
The 16 voting members will include the following:
(i) One of whom is the Governor of the State or the person
designated by the Governor to serve on the panel, on behalf of the
Governor, for that year;
(ii) One of whom is the director of the State agency responsible for
economic and community development or the person designated by the
director to serve on the panel, on behalf of the director, for that
year:
(iii) One of whom is appointed by a statewide association of banking
organizations;
(iv) One of whom is appointed by a statewide association of
investor-owned utilities;
(v) One of whom is appointed by a statewide association of rural
telephone cooperatives;
(vi) One of whom is appointed by a statewide association of
noncooperative telephone companies;
(vii) One of whom is appointed by a statewide association of rural
electric cooperatives;
(viii) One of whom is appointed by a statewide association of health
care organizations;
(ix) One of whom is appointed by a statewide association of existing
local government-based planning and development organizations;
(x) One of whom is appointed by the Governor of the State from
either a statewide rural development organization or a statewide
association of publicly-owned electric utilities, neither of which is
described in any of paragraphs (c)(1)(iii) through (ix);
(xi) One of whom is appointed by a statewide association of
counties;
(xii) One of whom is appointed by a statewide association of towns
and townships, or by a statewide association of municipal leagues, as
determined by the Governor;
(xiii) One of whom is appointed by a statewide association of rural
water districts;
(xiv) The State director of the Federal small business development
center or, if there is no small business development center in place
with respect to the State, the director of the State office of the Small
Business Administration;
(xv) The State representative of the Economic Development
Administration of the Department of Commerce; and
(xvi) One of whom is appointed by the State Director from among the
officers and employees of Rural Development.
(2) Nonvoting members. The panel will have not more than four
nonvoting members who will serve in an advisory capacity and who are
representatives of rural areas. The four nonvoting members will be
appointed by the Governor and include:
(i) One from names submitted by the dean or the equivalent official
of each school or college of business, from colleges and universities in
the State;
(ii) One from names submitted by the dean or the equivalent official
of each school or college of engineering, from colleges and universities
in the State;
(iii) One from names submitted by the dean or the equivalent
official, of each school or college of agriculture, from colleges and
universities in the State; and
(iv) The director of the State agency responsible for extension
services in the State.
(3) Qualifications of panel members appointed by the Governor. Each
individual appointed to the panel by the Governor will be specially
qualified to serve on the panel by virtue of the individual's technical
expertise in business and community development.
(4) Notification of selection. Each statewide organization that
selects an individual to represent the organization on the panel must
notify the Governor of the selection.
(5) Appointment of members representative of statewide organization
in certain cases. (i) If there is no statewide association or
organization of the entities described in paragraph (c)(1) of this
section, the Governor of the State will appoint an individual to fill
the position or positions, as the case may be, from among nominations
submitted by local groups of such entities.
[[Page 109]]
(ii) If a State has more than one of any of the statewide
associations or organizations of the entities described in paragraph
(c)(1) of this section, the Governor will select one of the like
organizations to name a member to serve during no more than one
established time period. Thereafter, the Governor will rotate selection
from among the remaining like organizations to name a member.
(d) Failure to appoint panel members. The failure of the Governor, a
Federal agency, or an association or organization described in paragraph
(c) of this section, to appoint a member to the panel as required under
this subpart, shall not prevent a State from being determined an
eligible State.
(e) Panel vacancies. A vacancy on the panel will be filled in the
manner in which the original appointment was made. Vacancies should be
filled prior to the third panel meeting held after the vacany occurred.
The State coordinator will notify the State Director, in writing, when
the vacancy is filled or if the vacancy will not be filled.
(f) Chairperson and vice chairperson. The panel will select two
members of the panel who are not officers or employees of the United
States to serve as the chairperson and vice chairperson of the panel.
The term shall be for 1 year.
(g) Compensation to panel members--(1) Federal members. Except as
provided in Sec. 1940.960 of this subpart, each member of the panel who
is an officer or employee of the Federal Government may not receive any
compensation or benefits by reason of service on the panel, in addition
to that which is received for performance of such officer or employee's
regular employment.
(2) NonFederal members. Each nonfederal member may be compensated by
the State and/or from grant funds established in Sec. 1940.968 of this
subpart.
(h) Rules governing panel meetings--(1) Quorum. A majority of voting
members of the panel will constitute a quorum for the purpose of
conducting business of the panel.
(2) Frequency of meetings. The panel will meet not less frequently
than quarterly. Frequency of meetings should be often enough to assure
that applications are reviewed and ranked for funding in a timely
manner.
(3) First meeting. The State coordinator will schedule the first
panel meeting and will notify all panel members of the location, date,
and time at least seven days prior to the meeting. Subsequent meetings
will be scheduled by vote of the panel.
(4) Records of meetings. The panel will keep records of the minutes
of the meetings, deliberations, and evaluations of the panel in
sufficient detail to enable the panel to provide interested agencies or
persons the reasons for its actions.
(i) Federal Advisory Committee Act. The Federal Advisory Committee
Act shall not apply to any State rural economic development review
panel.
(j) Liability of members. The members of a State rural economic
development review panel shall not be liable to any person with respect
to any determination made by the panel.
Sec. 1940.957 State coordinator.
The Governor will appoint an officer or employee of State government
as State coordinator in order for a State to become and remain an
eligible State under this subpart. The State coordinator will have the
following duties and responsibilities:
(a) Manage, operate, and carry out the instructions of the panel;
(b) Serve as liaison between the panel and the Federal and State
agencies involved in rural development;
(c) Coordinate the efforts of interested rural residents with the
panel and ensure that all rural residents in the State are informed
about the manner in which assistance under designated rural development
programs is provided to the State pursuant to this subpart, and if
requested, provide information to State residents; and
(d) Coordinate panel activities with Rural Development.
Sec. 1940.958 Designated agency.
The Governor will appoint a State agency to provide the panel and
the State coordinator with support for the daily operation of the panel.
In addition to providing support, the designated agency is responsible
for identifying:
(a) Alternative sources of financial assistance for project
preapplications/
[[Page 110]]
applications reviewed and ranked by the panel, and
(b) Related activities within the State.
Sec. 1940.959 Area plan.
Each area plan submitted to the panel for review in accordance with
Sec. 1940.956 of this subpart shall identify the geographic boundaries
of the area and shall include the following information:
(a) An overall development plan for the area with goals, including
business development and infrastructure development goals, and time
lines based on a realistic assessment of the area, including, but not
limited to, the following:
(1) The number and types of businesses in the area that are growing
or declining;
(2) A list of the types of businesses that the area could
potentially support;
(3) The outstanding need for water and waste disposal and other
public services or facilities in the area;
(4) The realistic possibilities for industrial recruitment in the
area;
(5) The potential for development of tourism in the area;
(6) The potential to generate employment in the area through
creation of small businesses and the expansion of existing businesses;
and
(7) The potential to produce value-added agricultural products in
the area.
(b) An inventory and assessment of the human resources of the area,
including, but not limited to, the following:
(1) A current list of organizations in the area and their special
interests;
(2) The current level of participation of area residents in rural
development activities and the level of participation required for
successful implementation of the plan;
(3) The availability of general and specialized job training in the
area and the extent to which the training needs of the area are not
being met;
(4) A list of area residents with special skills which could be
useful in developing and implementing the plan; and
(5) An analysis of the human needs of the area, the resources in the
area available to meet those needs, and the manner in which the plan, if
implemented, would increase the resources available to meet those needs.
(c) The current degree of intergovernmental cooperation in the area
and the degree of such cooperation needed for the successful
implementation of the plan.
(d) The ability and willingness of governments and citizens in the
area to become involved in developing and implementing the plan.
(e) A description of how the governments in the area apply budget
and fiscal control processes to the plan. This process is directed
toward costs associated with carrying out the planned development. When
plans are developed, the financial condition of all areas covered under
the plan should be fully recognized and planned development should
realistically reflect the area's immediate and long-range financial
capabilities.
(f) The extent to which public services and facilities need to be
improved to achieve the economic development and quality of life goals
of the plan. At a minimum, the following items will be considered:
(1) Law enforcement;
(2) Fire protection;
(3) Water, sewer, and solid waste management;
(4) Education;
(5) Health care;
(6) Transportation;
(7) Housing;
(8) Communications; and
(9) The availability of and capability to generate electric power.
(g) Existing area or regional plans are acceptable provided the plan
includes statements that indicate the degree to which the plan has met
or is meeting all the requirements in paragraphs (a) through (f) of this
section.
Sec. 1940.960 Federal employee panel members.
(a) The State Director will appoint one Rural Development employee
to serve as a voting member of the panel established in Sec.
1940.956(c)(1) of this subpart.
[[Page 111]]
(b) The Administrator may appoint, temporarily and for specific
purposes, personnel from any department or agency of the Federal
Government as nonvoting panel members, with the consent of the head of
such department or agency, to provide official information to the panel.
The member(s) appointed shall have expertise to perform a duty described
in Sec. 1940.956(b) of this subpart that is not available among panel
members.
(c) Federal panel members will be paid per diem or otherwise
reimbursed by the Federal Government for expenses incurred each day the
employee is engaged in the actual performance of a duty of the panel.
Reimbursement will be in accordance with Federal travel regulations.
Sec. 1940.961 Allocation of appropriated funds.
(a) Initial allocations. (1) Each FY, from sums appropriated for
direct loans, loan guarantees, or grants for any designated rural
development program, funds will be allocated to designated States in
accordance with RD Instruction subpart L of part 1940, exhibit A,
attachment 4, of this chapter (available in any RD State or District
Office).
(2) Each FY, and normally within 30 days after the date Rural
Development receives an appropriation of designated rural development
program funds, the Governor of each designated State will be notified of
the amounts allocated to the State under each designated program for
such FY. The Governor will also be notified of the total amounts
appropriated for the FY for each designated rural development program.
(3) The State Director will fund projects from a designated State's
allocation of funds, according to appropriate program regulations giving
great weight to the order in which the preapplications/applications for
projects are ranked and listed by the panel in accordance with Sec.
1940.956(b)(3) of this subpart.
(b) Reserve. A percentage of the National Office reserve established
in subpart L of part 1940 of this chapter will be used to establish a
reserve for designated States that is separate and apart from that of
nondesignated States. The percent reserved will be based upon the same
criteria used in subpart L of part 1940 of this chapter to allocate
program funds.
(c) Pooling. (1) On July 15 of each FY, and from time to time
thereafter during the FY, as determined appropriate, unobligated funds
will be pooled from among the designated States. Pooled funds will be
made a part of the reserve established for designated States and will
revert to National Office control.
(2) Funds pooled from designated States can be requested by
designated States, pursuant to subsection (d) of this section. The
designated States' pool; however, will not be available to nondesignated
States until September 1 of each year.
(d) Request for funds. (1) Designated States may request designated
States' reserve funds, and funds for other designated rural development
programs controlled by the National Office, as shown in RD Instruction
subpart L of part 1940, exhibit A, attachment 4, of this chapter, in
accordance with applicable program regulations.
(2) Designated States may request funds from the nondesignated
reserve account when:
(i) All allocated and reserve funds to designated states have been
used, or
(ii) Sufficient funds do not remain in any designated State
allocation and in the designated States' reserve account to fund a
project.
Sec. 1940.962 Authority to transfer direct loan amounts.
(a) Transfer of funds. If the amounts allocated to a designated
State for direct Water and Waste Disposal or Community Facility loans
for a FY are not sufficient to provide the full amount requested for a
project in accordance with this subpart, the State Director may transfer
part or all of the funds allocated to the State, from one program to
another, subject to paragraphs (b) and (c) of this section.
(b) Limitation on amounts transferred. (1) Amounts transferred
within a designated State. The amount of direct loan funds transferred
from a program under this section shall not exceed the
[[Page 112]]
amount left unobligated after obligating the full amount of assistance
requested for each project that ranked higher in priority on the panel's
list.
(2) Amounts transferred on a National basis. The amount of direct
loan funds transferred in a FY, among the designated States, from a
program under this subpart (after accounting for any offsetting
transfers into such program) shall not exceed $9 million, or an amount
otherwise authorized by law.
(c) National Office concurrence. The State Director may transfer
direct loan funds authorized in this section, after requesting and
receiving concurrence from the National Office. If permitted by law, the
National Office will concur in requests on a first-come-first-served
basis.
Sec. 1940.963 Authority to transfer guaranteed loan amounts.
(a) Transfer of funds. If the amounts allocated to a designated
State for guaranteed Water and Waste Disposal, Community Facility, or
Business and Industry loans for a FY are not sufficient to provide the
full amount requested for a project in accordance with this subpart, the
State Director may transfer part or all of the funds allocated to the
State, from one program to another, subject to paragraphs (b) and (c) of
this section.
(b) Limitation on amounts transferred. The amount of guaranteed loan
funds transferred from a program under this section shall not exceed the
amount left unobligated after obligating the full amount of assistance
requested for each project that ranked higher in priority on the panel's
list.
(c) National Office concurrence. The State Director may transfer
guaranteed loan funds authorized in this section, after requesting and
receiving concurrence from the National Office. If permitted by law, the
National Office will concur in requests on a first-come-first-served
basis.
Sec. 1940.964 [Reserved]
Sec. 1940.965 Processing project preapplications/applications.
Except for the project review and ranking process established in
this subpart, all requests for funds from designated rural development
programs will be processed, closed, and serviced according to applicable
Rural Development regulations, available in any Rural Development
office.
(a) Preapplications/applications. All preapplications/applications
on hand that have not been selected for further processing will be
submitted initially to the panel for review and ranking.
Preapplications/applications on hand that had been selected for further
processing prior to the time a State was selected to participate in this
program may be funded by Rural Development without review by the panel.
Preapplications/applications selected for further processing by Rural
Development will not exceed the State's previous year's funding level.
The State Director will provide the State coordinator a list of
preapplications/applications that are in process and will be considered
for funding without review by the panel. This list will be provided at
the same time preapplications/applications are initially submitted to
the State coordinator in accordance with paragraph (d) of this section.
(b) Rural Development review. Preapplications/applications will be
reviewed in sufficient detail to determine eligibility and, if
applicable, determine if the applicant is able to obtain credit from
other sources at reasonable rates and terms. Normally, within 45 days
after receiving a complete preapplication/application, Rural Development
will notify the applicant of the eligibility determination. A copy of
all notifications will be sent to the State coordinator.
(c) Applicant notification. The notification to eligible applicants
will contain the following statements:
Your application has been submitted to the State coordinator for
review and ranking by the State rural economic development review panel.
If you have questions regarding this review process, you should contact
the State coordinator. The address and telephone number are: (insert).
You will be notified at a later date of the decision reached by the
panel and whether or not you can proceed with the proposed project.
You are advised against incurring obligations which cannot be
fulfilled without Rural Development funds.
[[Page 113]]
These statements should be included in notifications to applicants with
preapplications/applications on hand that had not been selected for
further processing prior to the time a State was selected to participate
in this program.
(d) Information to State coordinator. Rural Development will forward
a copy of the preapplication/application and other information received
from the applicant to the State coordinator according to a schedule
prepared in accordance with Sec. 1940.956(a) of this subpart. The State
coordinator will be advised that no further action will be taken on
preapplications/applications until they have been received and ranked by
the panel, and a priority funding list has been received from the State.
Applications forwarded to the State coordinator will be reviewed and
ranked for funding in accordance with Sec. 1940.956 of this subpart.
(e) The Rural Development review of priority funding list. Rural
Developmentwill review the list of ranked applications received from the
State coordinator and determine if projects meet the requirements of the
designated rural development program under which the applicant seeks
assistance. Any project that does not meet program regulations will be
removed from the list. Applicants will be notified of the decision
reached by the panel and whether or not the applicant should proceed
with the project. Rural Development will provide a copy of all
notifications to the State coordinator. The decisions of the panel are
not appealable.
(f) Obligation of funds. Rural Development will provide funds for
projects whose application remains on the list, subject to available
funds. Consideration will be given to the order in which the
applications were ranked and prioritized by the panel. If Rural
Development proposes to provide assistance to any project without
providing assistance to all projects ranked higher in priority by the
panel than the project to be funded, 10 days prior to requesting an
obligation of funds, the State Director will submit a report stating
reasons for funding such lower ranked project to the following:
(1) Panel.
(2) National Office. The National Office will submit a copy of the
notification to:
(i) Committee on Agriculture of the House of Representatives,
Washington, DC.
(ii) Committee on Agriculture, Nutrition, and Forestry of the
Senate, Washington, DC.
Sec. Sec. 1940.966-1940.967 [Reserved]
Sec. 1940.968 Rural Economic Development Review Panel Grant (Panel Grant).
(a) General. Panel Grants awarded will be made from amounts
appropriated for grants under any provision of section 306(a) of the
CONACT (7 U.S.C 1926(a)), not to exceed $100,000 annually to each
eligible State. This section outlines Rural Development's policies and
authorizations and sets forth procedures for making grants to designated
States for administrative costs associated with a State rural economic
development review panel.
(b) Objective. The objective of the Panel Grant program is to make
grant funds available annually to each designated State to use for
administrative costs associated with the State rural economic
development review panels meeting requirements of Sec. 1940.956 of this
subpart.
(c) Authorities, delegations, and redelegations. The State Director
is responsible for implementing the authorities in this section and to
issue State supplements redelegating these authorities to appropriate
Rural Development employees. Grant approval authorities are contained in
subpart A of part 1901 of this chapter.
(d) Joint funds. Rural Development grant funds may be used jointly
with funds furnished by the grantee or grants from other sources.
(e) Eligibility. A State designated by the Under Secretary to
participate in this program is eligible to receive not more than
$100,000 annually under this section. A State must become and remain an
eligible State in order to receive funds under this section.
(f) Purpose. Panel Grant funds may be used to pay for reasonable
administrative costs associated with the panel, including, but not
limited to, the following:
[[Page 114]]
(1) Travel and lodging expenses;
(2) Salaries for State coordinator and support staff;
(3) Reasonable fees and charges for professional services necessary
for establishing or organizing the panel. Services must be provided by
individuals licensed in accordance with appropriate State accreditation
associations;
(4) Office supplies, and
(5) Other costs that may be necessary for panel operations.
(g) Limitations. Grant funds will not be used to:
(1) Pay costs incurred prior to the effective date of the grant
authorized under this subpart;
(2) Recruit preapplications/applications for any designated rural
development loan or grant program or any loan or grant program;
(3) Duplicate activities associated with normal execution of any
panel member's occupation;
(4) Fund political activities;
(5) Pay costs associated with preparing area development plans;
(6) Pay for capital assets; purchase real estate, equipment or
vehicles; rent, improve, or renovate office space; or repair and
maintain State or privately owned property;
(7) Pay salaries to panel members; or
(8) Pay per diem or otherwise reimburse panel members unless
distance traveled exceed 50 miles.
(h) Other considerations--(1) Equal opportunity requirements. Grants
made under this subpart are subject to title VI of the Civil Rights Act
of 1964 as outlined in subpart E of part 1901 of this chapter.
(2) Environmental requirements. The policies and regulations
contained in subpart G of part 1940 of this chapter apply to grants made
under this subpart.
(3) Management assistance. Grantees will be provided management
assistance as necessary to assure that grant funds are used for eligible
purposes for the successful operation of the panel. Grants made under
this subpart will be administered under and are subject to the U.S.
Department of Agriculture regulations, 7 CFR, parts 3016 and 3017, as
appropriate.
(4) Drug-free work place. The State must provide for a drug-free
workplace in accordance with the requirements of RD Instruction 1940-M
(available in any Rural Development office). Just prior to grant
approval, the State must prepare and sign Form AD-1049, ``Certification
Regarding Drug-Free Workplace Requirements (Grants) Alternative I--For
Grantees Other Than Individuals.''
(i) Application processing. (1) The State Director shall assist the
State in application assembly and processing. Processing requirements
should be discussed during an application conference.
(2) After the Governor has been notified that the State has been
designated to participate in this program and the State has met all
eligibility requirements of this subpart, the State may file an original
and one copy of SF 424.1 with the State Director. The following
information will be included with the application:
(i) State's financial or in-kind resources, if applicable, that will
maximize the use of Panel Grant funds;
(ii) Proposed budget. The financial budget that is part of SF 424.1
may be used, if sufficient, for all panel income and expense categories;
(iii) Estimated breakdown of costs, including costs to be funded by
the grantee or from other sources;
(iv) Financial management system in place or proposed. The system
will account for grant funds in accordance with State laws and
procedures for expending and accounting for its own funds. Fiscal
control and accounting procedures of the State must be sufficient to
permit preparation of reports required by Federal regulations and permit
the tracing of funds to a level of expenditures adequate to establish
that grant funds are used solely for authorized purposes;
(v) Method to evaluate panel activities and determine if objectives
are met;
(vi) Proposed Scope-of-Work detailing activities associated with the
panel and time frames for completion of each task, and
(vii) Other information that may be needed by Rural Development to
make a grant award determination.
[[Page 115]]
(3) The applicable provisions of Sec. 1942.5 of subpart A of part
1942 of this chapter relating to preparation of loan dockets will be
followed in preparing grant dockets. The docket will include at least
the following:
(i) Form RD 400-4, ``Assurance Agreement;''
(ii) Scope-of-work prepared by the applicant and approved by Rural
Development;
(iii) Form RD 1940-1, ``Request for Obligation of Funds,'' with
exhibit A, and
(iv) Certification regarding a drug-free workplace in accordance
with RD Instruction 1940-M (available in any Rural Development office).
(j) Grant approval, obligation of funds, and grant closing. (1) The
State Director will review the application and other documents to
determine whether the proposal complies with this subpart.
(2) Exhibit A of this subpart (available from any Rural Development
State Office) shall be attached to and become a permanent part of Form
RD 1940-1 and the following paragraphs will appear in the comment
section of that form:
The Grantee understands the requirements for receipt of funds under
the Panel Grant program. The Grantee assures and certifies that it is in
compliance with all applicable laws, regulations, Executive Orders, and
other generally applicable requirements, including those set out in 7
CFR, part 1940, subpart T, and 7 CFR, parts 3016 and 3017, including
revisions through ___ (date of grant approval). The Grantee further
agrees to use grant funds for the purposes outlined in the Scope-of-Work
approved by Rural Development. Exhibit A is incorporated as a part
hereof.
(3) Grants will be approved and obligated in accordance with the
applicable parts of Sec. 1942.5(d) of subpart A of part 1942 of this
chapter.
(4) An executed copy of the Scope-of-Work will be sent to the State
coordinator on the obligation date, along with a copy of Form RD 1940-1
and the required exhibit. Rural Development will retain the original of
Form RD 1940-1 and the exhibit.
(5) Grants will be closed in accordance with the applicable parts of
subpart A of part 1942 of this chapter, including Sec. 1942.7. The
grant is considered closed on the obligation date.
(6) A copy of Form RD 1940-1, with the required exhibit, and the
Scope-of-Work will be submitted to the National Office when funds are
obligated.
(7) If the grant is not approved, the State coordinator will be
notified in writing of the reason(s) for rejection. The notification
will state that a review of the decision by Rural Development may be
requested by the State under subpart B of part 1900 of this chapter.
(k) Fund disbursement. Grant funds will be disbursed on a
reimbursement basis. Requests for funds should not exceed one advance
every 30 days. The financial management system of the State shall
provide for effective control and accountability of all funds, property,
and assets.
(1) SF 270, ``Request for Advance or Reimbursement,'' will be
completed by the State coordinator and submitted to the State Director
not more frequently than monthly.
(2) Upon receipt of a properly completed SF 270, the State Director
will request funds through the Automated Discrepancy Processing System.
Ordinarily, payment will be made within 30 days after receipt of a
properly prepared request for reimbursement.
(3) States are encouraged to use minority banks (a bank which is
owned by at least 50 percent minority group members) for the deposit and
disbursement of funds. A list of minority owned banks can be obtained
from the Office of Minority Business Enterprises, Department of
Commerce, Washington, DC 20230.
(l) Title. Title to supplies acquired under this grant will vest,
upon acquisition, in the State. If there is a residual inventory of
unused supplies exceeding $5,000 in total aggregate fair market value
upon termination or completion of the grant awarded, and if the supplies
are not needed for any other federally sponsored programs, the State
shall compensate Rural Development for its share.
(m) Costs. Costs incurred under this grant program are subject to
cost principles established in Office of Management and Budget Circular
A-87.
[[Page 116]]
(n) Budget changes. Rebudgeting within the approval direct cost
categories to meet unanticipated requirements which do not exceed 10
percent of the current total approved budget shall be permitted. The
State shall obtain prior approval from the State Director for any
revisions which result in the need for additional funding.
(o) Programmatic changes. The State shall obtain prior written
approval from the State Director for any change to the scope or
objectives for which the grant was approved or for contracting out or
otherwise obtaining services of a third party to perform activities
which are central to the purposes of the grant. Failure to obtain prior
approval of changes to the scope can result in suspension or termination
of grant funds.
(p) Financial reporting. SF 269, ``Financial Status Report,'' and a
Project Performance Report are required on a quarterly basis. The
reports will be submitted to the State Director not later than 30 days
after the end of each quarter. A final SF 269 and Project Performance
Report shall be due 90 days after the expiration or termination of grant
support. The final report may serve as the last quarterly report. The
State coordinator will constantly monitor performance to ensure that
time schedules are met, projected work by time periods is accomplished,
and other performance objectives are achieved. Program outlays and
income will be reported on an accrual basis. Project Performance Reports
shall include, but not be limited to, the following:
(1) A comparison of actual accomplishments to the objectives
established for that period;
(2) Reasons why established objectives were not met;
(3) Problems, delays, or adverse conditions which will affect the
ability to meet the objectives of the grant during established time
periods. This disclosure must include a statement of the action taken or
planned to resolve the situation; and
(4) Objectives and timetable established for the next reporting
period.
(q) Audit requirements. Audit reports will be prepared and submitted
in accordance with Sec. 1942.17(q)(4) of subpart A of part 1942 of this
chapter. The audit requirements only apply to the year(s) in which grant
funds are received. Audits must be prepared in accordance with generally
accepted government auditing standards using publication, ``Standards
for Audits of Governmental Organizations, Programs, Activities and
Functions.''
(r) Grant cancellation. Grants which have been approved and funds
obligated may be cancelled by the grant approval official in accordance
with Sec. 1942.12 of subpart A of part 1942 of this chapter. The State
Director will notify the State coordinator that the grant has been
cancelled.
(s) Grant servicing. Grants will be serviced in accordance with
subparts E and O of part 1951 of this chapter.
(t) Subsequent grants. Subsequent grants will be processed in
accordance with the requirements of this subpart for each additional
time period a State is designated to participate in this program.
Sec. 1940.969 Forms, exhibits, and subparts.
Forms, exhibits, and subparts of this chapter (all available in any
Rural Development office) referenced in this subpart, are for use in
establishing a State economic development review panel and for
administering the Panel Grant program associated with the panel.
Sec. 1940.970 [Reserved]
Sec. 1940.971 Delegation of authority.
The authority authorized to the State Director in this subpart may
be redelegated.
Sec. Sec. 1940.972-1940.999 [Reserved]
Sec. 1940.1000 OMB control number.
The collection of information requirements contained in this
regulation has been approved by the Office of Management and Budget and
assigned OMB control number 0575-0145. Public reporting burden for this
collection of information is estimated to vary from 30 minutes to 48
hours per response with an average of 4 hours per response, including
the time for reviewing instructions, searching existing
[[Page 117]]
data sources, gathering and maintaining the data needed, and completing
and reviewing the collection of information. Send comments regarding
this burden estimate or any other aspect of this collection of
information, including suggestions for reducing this burden, to
Department of Agriculture, Clearance Officer, OIRM, Room 404-W,
Washington, DC 20250; and to the Office of Information and Regulatory
Affairs, Office of Management and Budget, Washington, DC 20503.
PART 1941 [RESERVED]
PART 1942_ASSOCIATIONS--Table of Contents
Subpart A_Community Facility Loans
Sec.
1942.1 General.
1942.2 Processing applications.
1942.3 Preparation of appraisal reports.
1942.4 Borrower contracts.
1942.5 Application review and approval.
1942.6 Preparation for loan closing.
1942.7 Loan closing.
1942.8 Actions subsequent to loan closing.
1942.9 Planning, bidding, contracting, and constructing.
1942.10-1942.11 [Reserved]
1942.12 Loan cancellation.
1942.13 Loan servicing.
1942.14 Subsequent loans.
1942.15 Delegation and redelegation of authority.
1942.16 State supplements and guides.
1942.17 Community facilities.
1942.18 Community facilities--Planning, bidding, contracting,
constructing.
1942.19 Information pertaining to preparation of notes or bonds and bond
transcript documents for public body applicants.
1942.20 Community Facility Guides.
1942.21 Statewide nonmetropolitan median household income.
1942.22-1942.49 [Reserved]
1942.50 OMB control number.
Subpart B [Reserved]
Subpart C_Fire and Rescue and Other Small Community Facilities Projects
1942.101 General.
1942.102 Nondiscrimination.
1942.103 Definitions.
1942.104 Application processing.
1942.105 Environmental review.
1942.106 Intergovernmental review.
1942.107 Priorities.
1942.108 Application docket preparation and review.
1942.109-1942.110 [Reserved]
1942.111 Applicant eligibility.
1942.112 Eligible loan purposes.
1942.113 Rates and terms.
1942.114 Security.
1942.115 Reasonable project costs.
1942.116 Economic feasibility requirements.
1942.117 General requirements.
1942.118 Other Federal, State, and local requirements.
1942.119 Professional services and borrower contracts.
1942.120-1942.121 [Reserved]
1942.122 Actions prior to loan closing and start of construction.
1942.123 Loan closing.
1942.124-1942.125 [Reserved]
1942.126 Planning, bidding, contracting, constructing, procuring.
1942.127 Project monitoring and fund delivery.
1942.128 Borrower accounting methods, management reports and audits.
1942.129 Borrower supervision and servicing.
1942.130-1942.131 [Reserved]
1942.132 Subsequent loans.
1942.133 Delegation and redelegation of authority.
1942.134 State supplements and guides.
1942.135-1942.149 [Reserved]
1942.150 OMB control number.
Subparts D-H [Reserved]
Authority: 5 U.S.C. 301; 7 U.S.C. 1989.
Editorial Notes: 1. Nomenclature changes to part 1942 appear at 80
FR 9878, Feb. 24, 2015.
2. At 80 FR 9884, Feb. 24, 2015, sections in subpart G (Sec. Sec.
1942.301-1942.350) were affected by amendatory instructions 180-189;
however, the amendments could not be incorporated because the subpart
was removed and reserved at 80 FR 15667, Mar. 25, 2015.
Subpart A_Community Facility Loans
Source: 50 FR 7296, Feb. 22, 1985, unless otherwise noted.
Sec. 1942.1 General.
(a) This subpart outlines the policies and procedures for making and
processing insured loans for Community Facilities except fire and rescue
and other small essential community facility loans and water and waste
disposal facilities. This subpart applies to Community Facilities loans
for fire and rescue and other small essential community facility loans
only as specifically provided for in subpart C of this part.
[[Page 118]]
Water and waste loans are provided for in part 1780 of this title. The
Agency shall cooperate fully with State and local agencies in making
loans to assure maximum support to the State strategy for rural
development. State Directors and their staffs shall maintain
coordination and liaison with State agency and substate planning
districts. Funds allocated for use under this subpart are also for the
use of Indian tribes within the State, regardless of whether State
development strategies include Indian reservations within the State's
boundaries. Indians residing on such reservations must have equal
opportunity to participate in the benefits of these programs as compared
with other residents of the State. Federal statutes provide for
extending Agency financial programs without regard to race, color,
religion, sex, national origin, marital status, age, or physical/mental
handicap. The participants must possess the capacity to enter into legal
contracts under State and local statutes. Any processing or servicing
activity conducted pursuant to this subpart involving authorized
assistance to Agency employees, members of their families, known close
relatives, or business or close personal associates, is subject to the
provisions of subpart D of part 1900 of this chapter. Applicants for
this assistance are required to identify any known relationship or
association with an Agency employee.
(b) Indian tribes on Federal and State reservations and other
Federally recognized Indian tribes are eligible to apply for and are
encouraged to participate in this program. Such tribes might not be
subject to State and local laws or jurisdiction. However, any
requirements of this subpart that affect applicant eligibility, the
adequacy of Agency's security or the adequacy of service to users of the
facility and all other requirements of this subpart must be met.
(c) Loans sold without insurance by RD to the private sector will be
serviced in the private sector and will not be serviced under this
subpart. The provisions of this subpart are not applicable to such
loans. Future changes to this subpart will not be made applicable to
such loans.
(d) The District Office will normally be the entry point for
preapplications and serve as a local point. Applications will be filed
with the District Office and loans will be processed to the maxium
extent possible by the District Office staff. The applicant's governing
body should designate one person to coordinate the activities of its
engineer, architect, attorney, and any other professional employees and
to act as contact person during loan processing. Agency personnel should
make every effort to involve the applicant's contact person when meeting
with the applicant's professional consultants and/or agents. The State
Office staff will monitor community programs loanmaking and servicing,
and will provide assistance to District Office personnel to the extent
necessary to assure that the activities are being accomplished in an
orderly manner consistent with Agency regulations.
(e) The Office of Management and Budget (OMB) issued guidance on
Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards at 2 CFR part 200 on December 26, 2013.
In 2 CFR 400.1, the Department adopted OMB's guidance in subparts A
through F of 2 CFR part 200 as the Department's policies and procedures
for uniform administrative requirements, cost principles, and audit
requirements for federal awards. As a result, this regulation contains
references to 2 CFR part 200 as it has regulatory effect for the
Department's programs and activities.
[50 FR 7296, Feb. 22, 1985, as amended at 52 FR 38908, Oct. 20, 1987; 52
FR 43725, Nov. 16, 1987; 52 FR 47097, Dec. 11, 1987; 57 FR 21193, May
19, 1992; 58 FR 226, Jan. 5, 1993; 62 FR 33510, June 19, 1997; 68 FR
65830, Nov. 24, 2003; 79 FR 76007, Dec. 19, 2014]
Sec. 1942.2 Processing applications.
(a) Preapplications. (1) The District Office may handle initial
inquiries and provide basic information about the program. They are to
provide the preappllcation, SF 424.2, ``Application for Federal
Assistance (For Construction).'' The District Director will assist
applicants as needed in completing SF 424.2, and in filing written
notice of intent and priority recommendation with
[[Page 119]]
the appropriate clearinghouse. The District Director will inform the
applicant that it may be necessary to apply for credit from commercial
sources. It will be explained that if credit for the project is
available from commercial sources at reasonable rates and terms the
applicant is not eligible for RD financing. The District Director will
meet with the applicant, whenever appropriate to discuss RD
preapplication processing. Guidance and assistance will be provided by
the State Director, as needed, for orderly application processing. The
District Director will determine that the preapplication is property
completed and fully reviewed. The District Director will then forward to
the State Director:
(i) Eligibility determination and recommendations.
(ii) One copy of SF 424.2.
(iii) State intergovernmental review comments and recommendations
(clearinghouse comments), as outlined in 2 CFR part 400, if applicable.
(iv) Priority recommendations.
(v) Supporting documentation necessary to make an eligibility
determination such as financial statements, audits, or copies of
organizational documents or existing debt instruments. The District
Director will advise applicants on what documents are necessary.
Applicants should not be required to expend significant amounts of money
or time developing supporting documentation at the preapplication stage.
(2) The State Director will review each SF 424.2 along with other
information that is deemed necessary to determine whether financing from
commercial sources at reasonable rates and terms is available. If credit
elsewhere is indicated, the State Director will instruct the District
Director to so inform the applicant and recommend the applicant apply to
commercial sources for financing. Projects may be funded jointly with
other lenders provided the requirements of Sec. 1942.17 (g) of this
subpart are met. Joint financing occurs when two or more lenders make
separate loans to supply the funds required by one applicant for a
project.
(i) In order to provide a basis for referral of preapplications of
only those applicants who may be able to finance projects through
commercial sources, State Directors should maintain liaison with
representatives of banks, investment bankers, financial advisors, and
other lender representatives in the State. State Directors with their
assistance, should maintain criteria for determining preapplications
which should be referred to commercial lenders. A list of lender
representatives interested in receiving such referrals should be
maintained.
(ii) The State Director shall maintain a working relationship with
the State Office or official that has been designated as the single
point of contact for the intergovernmental review process and give full
consideration to their comments when selecting preapplications to be
processed.
(iii) The State Director will review the District Director's
eligibility determination and recommendations in sufficient time for the
District Director's use in preparing and issuing Form AD-622.
(iv) Form AD-622 will be prepared by the District Director within
forty-five (45) calendar days from receipt of the preapplication by RD,
stating the results of the review action. The original will be signed
and delivered to the applicant with a copy to the State Director.
(3) For preapplications eligible for Agency funding which have the
necessary priority to compete with similar preapplications, the Agency
will issue Form AD-622 inviting an application containing the following
statement:
You are advised against taking any actions or incurring any
obligations which would either limit the range of alternatives to be
considered, or which would have an adverse effect on the environment.
Satisfactory completion of the environmental review process must occur
prior to the issuance of the letter of conditions.
(4) The following statement must be added to Form AD-622 when
notifying preapplicants who are eligible, but do not have the priority
necessary for further consideration at this time:
You are advised against incurring obligations which would limit the
range of alternatives to be considered, or which cannot be fulfilled
without Rural Development funds until the funds are actually made
available.
[[Page 120]]
Therefore, you should refrain from such actions as initiating
engineering and legal work, taking actions which would have an adverse
effect on the environment, taking options on land rights, developing
detailed plans and specifications, or inviting construction bids until
notified by Rural Development to proceed.
(b) Environmental review. Environmental requirements will be
documented in accordance with subpart G of part 1940 of this chapter and
submitted to the State Director. Starting with the earliest discussions
with prospective applicants or review of preapplications and continuing
throughout application processing, environmental issues must be
considered. This should provide flexibility to consider alternatives to
the project and develop methods to mitigate identified adverse
environmental impacts. Documentation of the appropriate environmental
review should be completed as soon as possible; however, the State
Director will ensure that the appropriate environmental review is
completed prior to issuing the letter of conditions.
(c) Applications. The District Director should assist the applicant
in application assembly and processing.
(1) State Directors should have applications in process representing
approximately 150 percent of the current State allocation.
(2) The application docket will include SF 424.2, and related forms,
materials, and information. The application will be assembled in
accordance with guide 15 of this subpart or State guides developed under
Sec. 1942.16 of this subpart.
(3) When an applicant is notified to proceed with an application,
the District Director should arrange for a conference with the applicant
to provide copies of appropriate appendices and forms; furnish guidance
necessary for orderly application processing; and to initiate a
processing checklist for establishing a time schedule for completing
items using Form RD 1942-39, ``Processing Check List (Other Than Public
Bodies),'' or Form RD 1942-40, ``Processing Check List (Public
Bodies),'' or other checklist adopted for use in the State. The District
Director will confirm decisions made at this conference by letter to the
applicant and by a copy of the processing checklist. The original and a
copy of the processing checklist will be retained in the District Office
and a copy will be forwarded to the State Office. The original and copy
of the checklist retained in the District Office will be kept current as
application processing actions are taken. The copy will be sent to the
State Office to use in updating its copy of this form. The State Office
will then return the District Office's copy. As the application is being
processed, and the need develops for additional conferences, the
District Director will arrange with the applicant for such conference to
extend and update the processing checklist.
(d) Review of decision. If at any time prior to loan approval it is
decided that favorable action will not be taken on a preapplication or
application, the District Director will notify the applicant in writing
of the reasons why the request was not favorably considered. The
notification to the applicant will state that a review of this decision
by Rural Development may be requested by the applicant under subpart B
of part 1900 of this chapter. The following statement will also be made
on all notifications of adverse action.
The Federal Equal Credit Opportunity Act prohibits creditors from
discriminating against credit applicants on the basis of race, color,
religion, national origin, sex, marital status, age (provided that the
applicant has the capacity to enter into a binding contract); because
all or part of the applicant's income is derived from any public
assistance program; or because the applicant has in good faith exercised
any right under the Consumer Credit Protection Act. The Federal agency
that administers compliance with this law is the Federal Trade
Commission, Equal Credit Opportunity, Washington, DC 20580.
(e) Joint funding. Rural Development may finance projects jointly
with funds from other sources, such as, commercial/private lenders,
Federal agencies, State and local Governments, etc. Other departments,
agencies, and executive establishments of the Federal Government may
participate and provide financial and technical assistance jointly with
Rural Development to any applicant to whom Rural Development is
providing assistance. The amount of participation by the other
department,
[[Page 121]]
agency, or executive establishment shall only be limited by its
authorities except that any limitation on joint participation itself is
superseded by section 125 of Pub. L. 95-334 (Section 347, Consolidated
Farm and Rural Development Act, as amended).
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6786, Mar. 3, 1988; 54
FR 47197, Nov. 13, 1989; 55 FR 13503, 15304, Apr. 11, 1990; 57 FR 21194,
May 19, 1992; 61 FR 6309, Feb. 20, 1996; 79 FR 76007, Dec. 19, 2014]
Sec. 1942.3 Preparation of appraisal reports.
When the loan approval official requires an appraisal, Form RD 442-
10, ``Appraisal Report--Water and Waste Disposal Systems,'' may be used
with appropriate supplements. Form RD 442-10 may be modified as
appropriate or other appropriate format may be used for facilities other
than water and waste disposal. Appraisal reports prepared for use in
connection with the purchase of existing essential community facilities
or when required by Sec. 1942.17 (g)(2)(iii)(B)(2), (g)(3)(iii)(B)(2),
and (j)(4) of this subpart, may be prepared by the RD engineer/architect
or, if desired by the State Director, some other qualified appraiser.
The loan approval official may require an applicant to provide an
appraisal prepared by an independent qualified appraiser; however, the
loan approval official must determine that the appraised value shown in
such reports reflects the present market value.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6786, Mar. 3, 1988]
Sec. 1942.4 Borrower contracts.
The State Director will, with assistance as necessary by the Office
of the General Counsel (OGC), concur in agreements between borrowers and
third parties such as contracts for professional and technical services
and contracts for the purchase of water or treatment of waste. State
Directors are expected to work closely with representatives of
engineering and architectural societies, bar associations, commercial
lenders, accountant associations, and others in developing standard
forms of agreements, where needed, and other such matters in order to
expedite application processing, minimize referrals to OGC, and resolve
problems which may arise.
Sec. 1942.5 Application review and approval.
(a) Procedures for review. The Rural Development staff review will
proceed as applications are being developed. An overall review of the
applicant's financial status, including a review of all assets and
liabilities, will be a part of the docket review process by the staff
and approval officials. The engineering/architect reports and associated
data are to be reviewed by the Rural Development staff engineer or
architect, as appropriate, as soon as available but prior to the
District Director's completion of the project summary. During the review
the District Director in all cases will make certain that no low income
or minority community within the service area has been omitted or
discouraged from participating in the proposed project. The District
Director will also determine how the service area was defined to assure
that gerrymandering of specific communities or areas has not occurred.
The findings should be documented in the running record. Prior to
presenting the assembled application to the approval official, the
assembled application ordinarily will be processed in the following
sequence:
(1) The Rural Development manager will complete the project summary,
including written analysis and recommendations, and will prepare a draft
letter of conditions listing all the requirements that the applicant
must agree to meet within a specific time.
(i) Requirements listed in letters of conditions will include the
following unless inappropriate due to the particular type of funding or
entity involved: Maximum amount of loan and/or grant which may be
considered, scheduling of payments, term of loan and any deferment of
principal which may be allowed, reserve requirements, compliance with
section 504 of the Rehabilitation Act of 1973, number of users (members)
and verification required, contributions rates and charges, interim
financing, disbursement of funds, security requirements, graduation
requirements, debt collection policies execution of Form RD
[[Page 122]]
1910-11, ``Application Certification, Federal Collection Policies for
Consumer or Commercial Debts,'' organization, business operations,
insurance and bonding (including applicant/borrower and contractor),
construction contract documents and bidding, accounts, records, and
audit reports required (including requirements of OMB Circulars A-128
and A-110), adoption of Form RD 1942-47, ``Loan Resolution (Public
Bodies),'' for public bodies or Form RD 1942-9, ``Loan Resolution
(Security Agreement),'' for other than public bodies, closing
instructions, and other requirements.
(ii) Each letter of conditions will contain the following
paragraphs:
This letter establishes conditions which must be understood and
agreed to by you before further consideration may be given to the
application. Any changes in the project cost, source of funds, scope of
services, or any other significant changes in the project or applicant
must be reported to and approved by RDwritten amendment to this letter.
Any changes not approved by RD shall be cause for discontinuing
processing of the application.
This letter is not to be considered as loan approval or as
representation to the availability of funds. The docket may be completed
on the basis of a loan not to exceed $___.
If (insert agency name) makes the loan, you may make a written
request that the interest rate be the lower of the rate in effect at the
time of loan approval or the time of loan closing. If you do not request
the lower of the two interest rates, the interest rate charged will be
the rate in effect at the time of loan approval. The loan will be
considered approved on the date a signed copy of Form RD 1940-1,
``Request for Obligation of Funds,'' is mailed to you. If you want the
lower of the two rates, your written request should be submitted to RD
as soon as practical. In order to avoid possible delays in loan closing
such a request should ordinarily be submitted at least 30 calendar days
before loan closing.
Please complete and return the attached Form RD 1942-46, ``Letter of
Intent to Meet Conditions,'' if you desire that further consideration be
given your application.
(iii) Rural Development Managers may add the following:
If the conditions set forth in this letter are not met within ___
days from the date hereof, FmHA or its successor agency under Public Law
103-354 reserves the right to discontinue the processing of the
application.
(2) The State staff engineer or architect, as appropriate, will
include a written analysis and recommendations on the project summary.
(3) The Chief, Community Programs or Community and Business
Programs, will review the assembled application and include in the
project summary a written analysis and recommendations, including the
availability of other credit and other eligibility determinations. The
draft letter of conditions will be reviewed and any necessary
modifications made.
(b) Project requiring National Office review. Prior National Office
review is required for certain proposals (See subpart A of part 1901 of
this chapter).
(1) The Rural Development Manager should assemble applications for
the National Office review in the following order from top to bottom and
forward them to the State Director for review and recommedation prior to
submission to the National Office:
(i) Transmittal memorandum including:
(A) Recommendation.
(B) Date of expected obligation.
(C) Any unusual circumstances.
(ii) Copies of the following:
(A) Proposed letter of conditions.
(B) Applicable State Intergovernmental Review comments, if the
program or activity has been selected under the State. RD Instruction
1970-I, available in any Rural Development office.
(C) Community Facilities Project Summary.
(D) Preliminary architectural or engineering report.
(E) Form RD 442-3, ``Balance Sheet,'' or a financial statement or
audit that includes a balance sheet.
(F) For other essential community facility loan applicants whose
proposals do not meet the assured income or tax based security
requirements of Sec. 1942.17 (g)(2)(iii) and (g)(3)(iii) of this
subpart, financial information for the last five years of operation will
be submitted if available. The type of financial information to be
submitted should be determined based on what is available and the
following order of preference:
(1) Complete audits;
[[Page 123]]
(2) Unaudited financial statements including balance sheets and
statements of income and expenses;
(3) Lists of income and expenses.
(G) For other essential community facility loans secured under
paragraph (b)(1)(ii)(F) of this section, submit a detailed explanation
of the proposed security; evidence that the application cannot be
processed and the loan secured under paragraph (b)(1)(ii)(F) of this
section; evidence supporting the efforts by the applicant in persuading
appropriate public bodies to provide the proposed facility and services
and the results, and comments of the Regional Attorney concurring in the
applicants' legal authority to give the proposed security.
(H) Financial Feasibility Report when required by Sec. 1942.17
(h)(1).
(I) Proposed lease agreements, management agreements, or other
agreements when facility management will be provided by other than the
applicant.
(J) Other forms and documents on which there are specific questions.
(K) Environmental impact analysis and documentation.
(2) For applications to be reviewed in the State or field, at least
those items in paragraph (b)(1)(ii) of this section, should be
available.
(c) For all applications. All letters of conditions will be
addressed to the applicant, signed by the Rural Development Manager or
other Agency representative designated by the State Director, and
delivered to the applicant. Upon signing the letter of conditions, the
Rural Development Manager will send two copies of the letter of
conditions and two copies of the project summary to the State Director.
The State Director will immediately send one copy of the project summary
and a copy of the letter of conditions to the National Office,
Attention: Community Programs. The Rural Development Manager, with
assistance as needed from the State Office, will discuss the
requirements of the letter of conditions with the applicant's
representatives and afford them an opportunity to execute Form RD 1942-
46.
(1) The letter of conditions should not ordinarily be issued unless
the State Director expects to have adequate funds in the State
allocation to fund the project within the next 12 months based on
historic allocations or other reliable projections.
(2) If the applicant declines to execute Form RD 1942-46, the Rural
Development Manager will immediately notify the State Director and
provide complete information as to the reasons for such declination.
(3) If the applicant accepts the letter of conditions, the Rural
Development Manager will forward the executed Form RD 1942-46 and a
signed and an unsigned copy of Form RD 1940-1 to the State Director.
(d) Loan approval and obligating funds. Loans will be approved under
this subpart and subpart A of part 1901 of this chapter (available in
any Rural Development office). The loan will be considered approved on
the date the signed copy of Form RD 1940-1 is mailed to the applicant.
The State Director or designee may request an obligation of funds when
available within their State allocation and according to the following:
(1) Form RD 1940-1, authorizing funds to be reserved, may be
executed by the loan approval official providing the applicant has the
legal authority to contract for a loan and to enter into required
agreements and has signed Form RD 1940-1.
(2) If approval was concurred in by the National Office, a copy of
the concurring memorandum will be attached to the original of Form RD
1940-1.
(3) The State Director or designee will request an obligation of
loan and/or grant funds via the automated terminal system after signing
Form RD 1940-1. The requesting official will furnish security
identification as necessary. The requesting official will record the
date, time of request, and their initials on the original Form RD 1940-
1.
(4) The date the applicant is notified of loan and/or grant approval
is six working days from the date funds are reserved unless an exception
is granted by the National Office.
(5) Immediately after verifying that funds have been reserved,
utilizing the Rural Development Field Office terminal system status
inquiry function,
[[Page 124]]
the State Director or designee will notify by telephone, the Legislative
and Public Affairs Staff in the Rural Development National Office as
required by RD Instruction 2015-C, ``Announcement of Approval of Loans,
Grants, or Guaranteed Loans for Rural Project,'' (available in any FmHA
or its successor agency under Public Law 103-354 State Office).
(6) Loan approval and applicant notification will be accomplished by
the State Director or designee by mailing to the applicant, 6 working
days from the obligation date, a copy of Form RD 1940-1 which has been
previously signed by the applicant and loan approval official. The date
the applicant is notified is also the date the interest rate at loan
approval is established. The State Director or designee will record the
date of applicant notification and the interest rate in effect at that
time on the original of Form RD 1940-1 and include it as a permanent
part of the District Director project file with a copy placed in the
State Office file.
(7) If a transfer of obligation of funds is necessary, complete Form
RD 450-10, ``Advice of Borrower's Change of Address, Name, Case Number,
or Loan Number,'' and process via the Rural Development Field Office
terminal system. An obligation of funds established for an applicant may
be transferred to a different (substituted) applicant provided:
(i) The substituted applicant is eligible to receive the assistance
approved for the original applicant; and
(ii) The substituted applicant bears a close and genuine
relationship to the original applicant (such as two organizations that
are controlled by the same individuals); and
(iii) The need for and scope of the project and the purpose(s) for
which Rural Development funds will be used remain substantially
unchanged.
[50 FR 7296, Feb. 22, 1985, as amended at 50 FR 33332, Aug. 19, 1985; 50
FR 43378, Oct. 25, 1985; 53 FR 6787, Mar. 3, 1988; 54 FR 47196, Nov. 13,
1989; 63 FR 16089, Apr. 2, 1998; 67 FR 60584, Sept. 27, 2002; 67 FR
63019, Oct. 9, 2002; 76 FR 80730, Dec. 27, 2011; 79 FR 76007, Dec. 19,
2014; 79 FR 55967, Sept. 18, 2014]
Editorial Note: At 80 FR 9879, Feb. 24, 2015, Sec. 1942.5 was
amended in paragraph (a)(1)(ii) by removing ``FmHA or its successor
agency under Public Law 103-354 reserves'' and adding ``Rural
Development reserves'' in its place; however, the amendment could not be
incorporated because the phrase did not exist in the paragraph.
Sec. 1942.6 Preparation for loan closing.
(a) Obtaining closing instructions. Completed dockets will be
reviewed by the State Director. The information required by OGC will be
transmitted to OGC with a request for closing instructions. Upon receipt
of the closing instructions from OGC, the State Director will forward
them along with any appropriate instructions to the District Director.
Upon receipt of closing instructions, the District Director will discuss
with the applicant and its architect or engineer, attorney, and other
appropriate representatives, the requirements contained therein and any
actions necessary to proceed with closing.
(b) Verification of users and other funds. (1) In connection with a
loan for a utility type project to be secured by a pledge of user fees
or revenues, the District Director will authenticate the number of users
prior to loan closing or the commencement of construction, whichever
occurs first. Such individual will review each signed user agreement and
check evidence of cash contributions. If during the review any
indication is received that all signed users may not connect to the
system, there will be such additional investigation made as deemed
necessary to determine the number of users who will connect to the
system. The District Director will record the determination in a
memorandum to the State Director.
(2) In all cases the availability and amounts of other funds to be
used in the project will be verified by Rural Development.
(c) Initial compliance review. An initial compliance review should
be completed under subpart E of part 1901 of this chapter.
(d) Ordering loan checks. Checks will not be ordered until:
(1) The applicant has complied with approval conditions and closing
instructions, except for those actions which are to be completed on the
date of loan closing or subsequent thereto; and
[[Page 125]]
(2) The applicant is ready to start construction or funds are needed
to pay interim financing obligations.
(e) Multiple advances of Rural Development funds. When Rural
Development provides loan funds during the construction period using
interim (temporary) instruments described in Sec. 1942.19(g) of this
subpart, the following action will be taken prior to the issuance of the
permanent instruments:
(1) The Finance Office will be notified of the anticipated date for
retirement of the interim instruments and issuance of permanent
instruments of debt.
(2) The Finance Office will prepare a statement of account including
accrued interest through the proposed date of retirement and also show
the daily interest accrual. The statement of account and the interim
financing instruments will be forwarded to the District Director.
(3) The District Director will collect interest through the actual
date of the retirement and obtain the permanent instrument(s) of debt in
exchange for the interim financing instruments. The permanent
instruments and the cash collection will be forwarded to the Finance
Office immediately, except that for promissory notes and single
instrument bonds fully registered as to principal and interest, the
original will be retained in the District Office and a copy will be
forwarded to the Finance Office. In developing the permanent
instruments, the sequence of preference set out in Sec. 1942.19(e) of
this subpart will be followed.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6787, Mar. 3, 1988; 53
FR 26589, July 14, 1988]
Sec. 1942.7 Loan closing.
Loans will be closed in accordance with the closing instructions
issued by the OGC and Sec. 1942.17(o) of this subpart and as soon as
possible after receiving the check.
(a) Authority to execute, file, and record legal instruments. Area
Office employees are authorized to execute and file or record any legal
instruments necessary to obtain or preserve security for loans.
(b) Preparation of mortgages. Unless otherwise required by State law
or unless an exception is approved by the State Director with advice of
the OGC, only one mortgage will be taken even though the indebtedness is
to be evidenced by more than one instrument.
(c) Source of funds for insured loans. All loans will be made from
the Rural Development Insurance Fund (RDIF).
(d) Unused funds. Obligated funds planned for project development
which remain after all authorized costs have been provided for will be
disposed of in accordance with Sec. 1942.17(p)(6) of this subpart.
(e) Loan disbursements. Whenever a loan disbursement is received,
lost, or destroyed, the Rural Development Manager will take appropriate
actions outlined in Rural Development Instruction 2018-D.
(f) Supervised bank accounts. Supervised bank accounts will be
handled under subpart A of part 1902 of this chapter.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6787, Mar. 3, 1988; 59
FR 54788, Nov. 2, 1994; 68 FR 61331, Oct. 28, 2003; 70 FR 19253, Apr.
13, 2005]
Sec. 1942.8 Actions subsequent to loan closing.
(a) Mortgages. Real estate or chattel mortages or security
instruments will be delivered to the recording office for recordation or
filing, as appropriate. A copy of such instruments will be delivered to
the borrower. The original instrument, if returnable after recording or
filing, will be retained in the borrower's case folder.
(b) Notes and bonds. When the debt instrument is a promissory note
or single instrument bond fully registered as to principal and interest,
a conformed copy will be sent to the Finance Office immediately after
loan closing and the original instrument will be stored in the District
Office. When other types of bonds are used, the original bond(s) will be
forwarded to the Finance Office immediately after loan closing.
(c) Multiple advances--bond(s). When temporary paper, such as bond
anticipation notes or interim receipts, is used to conform with the
multiple advance requirement, the original temporary paper will be
forwarded to the
[[Page 126]]
Finance Office after each advance is made to the borrower. The
borrower's case number will be entered in the upper righthand corner of
such paper by the District Office. The permanent debt instrument(s)
should be forwarded to the Finance Office as soon as possible after the
last advance is made except that for promissory notes and single
instrument bonds fully registered as to principal and interest, the
original will be retained in the District Office and a copy will be
forwarded to the Finance Office.
(d) Bond registration record. Form RD 442-28, ``Bond Registration
Book,'' may be used as a guide to assist borrowers in the preparation of
a bond registration book in those cases where a registration book is
required and a book is not provided in connection with the printing of
the bonds.
(e) Disposition of title evidence. All title evidence other than the
opinion of title, mortgage title insurance policy, and water stock
certificates will be returned to the borrower when the loan has been
closed.
(f) Material for State Office. When the loan has been closed, the
District Director will submit to the State Director:
(1) The complete docket; and
(2) A statement covering information other than the completion of
legal documents showing what was done in carrying out loan closing
instructions.
(g) State Office review of loan closing. The State Director will
review the District Director's statement concerning loan closing, the
security instruments, and other documents used in closing to determine
whether the transaction was closed properly. All material submitted by
the District Director, including the executed contract documents (if
required by OGC) with the certification of the borrower's attorney,
along with a statement by the State Director that all administrative
requirements have been met, will be referred to OGC for post-closing
review. OGC will review the submitted material to determine whether all
legal requirements have been met. OGC's review of Rural Development's
standard forms will be only for proper execution thereof, unless the
State Director brings specific questions or deviations to the attention
of OGC. It is not expected that facility development including
construction will be held up pending receipt of the opinion from OGC.
When the opinion from OGC is received, the State Director will advise
the District Director of any deficiencies that must be corrected and
return all material that was submitted for review.
(h) Safeguarding bond shipments. Rural Development's personnel will
follow the procedures for safeguarding mailings and deliveries of bonds
and coupons outlined in FmHA Instruction 2018-E (available in any FmHA
or its successor agency under Public Law 103-354 office), whenever they
mail or deliver these items.
(i) Water stock certificates. Water stock certificates will be filed
in the loan docket in the District Office.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6787, Mar. 3, 1988]
Editorial Note: At 80 FR 9879, Feb. 24, 2015, Sec. 1942.8 was
amended in paragraph (h) by removing ``FmHA or its successor agency
under Public Law 103-354 Instruction'' and adding ``RD Instruction'' in
its place; however, the amendment could not be incorporated because the
phrase did not occur in the paragraph.
Sec. 1942.9 Planning, bidding, contracting, and constructing.
(a) Review of construction plans and specifications. All plans and
specifications will be submitted as soon as available to the State
Office for review and comments.
(b) Contract approval. The State Director or designee is responsible
for approving all construction contracts using legal advice and guidance
of OGC as necessary. The National Office must concur with the use of a
contracting method under Sec. 1942.18(l) of this subpart exceeding
$250,000. When an applicant requests such concurrence, the State
Director will submit the following to the National Office:
(1) State Director's and Rural Development engineer/architect's
comments and recommendations, and if noncompetitive negotiation per
Sec. 1942.18(k)(4) is accepted by the Agency, submit an evaluation of
previous work of the proposed construction firm.
[[Page 127]]
(2) Regional attorney's opinion and comments regarding the legal
adequacy of the proposed procurement method and proposed contract
documents.
(3) Copy of owner's written request and description of the
procurement method proposed.
(4) Copy of the proposed contract.
(c) Bid irregularities. Any irregularities in the bids received or
other matters pertaining to the contract award having legal implications
will be cleared with OGC before the State Director consents to the
contract award.
(d) Noncompliance. State Directors, upon receipt of information
indicating borrowers or their officers, employees, or agents are not
performing in compliance with Sec. 1942.18(j)(1) of this subpart, may
request the Regional Office of the Inspector General (OIG) to
investigate the matter and provide a report. The State Director is
responsible for resolving the issue.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6787, Mar. 3, 1988; 77
FR 29539, May 18, 2012]
Sec. Sec. 1942.10-1942.11 [Reserved]
Sec. 1942.12 Loan cancellation.
Loans which have been approved and obligations which have been
established may be canceled before closing as follows:
(a) Form Rural Development 1940-10, ``Cancellation of U.S. Treasury
Check and/or Obligation.'' The Rural Development Manager or State
Director may prepare and execute Form Rural Development 1940-10,
Cancellation of U.S. Treasury Check and/or Obligation, in accordance
with the Forms Manual Insert (FMI). If the disbursement has been
received or is subsequently received in the Area Office, the Rural
Development Manager will return it as prescribed in Rural Development
Instruction 2018-D.
(b) Notice of cancellation. If the docket has been forwarded to
Office of General Counsel that office will be notified of the
cancellation by copy of Form Rural Development 1940-10. Any application
for title insurance, if ordered, will be cancelled. The borrower's
attorney and engineer/architect, if any, should be notified of the
cancellation. The Rural Development Manager may provide the borrower's
attorney and engineer/architect with a copy of the notification to the
applicant. The State Director will notify the Director of Legislative
Affairs and Public Information by telephone or electronic mail and give
the reasons for such cancellation.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 26589, July 14, 1988; 54
FR 39727, Sept. 28, 1989; 59 FR 54788, Nov. 2, 1994; 70 FR 19254, Apr.
13, 2005]
Sec. 1942.13 Loan servicing.
Loans will be serviced under subpart E of part 1951 of this chapter.
Sec. 1942.14 Subsequent loans.
Subsequent loans will be processed under this subpart.
Sec. 1942.15 Delegation and redelegation of authority.
The State Director is responsible for implementing the authorities
in this subpart and for issuing State supplements redelegating
authorities. Loan and grant approval authority is in Subpart A of Part
1901 of this chapter. Except for loan and grant approval authority,
Rural Development Manager may redelegate their duties to qualified staff
members.
[70 FR 19254, Apr. 13, 2005]
Sec. 1942.16 State supplements and guides.
State Directors will obtain National Office clearance for all State
supplements and guides under RD Instruction 2006-B (available in any
Rural Development office).
(a) State supplements. State Directors may supplement this subpart
to meet State and local laws and regulations and to provide for orderly
application processing and efficient service to applicants. State
supplements shall not contain any requirements pertaining to bids,
contract awards, and materials more restrictive than those in Sec.
1942.18 of this subpart.
(b) State guides. State Directors may develop guides for use by
applicants if the guides to this subpart are not adequate. State
Directors may prepare guides for items needed for the application; items
necessary for the docket;
[[Page 128]]
and items required prior to loan closing or start of construction.
Sec. 1942.17 Community facilities.
(a) General. This section includes information and procedures
specifically designed for use by applicants, including their
professional consultants and/or agents who provide such assistance and
services as architectural, engineering, financial, legal, or other
services related to application processing and facility planning and
development. This section is made available as needed for such use. It
includes Rural Development policies and requirements pertaining to loans
for community facilities. It provides applicants with guidance for use
in proceeding with their application. Rural Development shall cooperate
fully with appropriate State agencies to give maximum support of the
State's strategies for development of rural areas.
(b) Eligibility. Financial assistance to areas or communities
adjacent to, or closely associated with, nonrural areas is limited by
Sec. 1942.17(c) of this subpart.
(1) Applicant. (i) A public body, such as a municipality, county,
district, authority, or other political subdivision of a state.
(A) Loans for water or waste disposal facilities will not be made to
a city or town with a population in excess of 10,000 inhabitants. The
population figure is obtained from the most recent decennial Census of
the United States (decennial Census). If the applicable population
figure cannot be obtained from the most recent decennial Census, RD will
determine the applicable population figure based on available population
data.
(B) Loans for essential community facilities will not be made to a
city or town with a population in excess of 20,000 inhabitants according
to the most recent decennial Census.
(ii) An organization operated on a not-for-profit basis, such as an
association, cooperative, and private corporation. Applicants organized
under the general profit corporation laws may be eligible if they
actually will be operated on a not-for-profit basis under their charter,
bylaws, mortgage, or supplemental agreement provisions as may be
required as a condition of loan approval. Essential community facility
applicants other than utility-type must have significant ties with the
local rural community. Such ties are necessary to ensure to the greatest
extent possible that a facility under private control will carry out a
public purpose and continue to primarily serve rural areas. Ties may be
evidenced by items such as:
(A) Association with or controlled by a local public body or bodies,
or broadly based ownership and controlled by members of the community.
(B) Substantial public funding through taxes, revenue bonds, or
other local Government sources, and/or substantial voluntary community
funding, such as would be obtained through a community-wide funding
campaign.
(iii) Indian tribes on Federal and State reservations and other
Federally recognized Indian tribes.
(2) Facility. (i) Facilities must be located in rural areas, except
for utility-type services such as water, sewer, natural gas, or
hydroelectric, serving both rural and non-rural areas. In such cases,
Rural Development funds may be used to finance only that portion serving
rural areas, regardless of facility location.
(ii) Essential community facilities must primarily serve rural
areas.
(iii) For water or waste disposal facilities, the terms rural and
rural area will not include any area in any city or town with a
population in excess of 10,000 inhabitants. The population figure is
obtained from the most recent decennial Census. If the applicable
population figure cannot be obtained from the most recent decennial
Census, RD will determine the applicable population figure based on
available population data.
(iv) For essential community facilities, the terms rural and rural
area will not include any area in any city or town with a population in
excess of 20,000 inhabitants. The population figure is obtained from the
most recent decennial Census. If the applicable population figure cannot
be obtained from the most recent decennial Census, RD will determine the
applicable population figure based on available population data.
[[Page 129]]
(3) Credit elsewhere. Applicants must certify in writing and Rural
Development shall determine and document that the applicant is unable to
finance the proposed project from their own resources or through
commercial credit at reasonable rates and terms.
(4) Legal authority and responsibility. Each applicant must have or
will obtain the legal authority necessary for constructing, operating,
and maintaining the proposed facility or service and for obtaining,
giving security for, and repaying the proposed loan. The applicant shall
be responsible for operating, maintaining, and managing the facility,
and providing for its continued availability and use at reasonable rates
and terms. This responsibility shall be exercised by the applicant even
though the facility may be operated, maintained, or managed by a third
party under contract, management agreement, or written lease. Leases may
be used when this is the only feasible way to provide the service and is
the customary practice. Management agreements should provide for at
least those items listed in guide 24 of this subpart (available in any
Rural Development office). Such contracts, management agreements, or
leases must not contain options or other provisions for transfer of
ownership.
(5) Refinancing debt. The Government shall require an agreement that
if at any time it shall appear to the Government that the borrower is
able to refinance the amount of the indebtedness then outstanding, in
whole or in part, by obtaining a loan for such purposes from responsible
cooperative or private credit sources, at reasonable rates and terms for
loans for similar purposes and periods of time, the borrower will, upon
request of the Government, apply for and accept such loan in sufficient
amount to repay the Government and will take all such actions as may be
required in connection with such loan.
(6) Expanded eligibility for timber-dependent communities in Pacific
Northwest. In the Pacific Northwest, defined as an area containing
national forest covered by the Federal document entitled, ``Forest Plan
for a Sustainable Economy and a Sustainable Environment,'' dated July 1,
1993; the population limits contained Sec. 1942.17(b) are expanded to
include communities with not more than 25,000 inhabitants until
September 30, 1998, if:
(i) Part or all of the community lies within 100 miles of the
boundary of a national forest covered by the Federal document entitled,
``Forest Plan for a Sustainable Economy and a Sustainable Environment,''
dated July 1, 1993; and
(ii) The community is located in a county in which at least 15
percent of the total primary and secondary labor and proprietor income
is derived from forestry, wood products, or forest-related industries
such as recreation and tourism.
(c) Priorities--(1) Truly rural areas. Rural Development program
assistance will be directed toward truly rural areas and rural
communities. Normally, priority will not be given to preapplications for
projects that will serve other than truly rural areas. Truly rural areas
are areas other than densely settled areas or communities adjacent to,
or closely associated with, a city or town with a population exceeding
10,000 residents for water or waste disposal assistance, or 20,000
residents for essential community facility assistance. When determining
whether a rural area or rural community is adjacent to, or closely
associated with, a city or town with a population exceeding 10,000
residents for water and waste disposal, or 20,000 residents for
essential community facility assistance, minor open spaces such as those
created by physical or legal barriers, commercial or industrial
development, parks, areas reserved for convenience or appearance, or
narrow strips of cultivated land, will be disregarded. An area or
community shall be considered adjacent to or closely related with a
nonrural area when it constitutes for general, social, and economic
purposes a single community having a contiguous boundary.
(2) Project selection process. The following paragraphs indicate
items and conditions which must be considered in selecting
preapplications for further development. When ranking eligible
preapplications for consideration for limited funds, Rural Development
officials must consider the priority items
[[Page 130]]
met by each preapplication and the degree to which those priorities are
met, and apply good judgement.
(i) Preapplications. The preapplication and supporting information
submitted with it will be used to determine the proposed project's
priority for available funds.
(ii) State Office review. All preapplications will be reviewed and
scored and Form AD-622, ``Notice of Preapplication Review Action,''
issued within the time limits in Sec. 1942.2(a)(2)(iv) of this subpart.
When considering authorizing the development of an application for
funding, the State Director should consider the remaining funds in the
State allocation, and the anticipated allocation of funds for the next
fiscal year as well as the amount of time necessary to complete that
application. Applicants whose preapplications are found to be ineligible
will be so advised. These applicants will be given adverse notice
through Form AD-622 and advised of their appeal rights under subpart B
of part 1900 of this chapter. Those applicants with eligible lower
scoring preapplications which obviously cannot be funded within an
eighteen month period of time, and are not within 150 percent of the
State's allocation, should be notified that funds are not available; and
requested to advise whether they wish to have their preapplication
maintained in an active file for future consideration. The State
Director may request an additional allocation of funds from the National
Office for such preapplications. Such requests will be considered along
with all others on hand.
(iii) Selection priorities. The priorities described below will be
used by the State Director to rate preapplications. The priorities
should be applied to water and waste disposal or community facilities
preapplications as directed. The format found in part I of guide 26 of
this subpart should be followed in scoring each preapplication. A copy
of the score sheet should be placed in the case file for future
reference.
(A) Population priorities. The following priorities apply to both
Water and Waste Disposal and Community Facilities preapplications.
Points will be distributed as indicated.
(1) The proposed project is located in a rural community having a
population not in excess of 2,500--25 points.
(2) The proposed project is located in a rural community having a
population not in excess of 5,500--20 points. (Points under this
priority should not be assigned to a preapplication if points were
assigned under paragraph (c)(2)(iii) (A)(1) of this section.)
(B) Health priorities. Points will be distributed as indicated.
(1) Water and Waste Disposal preapplications only. The proposed
project is:
(i) Needed to alleviate the sudden unexpected diminution or
deterioration of a water supply, or to meet health or sanitary standards
which pertain to a community's water supply--25 points.
(ii) Required to correct an inadequate waste disposal system due to
unexpected occurrences, or to meet health or sanitary standards which
pertain to a community's waste disposal system--25 points.
(2) Community Facility preapplication only. The proposed project is
required either to correct a health or sanitary problem, or to meet a
health or sanitary standard--25 points.
(C) Income priorities. The following priorities apply to both Water
and Waste Disposal and Community Facilities preapplications. Points will
be distributed as indicated. The median income of the population to be
served by the proposed facility is:
(1) Less than the poverty line for a family of four, as defined in
Section 673(2) of the Community Services Block Grant Act (42 U.S.C.
9902(2)), or less than 80 percent of the statewide nonmetropolitan
median household income--25 points.
(2) Equal to or more than the poverty line and between 80% and 100%,
inclusive, of the State's nonmetropolitan median household income--20
points.
(D) Other factors. Points will be distributed as indicated.
(1) Water and Waste Disposal preapplications only. The proposed
[[Page 131]]
project will: merge ownership, management, and operation of smaller
facilities providing for more efficient management and economical
service; and/or enlarge, extend, or otherwise modify existing facilities
to provide service to additional rural residents--10 points.
(2) Community Facilities preapplications only. The purpose of the
proposed project is to construct, enlarge, extend or otherwise improve
the following types of facilities. (Select only the factor most
applicable to the proposed project.)
(i) Public safety--10 points. (Examples include police services and
fire, rescue and ambulance services as authorized by subpart C of this
part 1942.)
(ii) Health care--5 points. (Examples include clinics, nursing
homes, convalescent facilities, and hospital projects designed to make
the facility conform with life/safety codes, medicare and medicaid
requirements, and minor expansions needed to meet the immediate
requirements of the community. Points under this authority should not be
awarded to a preapplication if points were awarded under Sec.
1942.17(c)(2)(iii)(B)(2) of this subpart.)
(3) Water and Waste Disposal and Community Facilities
preapplications.
(i) Applicant is a public body or Indian tribe--5 points.
(ii) Project is located in a ``truly rural area'' as described in
Sec. 1942.17(c)(1) of this subpart--10 points.
(iii) Amount of joint financing committed to the project is:
(a) 20% or more private, local or state funds except federal funds
channeled through a state agency--10 points.
(b) 5%-19% private, local or state funds except federal funds
channeled through a state agency--5 points.
(E) In certain cases the State Director may assign up to 15 points
to a preapplication, in addition to those that may be scored under
paragraphs (c)(2)(iii) (A) through (D), of this section. These points
are primarily intended to address an unforeseen exigency or emergency,
such as the loss of a community facility due to accident or natural
disaster or the loss of joint financing if Rural Development funds are
not committed in a timely fashion. However, the points may also be
awarded to projects in order to improve compatibility/coordination
between Rural Development's and other agencies' selection systems and to
assist those projects that are the most cost effective. A written
justification must be prepared and placed in the project file each time
the State Director assigns these points.
(iv) Results of State Office review. After completing the review,
the State Director will normally select the eligible preapplications
with the highest scores for further processing. In cases where
preliminary cost estimates indicate that an eligible, high scoring
preapplication is unfeasible or would require an amount of funding from
Rural Development that exceeds either 25 percent of a State's current
annual allocation or an amount greater than that remaining in the
State's allocation, the State Director may instead select the next lower
scoring preapplication(s) for futher processing provided the high
scoring applicant is notified of this action and given an opportunity to
revise the proposal and resubmit it. If it is found that there is no
effective way to reduce costs, the State Director, after consultation
with applicant, may submit a request for an additional allocation of
funds for the proposed project to the National Office. The request
should be submitted during the fiscal year in which obligation is
anticipated. Such request will be considered along with all others on
hand. A written justification must be prepared and placed in the project
file when an eligible preapplication with a higher rating is not
selected for further processing. The State Director will notify the
District Director of the results of the review action. The State
Director will return the preapplication information with an
authorization for the District Director to prepare and issue Form AD-622
in accordance with Sec. 1942.2(a)(2)(iv) of this subpart. Priority will
be given to those preapplications and applications for funding which
meet criteria in Sec. 1942.17(c)(2)(iii)(A) (1) or (2); and the
criteria in Sec. 1942.17(c) (2)(iii)(B)(1) (i) or (ii) or (B)(2) of
this subpart.
(v) Application development. Applications should be developed
expeditiously
[[Page 132]]
following good management practices. Applications that are not developed
in a reasonable period of time taking into account the size and
complexity of the proposed project may be removed from the State's
active file. Applicants will be consulted prior to taking such action.
(vi) Project obligations. To ensure efficient use of resources,
obligations should occur in a timely fashion throughout the fiscal year.
Projects may be obligated as their applications are completed and
approved.
(vii) Requests for additional funding. All requests for additional
allocations of funds submitted to the National Office must follow the
formats found in parts I and II of guide 26. In selecting projects for
funding at the National Office level, additional points may be scored
based on the priority assigned to the project by the State Office. These
points will be scored in the manner shown below. Only the three highest
priority projects can score points. In addition, the Administrator may
assign up to 15 additional points to account for items such as
geographic distribution of funds and emergency conditions caused by
economic problems or natural disasters.
------------------------------------------------------------------------
Priority Points
------------------------------------------------------------------------
1....................................................... 5
2....................................................... 3
3....................................................... 1
------------------------------------------------------------------------
(viii) Cost overruns. A preapplication may receive consideration for
funding before others at the State Office level or at the National
Office level, if funds are not available in the State Office, when it is
a subsequent request for a previously approved project which has
encountered cost overruns due to high bids or unexpected construction
problems that cannot be reduced by negotiations, redesign, use of bid
alternatives, rebidding or other means.
(d) Eligible loan purposes. (1) Funds may be used:
(i) To construct, enlarge, extend, or otherwise improve water or
waste disposal and other essential community facilities providing
essential service primarily to rural residents and rural businesses.
Rural businesses would include facilities such as educational and other
publicly owned facilities.
(A) Water or waste disposal facilities include water, sanitary
sewerage, solid waste disposal, and storm waste-water facilities.
(B) Essential community facilities are those public improvements
requisite to the beneficial and orderly development of a community
operated on a nonprofit basis including but not limited to:
(1) Health services;
(2) Community, social, or cultural services;
(3) Transportation facilities, such as streets, roads, and bridges;
(4) Hydroelectric generating facilities and related connecting
systems and appurtenances, when not eligible for Rural Electrification
Administration (REA) financing;
(5) Supplemental and supporting structures for other rural
electrification or telephone systems (including facilities such as
headquarters and office buildings, storage facilities, and maintenance
shops) when not eligible for Rural Electrification Administration
financing;
(6) Natural gas distribution systems; and
(7) Industrial park sites, but only to the extent of land
acquisition and necessary site preparation, including access ways and
utility extensions to and throughout the site. Funds may not be used in
connection with industrial parks to finance on-site utility systems, or
business and industrial buildings.
(C) Otherwise improve includes but is not limited to the following:
(1) The purchase of major equipment, such as solid waste collection
trucks and X-ray machines, which will in themselves provide an essential
service to rural residents;
(2) The purchase of existing facilities when it is necessary either
to improve or to prevent loss of service;
(3) Payment of tap fees and other utility connection charges as
provided in utility purchase contracts prepared under Sec. 1942.18(f)
of this subpart.
(ii) To construct or relocate public buildings, roads, bridges,
fences, or utilities, and to make other public improvements necessary to
the successful
[[Page 133]]
operation or protection of facilities authorized in paragraph (d)(1)(i)
of this section.
(iii) To relocate private buildings, roads, bridges, fences, or
utilities, and other private improvements necessary to the successful
operation or protection of facilities authorized in paragraph (d)(1)(i)
of this section.
(iv) To pay the following expenses, but only when such expenses are
a necessary part of a loan to finance facilities authorized in
paragraphs (d)(1)(i), (d)(1)(ii) and (d)(1)(iii) of this section.
(A) Reasonable fees and costs such as legal, engineering,
architectural, fiscal advisory, recording, environmental impact
analyses, archeological surveys and possible salvage or other mitigation
measures, planning, establishing or acquiring rights.
(B) Interest on loans until the facility is self-supporting, but not
for more than three years unless a longer period is approved by the
National Office; interest on loans secured by general obligation bonds
until tax revenues are available for payment, but not for more than two
years unless a longer period is approved by the National Office; and
interest on interim financing, including interest charges on interim
financing from sources other than Rural Development.
(C) Costs of acquiring interest in land; rights, such as water
rights, leases, permits, rights-of-way; and other evidence of land or
water control necessary for development of the facility.
(D) Purchasing or renting equipment necessary to install, maintain,
extend, protect, operate, or utilize facilities.
(E) Initial operating expenses for a period ordinarily not exceeding
one year when the borrower is unable to pay such expenses.
(F) Refinancing debts incurred by, or on behalf of, a community when
all of the following conditions exist:
(1) The debts being refinanced are a secondary part of the total
loan;
(2) The debts are incurred for the facility or service being
financed or any part thereof;
(3) Arrangements cannot be made with the creditors to extend or
modify the terms of the debts so that a sound basis will exist for
making a loan.
(G) Prepay costs for which Rural Development grant funds were
obligated provided there is:
(1) No conflict with the loan resolution, State statutes, or any
other loan requirements; and
(2) Full documentation showing that:
(i) Loan funds will only be utilized on a temporary basis; and
(ii) All Rural Development loan funds are restored at a later date
for purpose(s) for which they were obligated.
(v) To pay obligations for construction incurred before loan
approval. Construction work should not be started and obligations for
such work or materials should not be incurred before the loan is
approved. However, if there are compelling reasons for proceeding with
construction before loan approval, applicants may request Rural
Development approval to pay such obligations. Such requests may be
approved if Rural Development determines that:
(A) Compelling reasons exist for incurring obligations before loan
approval; and
(B) The obligations will be incurred for authorized loan purposes;
and
(C) Contract documents have been approved by Rural Development; and
(D) All environmental requirements applicable to Rural Development
and the applicant have been met; and
(E) The applicant has the legal authority to incur the obligations
at the time proposed, and payment of the debts will remove any basis for
any mechanic, material, or other liens that may attach to the security
property. Rural Development may authorize payment of such obligations at
the time of loan closing. Rural Development's authorization to pay such
obligations, however, is on the condition that it is not committed to
make the loan; it assumes no responsibility for any obligations incurred
by the applicant; and the applicant must subsequently meet all loan
approval requirements. The applicant's request and Rural Development
authorization for paying such obligations shall be in writing. If
construction is started without Rural Development approval, post
approval in accordance with this section may be considered.
(2) Funds may not be used to finance:
[[Page 134]]
(i) On-site utility systems or business and industrial buildings in
connection with industrial parks.
(ii) Facilities to be used primarily for recreation purposes.
(iii) Community antenna television services or facilities.
(iv) Electric generation or transmission facilities or telephone
systems, except as provided in paragraph (d)(1)(i)(B)(4), or
(d)(1)(i)(B)(5) of this section; or extensions to serve a particular
essential community facility as provided in paragraph (d)(1)(ii) or
(d)(1)(iii) of this section.
(v) Facilities which are not modest in size, design, and cost.
(vi) Loan or grant finder's fees.
(vii) Projects located within the Coastal Barriers Resource System
that do not qualify for an exception as defined in section 6 of the
Coastal Barriers Resource Act, Pub. L. 97-348.
(viii) New combined sanitary and storm water sewer facilities.
(ix) That portion of a water and/or waste disposal facility normally
provided by a business or industrial user.
(e) Facilities for public use. All facilities financed under the
provisions of this subpart shall be for public use.
(1) Utility-type service facilities will be installed so as to serve
any user within the service area who desires service and can be feasibly
and legally served. Applicants and borrowers must obtain written
concurrence of the Rural Development prior to refusing service to such
user. Upon failure to provide service which is reasonable and legal,
such user shall have direct right of action against the applicant/
borrower. A notice of the availability of this service should be given
by the applicant/borrower to all persons living within the area who can
feasibly and legally be served by the phase of the project being
financed.
(i) If a mandatory hookup ordinance will be adopted, the required
bond ordinance or resolution advertisement will be considered adequate
notification.
(ii) When any portion of the income will be derived from user fees
and a mandatory hookup ordinance will not be adopted, each potent user
will be afforded an opportunity to request service by signing a Users
Agreement.
Those declining service will be afforded an opportunity to sign a
statement to such effect. Rural Development has guides available for
these purposes in all Rural Development offices.
(2) In no case will boundaries for the proposed service area be
chosen in such a way that any user or area will be excluded because of
race, color, religion, sex, marital status, age, handicap, or national
origin.
(3) This does not preclude:
(i) Financing or constructing projects in phases when it is not
practical to finance or construct the entire project at one time; and
(ii) Financing or constructing facilities where it is not
economically feasible to serve the entire area, provided economic
feasibility is determined on the basis of the entire system and not by
considering the cost of separate extensions to or parts thereof; the
applicant publicly announces a plan for extending service to areas not
initially receiving service from the system; and potential users located
in the areas not to be initially served receive written notice from the
applicant that service will not be provided until such time as it is
economically feasible to do so, and
(iii) Extending services to industrial areas when service is made
available to users located along the extensions.
(4) The State Director will determine that, when feasibly and
legally possible, inequities within the proposed project's service area
for the same type service proposed (i.e., water or waste disposal) will
be remedied by the owner on or before completion of the project that
includes Rural Development funding. Inequities are defined as flagrant
variations in availability, adequacy or quality of service. User rate
schedules for portions of existing systems that were developed under
different financing, rates, terms or conditions, as determined by the
State Director, do not necessarily constitute inequities.
(5) Before a loan is made to an applicant other than a public body,
for other than utility type projects, the articles of incorporation or
loan agreement will include a condition similar to the following:
In the event of dissolution of this corporation, or in the event it
shall cease to carry out the objectives and purposes herein set
[[Page 135]]
forth, all business, property, and assets of the corporation shall go
and be distributed to one or more nonprofit corporations or public
bodies as may be selected by the board of directors of this corporation
and approved by at least 75 percent of the users or members to be used
for, and devoted to, the purpose of a community facility project or
other purpose to serve the public welfare of the community. In no event
shall any of the assets or property, in the event of dissolution
thereof, go or be distributed to members, directors, stockholders, or
others having financial or managerial interest in the corporation either
for the reimbursement of any sum subscribed, donated or contributed by
such members or for any other purposes, provided that nothing herein
shall prohibit the corporation from paying its just debts.
(f) Rates and terms--(1) General. Each loan will bear interest at
the rate prescribed in RD Instruction 440.1, exhibit B (available in any
Rural Development office). The interest rates will be set by Rural
Development at least for each quarter of the fiscal year. All rates will
be adjusted to the nearest one-eighth of 1 percent. The applicant may
submit a written request prior to loan closing that the interest rate
charged on the loan be the lower of the rate in effect at the time of
loan approval or the rate in effect at the time of loan closing. If the
interest rate is to be that in effect at loan closing, the interest rate
charged on a loan involving multiple advances of Rural Development
funds, using temporary debt instruments, shall be that in effect on the
date when the first temporary debt instrument is issued. If no written
request is received from the applicant prior to loan closing, the
interest rate charged on the loan will be the rate in effect at the time
of loan approval.
(2) Poverty line rate. The poverty line interest rate will not
exceed 5 per centum per annum. The provisions of paragraph (f)(2)(i) of
this section do not apply to health care and related facilities that
provide direct health care to the public. Otherwise, all loans must
comply with the following conditions:
(i) The primary purpose of the loan is to upgrade existing
facilities or construct new facilities required to meet applicable
health or sanitary standards. Documentation will be obtained from the
appropriate regulatory agency with jurisdiction to establish the
standard, to verify that a bonafide standard exists, what that standard
is, and that the proposed improvements are needed and required to meet
the standard; and
(ii) The median household income of the service area is below the
poverty line for a family of four, as defined in section 673(2) of the
Community Services Block Grant Act (42 U.S.C. 9902(2)), or below 80
percent of the Statewide nonmetropolitan median household income.
(3) Intermediate rate. The intermediate interest rate will be set at
the poverty line rate plus one-half of the difference between the
poverty line rate and the market rate, not to exceed 7 percent per
annum. It will apply to loans that do not meet the requirements for the
poverty line rate and for which the median household income of the
service area is below the poverty line or not more than 100 percent of
the nonmetropolitan median household income of the State.
(4) Market rate. The market interest rate will be set using as
guidance the average of the Bond Buyer Index for the four weeks prior to
the first Friday of the last month before the beginning of the quarter.
The market rate will apply to all loans that do not qualify for a
different rate under paragraph (f)(2) or (f)(3) of this section. It may
be adjusted as provided in paragraph (f)(5) of this section.
(5) Prime farmland. For essential community facilities loans, the
rate indicated by paragraphs (f)(2), (f)(3) or (f)(4) of this section
will be increased by two per centum per annum if the project being
financed will involve the use of, or construction on, prime or unique
farmland in accordance with RD Instruction 440.1, exhibits B and J
(available in any Rural Development office).
(6) Income determination. The income data used to determine median
household income should be that which most accurately reflects the
income of the service area. The service area is that area reasonably
expected to be served by the facility being financed by Rural
Development. The median household income of the service area and the
nonmetropolitan median household income of the State will be determined
from 5-year income data from the American Community Survey (ACS) or, if
needed,
[[Page 136]]
other Census Bureau data. If there is reason to believe that the ACS or
other Census Bureau data does not accurately represent the median
household income within the area to be served, the reasons will be
documented and the applicant may furnish, or Rural Development may
obtain, additional information regarding such median household income
data. Information must consist of reliable data from local, regional,
State or Federal sources or from a survey conducted by a reliable
impartial source. The nonmetropolitan median household income of the
State may only be updated on a national basis by the Rural Development
National Office. This will be done only when median household income
data for the same year for all Bureau of the Census areas is available
from the Bureau of the Census or other reliable sources. Bureau of the
Census areas would include areas such as: Counties, County Subdivisions,
Cities, Towns, Townships, Boroughs, and other places.
(7) Repayment terms. The loan repayment period shall not exceed the
useful life of the facility, State statute or 40 years from the date of
the note(s) or bond(s), whichever is less. Where FmHA or its successor
agency under Public Law 103-354 grant funds are used in connection with
a Rural Development loan, the loan will be for the maximum term
permitted by this subpart, State statute, or the useful life of the
facility, whichever is less, unless there is an exceptional case where
circumstances justify making a Rural Development loan for less than the
maximum term permitted. In such cases, the reasons must be fully
documented. In all cases, including those in which the Rural Development
is jointly financing with another lender, the Rural Development payments
of principal and interest should approximate amortized installments.
(i) Principal payments may be deferred in whole or in part for a
period not to exceed 36 months following the date the first interest
installment is due. If for any reason it appears necessary to permit a
longer period of deferment, the State Director may authorize such
deferment with the prior approval of the National Office. Deferments of
principal will not be used to:
(A) Postpone the levying of taxes or assessments.
(B) Delay collection of the full rates which the borrower has agreed
to charge users for its services as soon as major benefits or the
improvements are available to those users.
(C) Create reserves for normal operation and maintenance.
(D) Make any capital improvements except those approved by Rural
Development determined to be essential to the repayment of the loan or
to the obtaining of adequate security thereof.
(E) Accelerate the payment of other debts.
(ii) Payment date. Loan payments will be scheduled to coincide with
income availability and be in accordance with State law. If consistent
with the foregoing, monthly payments will be required and will be
enumerated in the bond, other evidence of indebtedness, or other
supplemental agreement. However, if State law only permits principal
plus interest (P&I) type bonds, annual or semiannual payments will be
used. Insofar as practical monthly payments will be scheduled one full
month following the date of loan closing; or semiannual or annual
payments will be scheduled six or twelve full months, respectively,
following the date of loan closing or any deferment period. Due dates
falling on the 29th, 30th or 31st day of the month will be avoided.
(g) Security. Loans will be secured by the best security position
practicable in a manner which will adequately protect the interest of
Rural Development during the repayment period of the loan. Specific
requirements for security for each loan will be included in a letter of
conditions.
(1) Joint financing security. For projects utilizing joint
financing, when adequate security of more than one type is available,
the other lender may take one type of security with the United States
taking another type. For projects utilizing joint financing with the
same security to be shared by the United States and another lender, the
United States will obtain at least a parity position with the other
lender. A parity position is to ensure that with joint security, in the
event of default,
[[Page 137]]
each lender will be affected on a proportionate basis. A parity position
will conform with the following unless an exception is granted by the
National Office:
(i) Terms. It is not necessary for loans to have the same repayment
terms to meet the parity requirements. Loans made by other lenders
involved in joint financing with the United States for facilities should
be scheduled for repayment on terms similar to those customarily used in
the State for financing such facilities.
(ii) Use of trustee or other similar paying agent. The use of a
trustee or other similar paying agent by the other lender in a joint
financing arrangement is acceptable to the United States. A trustee or
other similar paying agent will not normally be used for the United
States portion of the funding unless required to comply with State law.
The responsibilities and authorities of any trustee or other similar
paying agent on projects that include United States funds must be
clearly specified by written agreement and approved by the State
Director and Regional Attorney. The United States must be able to deal
directly with the borrower to enforce the provisions of loan and grant
agreements and perform necessary servicing actions.
(iii) Regular payments. In the event adequate funds are not
available to meet regular installments on parity loans, the funds
available will be apportioned to the lenders based on the respective
current installments of principal and interest due.
(iv) Disposition of property. Funds obtained from the sale or
liquidation of secured property or fixed assets will be apportioned to
the lenders on the basis of the pro rata amount loaned, but not to
exceed their respective outstanding balances; provided, however, funds
obtained from such sale or liquidation for a project that included grant
funds will be apportioned as may be required by the grant agreement.
(v) Protective advances. Protective advances are payments made by a
lender for items such as insurance or taxes, to protect the financial
interest of the lender, and charged to the borrower's loan account. To
the extent consistent with State law and customary lending practices in
the area, repayment of protective advances made by either lender, for
the mutual protection of both lenders, should receive first priority in
apportionment of funds between the lenders. To ensure agreement between
lenders, efforts should be made to obtain the concurrence of both
lenders before one lender makes a protective advance.
(2) Public bodies. Loans to such borrowers will be evidenced by
notes, bonds, warrants, or other contractual obligations as may be
authorized by relevant State statutes and by borrower's documents,
resolutions, and ordinances.
(i) Utility-type facilities such as water and sewer systems, natural
gas distribution systems, electric systems, etc., will be secured by:
(A) The full faith and credit of the borrower when the debt is
evidenced by general obligation bonds; and/or
(B) Pledges of taxes or assessments; and/or
(C) Pledges of facility revenue and, when it is the customary
financial practice in the State, liens will be taken on the interest of
the applicant in all land, easements, rights-of-way, water rights, water
purchase contracts, water sales contracts, sewage treatment contracts,
and similar property rights, including leasehold interest, used or to be
used in connection with the facility whether owned at the time the loan
is approved or acquired with loan funds; and/or
(D) In those cases involving water and waste disposal projects where
there is a substantial number of other than full-time users and facility
costs result in a higher than reasonable rate for such full-time users,
the loan will be secured by the full faith and credit of the borrower or
by an assignment or pledge of taxes or assessments from public bodies or
other organizations having the authority to issue bonds or pledge such
taxes or assessments.
(ii) Solid waste systems. The type of security required will be
based on State law and what is determined adequate to protect the
interest of the United States during the repayment period of the loan.
(iii) Other essential community facilities other than utility type,
such as those
[[Page 138]]
for public health and safety, social, and cultural needs and the like
will meet the following security requirements:
(A) Such loans will be secured by one or a combination of the
following and in the following order of preference:
(1) General obligation bonds.
(2) Assessments.
(3) Bonds which pledge other taxes.
(4) Bonds pledging revenues of the facility being financed when such
bonds provide for the mandatory levy and collection of taxes in the
event revenues later become insufficient to properly operate and
maintain the facility and to retire the loan.
(5) Assignment of assured income which will be available for the
life of the loan, from such sources as insurance premium rebates, income
from endowments, irrevocable trusts, or commitments from industries,
public bodies, or other reliable sources.
(6) Liens on real and chattel property when legally permissible and
an assignment of the borrowers income from applicants who have been in
existence and are able to present evidence of a financially successful
operation of a similar facility for a period of time sufficient to
indicate project success. National Office concurrence is required when
the applicant has been in existence for less than five years or has not
operated on a financially successful basis for five years immediately
prior to loan application.
(7) Liens on real and chattel property when legally permissible and
an assignment of income from an organization receiving Health and Human
Services (HHS) operating grants under the ``Memorandum of Understanding
Between Health Resources and Services Administration, U.S. Department of
Health and Human Services and Rural Development, U.S. Department of
Agriculture'' (see RD Instruction 2000-T, available in any Rural
Development office.)
(8) Liens on real and chattel property when legally permissible and
an assignment of income from an organization proposing a facility whose
users receive reliable income from programs such as social security,
supplemental security income (SSI), retirement plans, long-term
insurance annuities, medicare or medicaid. Examples are homes for the
handicapped or institutions whose clientele receive State or local
government assistance.
(9) When the applicant cannot meet the criteria in paragraph
(g)(2)(iii)(A) (1) through (8) of this section, such proposals may be
considered when all the following are met:
(i) The applicant is a new organization or one that has not operated
the type of facility being proposed.
(ii) There is a demonstration of exceptional community support such
as substantial financial contributions, and aggressive leadership in the
formation of the organization and proposed project which indicates a
commitment of the entire community.
(iii) The State Director has determined that adequate and dependable
revenues will be available to meet all operation expenses, debt
repayment, and the required reserve.
(iv) Prior National Office review and concurrence is obtained.
(B) Real estate and chattel property taken as security in accordance
with paragraphs (g)(2)(iii)(A) (6) through (9) of this section:
(1) Ordinarily will include the property that is used in connection
with the facility being financed; and
(2) Will have an as-developed present market value determined by a
qualified appraiser equal to or exceeding the amount of the loan to be
obtained plus any other indebtedness against the proposed security; and
(3) May have one of the lien requirements deleted when the loan
approval official determines that the loan will be adequately secured
with a lien on either the real estate or chattel property.
(C) When security is not available in accordance with paragraphs
(g)(2)(iii)(A) (1) through (5) of this section and State law precludes
securing the loan with liens on real or chattel property, the loan will
be secured in the best manner consistent with State law and customary
security taken by private lenders in the State, such as revenue bonds,
and any other security the loan approval official determines necessary
for a sound loan. Such loans will otherwise meet the requirements of
(g)(2)(iii)(A) (6) through (9) of this section as appropriate.
[[Page 139]]
(3) Other-than-public bodies. Loans to other-than-public body
applicants will be secured as follows:
(i) Utility-type facilities eligible for Rural Development
assistance under paragraph (d) of this section such as water and sewer
systems, natural gas distribution systems, electric systems, etc., will
be secured as follows:
(A) Assignments of borrower income will be taken and perfected by
filing, if legally permissable; and
(B) A lien will be taken on the interest of the applicant in all
land, easements, rights-of-way, water rights, water purchase contracts,
water sales contracts, sewage treatment contracts and similar property
rights, including leasehold interest, used, or to be used in connection
with the facility whether owned at the time the loan is approved or
acquired with loan funds. In unusual circumstances where it is not
feasible to obtain a lien on such land (such as land rights obtained
from Federal or local government agencies, and from railroads) and the
loan approval official `determines that the interest of the United
States otherwise is secured adequately, the lien requirement may be
omitted as to such land rights.
(C) When the loan is approved or the acquisition of real property is
subject to an outstanding lien indebtedness, the next highest priority
lien obtainable will be taken if the loan approval official determines
that the loan is adequately secured.
(D) Other security. Promissory notes from individuals, stock or
membership subscription agreements, individuals member's liability
agreements, or other evidences of debt, as well as mortgages or other
security instruments encumbering the private property of members of the
association may be pledged or assigned to the United States as
additional security in any case in which the interest of the United
States will not be otherwise adequately protected.
(E) In those cases where there is a substantial number of other than
full-time users and facility costs result in a higher than reasonable
rate for such full-time users, the loan will be secured by an assignment
or pledge of general obligation bonds, taxes, or assessments from public
bodies or other organizations having the authority to issue bonds or
pledge such taxes, or assessments.
(ii) Solid waste systems. The type of security required will be
based on State law and what is determined adequate to protect the
interest of the United States during the repayment period of the loan.
(iii) Essential community facilities other than utility type such as
those for public health and safety, social, and cultural needs and the
like will meet the following security requirements:
(A) Such loans will be secured by one or a combination of the
following and in the following order of preference:
(1) An assignment of assured income that will be available for the
life of the loan, from sources such as insurance premium rebates, income
from endowments, irrevocable trusts, or commitments from industries,
public bodies, or other reliable sources.
(2) Liens on real and chattel property with an assignment of income
from applicants who have been in existence and are able to present
evidence of a financially successful operation of a similar facility for
a period of time sufficient to indicate project success. National Office
concurrence is required when the applicant has been in existence for
less than five years or has not operated on a financially successful
basis for at least the five years immediately prior to loan application.
(3) Liens on real and chattel property and an assignment of income
from an organization receiving HHS operating grants under the
``Memorandum of Understanding Between Health Resources and Services
Administration, U.S. Department of Health and Human Services and Rural
Development, U.S. Department of Agriculture'' (see RD Instruction 2000-
T, available in any Rural Development office).
(4) Liens on real and chattel property when legally permissible and
an assignment of income from an organization proposing a facility whose
users receive reliable income from programs such as social security,
supplemental security income (SSI), retirement plans, long-term
insurance annuities, medicare or medicaid. Examples are homes for the
[[Page 140]]
handicapped or institutions whose clientele receive State or local
government assistance.
(5) When the applicant cannot meet the criteria in paragraphs
(g)(3)(iii)(A) (1) through (4) of this section, such proposals may be
considered when all the following are met:
(i) The applicant is a new organization or one that has not operated
the type of facility being proposed.
(ii) There is a demonstration of exceptional community support such
as substantial financial contributions, and aggressive leadership in the
formation of the organization and proposed project which indicates a
commitment of the entire community.
(iii) The State Director has determined that adequate and dependable
revenues will be available to meet all operation expenses, debt
repayment, and the required reserve.
(iv) Prior National Office review and concurrence is obtained.
(6) Additional security may be taken as determined necessary by the
loan approval official.
(B) Real estate and chattel property taken as security:
(1) Ordinarily will include the property that is used in connection
with the facility being financed; and
(2) Will have an as-developed present market value determined by a
qualified appraiser equal to or exceeding the amount of the loan to be
obtained plus any other indebtedness against the proposed security; and
(3) May have one of the lien requirements deleted when the loan
approval official determines that the loan will be adequately secured
with a lien on either the real estate or the chattel property.
(h) Economic feasibility requirements. All projects financed under
the provisions of this section must be based on taxes, assessments,
revenues, fees, or other satisfactory sources of revenues in an amount
sufficient to provide for facility operation and maintenance, a
reasonable reserve, and debt payment. An overall review of the
applicant's financial status, including a review of all assets and
liabilities, will be a part of the docket review process by the Rural
Development staff and approval official. If the primary use of the
facility is by business and the success or failure of the facility is
dependent on the business, then the economic viability of that business
must be assessed. The number of users for a rural business will be based
on equivalent dwelling units, which is the level of service provided to
a typical rural residential dwelling.
(1) Financial feasibility reports. All applicants will be expected
to provide a financial feasibility report prepared by a qualified firm
or individual. These financial feasibility reports will normally be:
(i) Included as part of the preliminary engineer/architectural
report using guides 6 through 10 as applicable; or
(ii) Prepared by a qualified firm or individual not having a direct
interest in the management or construction of the facility using guide 5
when:
(A) The project will significantly affect the applicant's financial
operations and is not a utility-type facility but is dependent on
revenues from the facility to repay the loan; or
(B) It is specifically requested by Rural Development.
(2) Applicants for loans for utility-type facilities dependent on
users fees for debt payment shall base their income and expense forecast
on realistic user estimates in accordance with the following:
(i) In estimating the number of users and establishing rates or fees
on which the loan will be based for new systems and for extensions or
improvements to existing systems, consideration should be given to the
following:
(A) An estimated number of maximum initial users should not be used
when setting user fees and rates since it may be several years before
all residents in the community will need the services provided by the
system. In establishing rates a realistic number of initial users should
be employed.
(B) User agreements from individual vacant property owners will not
be considered when determining project feasibility unless:
(1) The owner has plans to develop the property in a reasonable
period of time and become a user of the facility; and
[[Page 141]]
(2) The owner agrees in writing to make a monthly payment at least
equal to the proportionate share of debt service attributable to the
vacant property until the property is developed and the facility is
utilized on a regular basis. A bond or escrowed security deposit must be
provided to guarantee this monthly payment and to guarantee an amount at
least equal to the owner's proportionate share of construction costs. If
a bond is provided, it must be executed by a surety company that appears
on the Treasury Department's most current list (Circular 570, as
amended) and be authorized to transact business in the State where the
project is located. The guarantee shall be payable jointly to the
borrower and the Rural Development; and
(3) Such guarantee will mature not later than 4 years from the date
of execution and will be finally due and payable upon default of a
monthly payment or at maturity, unless the property covered by the
guarantee has been developed and the facility is being utilized on a
regular basis.
(C) Income from other vacant property owners will be considered only
as extra income.
(ii) Realistic user estimates will be established as follows:
(A) Meaningful potential user cash contributions. Potential user
cash contributions are required except:
(1) For users presently receiving service, or
(2) Where Rural Development determines that the potential users as a
whole in the applicant's service area cannot make cash contributions, or
(3) Where State statutes or local ordinances require mandatory use
of the system and the applicant or legal entity having such authority
agrees in writing to enforce such statutes, or ordinances.
(B) The amount of cash contributions required in paragraph
(h)(2)(ii)(A) of this section will be set by the applicant and concurred
in by Rural Development. Contribtions should be an amount high enough to
indicate sincere interest on the part of the potential user, but not so
high as to preclude service to low income families. Contributions
ordinarily should be an amount approximating one year's minimum user
fee, and shall be paid in full before loan closing or commencement of
construction, whichever occurs first. Once economic feasibility is
ascertained based on a demonstration of meaningful potential user cash
contributions, the contribution, membership fee or other fees that may
be imposed are not a requirement of Rural Development under this
section. However, borrowers do have an additional responsibility
relating to generating sufficient revenues as set forth in paragraph
(n)(2)(iii) of this section.
(C) Enforceable user agreement. Except for users presently receiving
service, an enforceable user agreement with a penalty clause is required
unless State statutes or local ordinances require mandatory use of the
system and the applicant or legal entity having such authority agrees in
writing to enforce such statutes or ordinances.
(iii) In those cases where all or part of the borrower's debt
payment revenues will come from user fees, applicants must provide a
positive program to encourage connection by all users as soon as service
is available. The program will be available for review and approval by
Rural Development before loan closing or commencement of construction,
whichever occurs first. Such a program shall include:
(A) An aggressive information program to be carried out during the
construction period. The borrower should send written notification to
all signed users at least three weeks in advance of the date service
will be available, stating the date users will be expected to have their
connections completed, and the date user charges will begin.
(B) Positive steps to assure that installation services will be
available. These may be provided by the contractor installing the
system, local plumbing companies, or local contractors.
(C) Aggressive action to see that all signed users can finance their
connections. This might require collection of sufficient user
contributions to finance connections. Extreme cases might necessitate
additional loan funds for this purpose; however, loan funds should be
used only when absolutely necessary and when approved by Rural
Development prior to loan closing.
[[Page 142]]
(3) Utility-type facilities for new developing communities or areas.
Developers are normally expected to provide utility-type facilities in
new or developing areas and such facilities shall be installed in
compliance with appropriate State statutes and regulations. Rural
Development will be considered to an eligible applicant in such cases
when failure to complete development would result in an adverse economic
condition for the rural area (not the community being developed); the
proposal is necessary to the success of an area development plan; and
loan repayment can be assured by:
(i) The applicant already having sufficient assured revenues to
repay the loan; or
(ii) Developers providing a bond or escrowed security deposit as a
guarantee sufficient to meet expenses attributable to the area in
question until a sufficient number of the building sites are occupied
and connected to the facility to provide enough revenues to meet
operating, maintenance, debt service, and reserve requirements. Such
guarantees from developers will meet the requirements in paragraph
(h)(2)(i)(B) of this section; or
(iii) Developers paying cash for the increased capital cost and any
increased operating expenses until the developing area will support the
increased costs; or
(iv) The full faith and credit of a public body where the debt is
evidenced by general obligation bonds; or
(v) The loan is to a public body evidenced by a pledge of tax
assessments; or
(vi) The user charges can become a tax lien upon the property being
served and income from such lien can be collected in sufficient time to
be used for its intended purposes.
(i) Reserve requirements. Provision for the accumulation of
necessary reserves over a reasonable period of time will be included in
the loan documents and in assessments, tax levies, or rates charged for
services. In those cases where statutes providing for extinguishing
assessment liens of public bodies when properties subject to such liens
are sold for delinquent State or local taxes, special reserves will be
established and maintained for the protection of the borrower's
assessment lien.
(1) General obligation or special assessment bonds. Ordinarily, the
requirements for reserves will be considered to have been met if general
obligation or other bonds which pledge the full faith and credit of the
political subdivision are used, or special assessment bonds are used,
and if such bonds provide for the annual collection of sufficient taxes
or assessments to cover debt service, operation and maintenance, and a
reasonable amount for emergencies and to offset the possible nonpayment
of taxes or assessments by a percentage of the property owners, or a
statutory method is provided to prevent the incurrence of a deficiency.
(2) Other than general obligation or special assessment bonds. Each
borrower will be required to establish and maintain reserves sufficient
to assure that loan installments will be paid on time, for emergency
maintenance, for extensions to facilities, and for replacement of short-
lived assets which have a useful life significantly less than the
repayment period of the loan. It is expected that borrowers issuing
bonds or other evidences of debt pledging facility revenues as security
will ordinarily plan their reserve to provide for a total reserve in an
amount at least equal to one average loan installment. It is also
expected the ordinarily such reserve will be accumulated at the rate of
at least one-tenth of the total each year until the desired level is
reached.
(j) General requirements--(1) Membership authorization. For
organizations other than public bodies, the membership will authorize
the project and its financing except that the State Director may, with
the concurrence of OGC, accept the loan resolution without such
membership authorization when State statutes and the organization's
charter and bylaws do not require such authorization; and
(i) The organization is well established and is operating with a
sound financial base; or
(ii) For utility-type projects the members of the organization have
all signed an enforceable user agreement with a penalty clause and have
made
[[Page 143]]
the required meaningful user cash contribution, except for members
presently receiving service or when State statutes or local ordinances
require mandatory use of the facility.
(2) Planning, bidding, contracting, constructing. (See Sec.
1942.18).
(3) Insurance and fidelity bonds. The purpose of RD's insurance and
fidelity bond requirements is to protect the government's financial
interest based on the facility financed. The requirements below apply to
all types of coverage determined necessary. The National Office may
grant exceptions to normal requirements when appropriate justification
is provided establishing that it is in the best interest of the
applicant/borrower and will not adversely affect the government's
interest.
(i) General. (A) Applicants must provide evidence of adequate
insurance and fidelity bond coverage by loan closing or start of
construction, whichever occurs first. Adequate coverage in accordance
with this section must then be maintained for the life of the loan. It
is the responsibility of the applicant/borrower and not that of Rural
Development to assure that adequate insurance and fidelity bond coverage
is maintained.
(B) Insurance and fidelity bond requirements by Rural Development
shall normally not exceed those proposed by the applicant/borrower if
the Rural Development loan approval or servicing official determines
that proposed coverage is adequate to protect the government's financial
interest. Applicants/borrowers are encouraged to have their attorney,
consulting engineer/architect, and/or insurance provider(s) review
proposed types and amounts of coverage, including any deductible
provisions. If the FmHA or its successor agency under Public Law 103-354
official and the applicant/borrower cannot agree on the acceptability of
coverage proposed, a decision will be made by the State Director.
(C) The use of deductibles, i.e., an initial amount of each claim to
be paid by the applicant/borrower, may be allowed by Rural Development
providing the applicant/borrower has financial resources which would
likely be adequate to cover potential claims requiring payment of the
deductible.
(D) Borrowers must provide evidence to Rural Development that
adequate insurance and fidelity bond coverage is being maintained. This
may consist of a listing of policies and coverage amounts in yearend
reports submitted with management reports required under Sec.
1942.17(q)(2) or other documentation. The borrower is responsible for
updating and/or renewing policies or coverage which expire between
submissions to Rural Development. Any monitoring of insurance and
fidelity bond coverage by FmHA or its successor agency under Public Law
103-354 is solely for the benefit of FmHA or its successor agency under
Public Law 103-354, and does not relieve the applicant/borrower of its
obligation under the loan resolution to maintain such coverage.
(ii) Fidelity bond. Applicants/borrowers will provide fidelity bond
coverage for all persons who have access to funds. Coverage may be
provided either for all individual positions or persons, or through
``blanket'' coverage providing protection for all appropriate employees
and/or officials. An exception may be granted by the State Director when
funds relating to the facility financed are handled by another entity
and it is determined that the entity has adequate coverage or the
government's interest would otherwise be adequately protected.
(A) The amount of coverage required by Rural Development will
normally approximate the total annual debt service requirements for the
Rural Development loans.
(B) Form RD 440-24, ``Position Fidelity Schedule Bond'' may be used.
Similar forms may be used if determined acceptable to Rural Development.
Other types of coverage may be considered acceptable if it is determined
by Rural Development that they fulfill essentially the same purpose as a
fidelity bond.
(C) Fidelity bonds must be obtained from companies holding
certificates of authority as acceptable sureties, as prescribed in 31
CFR part 223, ``Surety Companies doing Business with the United
States.''
[[Page 144]]
(iii) Insurance. The following types of coverage must be maintained
if appropriate for the type of project and entity involved. Insurance
must be in amounts acceptable to the Agency and at least equivalent to
coverage for real property and equipment acquired without Federal funds.
(A) Property insurance. Fire and extended coverage will normally be
maintained on all structures except as noted in paragraphs
(j)(3)(iii)(A)(1) and (2) of this section. Ordinarily, Rural Development
should be listed as mortgagee on the policy when Rural Development has a
lien on the property. Normally, major items of equipment or machinery
located in the insured structures must also be covered. Exceptions:
(1) Reservoirs, standpipes, elevated tanks, and other structures
built entirely of noncombustible materials if such structures are not
normally insured.
(2) Subsurface lift stations except for the value of electrical and
pumping equipment therein.
(B) Liability and property damage insurance, including vehicular
coverage.
(C) Malpractice insurance. The need and requirements for malpractice
insurance will be carefully and thoroughly considered in connection with
each health care facility financed.
(D) Flood insurance. Facilities located in special flood- and
mudslide-prone areas must comply with the eligibility and insurance
requirements of subpart B of part 1806 of this chapter (RD Instruction
426.2).
(E) Worker's compensation. The borrower will carry worker's
compensation insurance for employees in accordance with State laws.
(4) Acquisition of land, easements, water rights, and existing
facilities. Applicants are responsible for acquisition of all property
rights necessary for the project and will determine that prices paid are
reasonable and fair. Rural Development may require an appraisal by an
independent appraiser or Rural Development employee.
(i) Title for land, rights-of-way, easements, or existing
facilities. The applicant must certify and provide a legal opinion
relative to the title to rights-of-way and easements. Form RD 442-21,
``Rights-of-Way Certificate,'' and Form RD 442-22, ``Opinion of Counsel
Relative to Rights-of-Way,'' may be used.
(A) Rights-of-way and easements. Applicants are responsible for and
will obtain valid, continuous and adequate rights-of-way and easements
needed for the construction, operation, and maintenance of the facility.
Form RD 442-20, ``Right-of-Way Easement,'' may be used. When a site is
for major structures for utility-type facilities such as a reservoir or
pumping station and the applicant is able to obtain only a right-of-way
or easement on such a site rather than a fee simple title, the applicant
will furnish a title report thereon by the applicant's attorney showing
ownership of the land and all mortgages or other lien defects,
restrictions, or encumbrances, if any. It is the responsibility of the
applicant to obtain and record such releases, consents or subordinations
to such property rights from holders of outstanding liens or other
instruments as may be necessary for the construction, operation, and
maintenance of the facility and give Rural Development the required
security.
(B) Title for land or existing facilities. Title to land essential
to the successful operation of facilities or title to facilities being
purchased, must not contain any restrictions that will adversely affect
the suitability, successful operation, security value, or
transferability of the facility. Title opinions must be provided by the
applicant's attorney. The opinions must be in sufficient detail to
assess marketability of the property. Form RD 1927-9, ``Preliminary
Title Opinion,'' and Form RD 1927-10, ``Final Title Opinion,'' may be
used to provide the required title opinions. If other forms are used
they must be reviewed and approved by Rural Development and OGC.
(1) In lieu of receiving title opinions from the applicant's
attorney, the applicant may use a title insurance company. If a title
insurance company is used, the company must provide RD a title insurance
binder, disclosing all title defects or restrictions, and include a
commitment to issue a title insurance policy. The policy should be in an
amount at least equal to the market value of the property as improved.
The title insurance binder and commitment
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should be provided to RD prior to requesting closing instructions. RD
will be provided a title insurance policy which will insure RD's
interest in the property without any title defects or restrictions which
have not been waived by RD.
(2) The loan approval official may waive title defects or
restrictions, such as utility easements, that do not adversely affect
the suitability, successful operation, security value, or
transferability of the facility. If the District Director is the loan
approval official and is unable to waive the defect or restriction, the
title opinion or title insurance binder will be forwarded to the State
Director. If the State Director, with the advice of the OGC, determines
that the defect or restriction cannot be waived, the defect or
restriction must be removed.
(ii) Water rights. When legally permissible, an assignment will be
taken on water rights owned or to be acquired by the applicant. The
following will be furnished as applicable:
(A) A statement by the applicant's attorney regarding the nature of
the water rights owned or to be acquired by the applicant (such as
conveyance of title, appropriation and decree, application and permit,
public notice and appropriation and use).
(B) A copy of a contract with another company or municipality to
supply water; or stock certificates in another company which represents
the right to receive water.
(iii) Land purchase contract: (A) A land purchase contract (known in
some areas as a contract for deed) is an agreement between two or more
parties which obligates the purchaser to pay the purchase price, gives
the purchaser the rights of immediate possession, control, and
beneficial use of the property, and entitles the purchaser to a deed
upon paying all or a specified part of the purchase price.
(B) Applicants may obtain land through land purchase contracts when
all of the following conditions are met:
(1) The applicant has exhausted all reasonable means of obtaining
outright fee simple title to the necessary land.
(2) The applicant cannot obtain the land through condemnation.
(3) There are not other suitable sites available.
(4) National Office concurrence is obtained in accordance with
paragraph (j)(4)(iii)(D)(2) of this section.
(C) The land purchase contract must provide for the transfer of
ownership by the seller without any restrictions, liens or other title
defects. The contract must not contain provisions for future advances
(except for taxes, insurance, or other costs needed to protect the
security), summary cancellations, summary forfeiture, or other clauses
that may jeopardize the Government's interest or the purchaser's ability
to pay the Rural Development loan. The contract must provide that if the
purchaser fails to make payment that Rural Development will be given at
least 90 days written notice with an option to cure the default before
the contract can be cancelled, terminated or foreclosed. Then Rural
Development must have the option of making the payment and charging it
to the purchaser's account, making the payment and taking over the
ownership of the purchase contract, or taking any other action necessary
to protect the Government's interest.
(D) Prior to loan closing or the beginning of construction,
whichever occurs first, the following actions must be taken in the order
listed below:
(1) The land purchase contract and any appropriate title opinions
must be reviewed by the Regional Attorney to determine if they are
legally sufficient to protect the interest of the Government.
(2) The land purchase contract, the Regional Attorney's comments,
and the State Director's recommendations must be submitted to the
National Office for concurrence.
(3) The land purchase contract must be recorded.
(5) Lease agreements. Where the right of use or control of real
property not owned by the applicant/borrower is essential to the
successful operation of the facility during the life of the loan, such
right will be evidenced by written agreements or contracts between the
owner(s) of the property and the applicant/borrower. Lease agreements
shall not contain provisions for restricted use of the site of facility,
forfeiture or
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summary cancellation clauses and shall provide for the right to transfer
and lease without restriction. Lease agreements will ordinarily be
written for a term at least equal to the term of the loan. Such lease
contracts or agreements will be approved by the Rural Development loan
approval official with the advice and counsel of the Regional Attorney,
OGC, as to the legal sufficiency of such documents. A copy of the lease
contract or agreement will be included in the loan docket.
(6) Notes and bonds. Notes and bonds will be completed on the date
of loan closing except for the entry of subsequent multiple advances
where applicable. The amount of each note will be in multiples of not
less than $100. The amount of each bond will ordinarily be in multiples
of not less than $1,000.
(i) Form RD 440-22, ``Promissory Note (Association or
Organization),'' will ordinarily be used for loans to nonpublic bodies.
(ii) Section 1942.19 contains instructions for preparation of notes
and bonds evidencing indebtedness of public bodies.
(7) Environmental requirements. Environmental requirements will be
documented by Rural Development in accordance with subpart G part 1940
of this chapter. The applicant will provide any information required.
(8) Health care facilities. The applicant will be responsible for
obtaining the following documents:
(i) A statement from the responsible State agency certifying that
the proposed health care facility is not inconsistent with the State
Medical Facilities Plan.
(ii) A statement from the responsible State agency or regional
office of the Department of Health and Services certifying that the
proposed facility meets the standards in Sec. 1942.18(d)(4).
(9) Public information. Applicants should inform the general public
regarding the development of any proposed project. Any applicant not
required to obtain authorization by vote of its membership or by public
referendum, to incur the obligations of the proposed loan or grant, will
hold at least one public information meeting. The public meeting must be
held after the preapplication is filed and not later than loan approval.
The meeting must give the citizenry an opportunity to become acquainted
with the proposed project and to comment on such items as economic and
environmental impacts, service area, alternatives to the project, or any
other issue identified by Rural Development. The applicant will be
required, at least 10 days prior to the meeting, to publish a notice of
the meeting in a newspaper of general circulation in the service area,
to post a public notice at the applicant's principal office, and to
notify Rural Development. The applicant will provide Rural Development a
copy of the published notice and minutes of the public meeting. A public
meeting is not normally required for subsequent loans which are needed
to complete the financing of the project.
(10) Service through individual installation. Community owned water
or waste disposal systems may provide service through individual
installations or small clusters of users within the applicant's service
area. When individual installations or small clusters are proposed, the
loan approval official should consider items such as: quantity and
quality of the individual installations that may be developed; cost
effectiveness of the individual facility compared with the initial and
long term user cost on a central system; health and pollution problems
attributable to individual facilities; operational or management
problems peculiar to individual installations; and permit and regulatory
agency requirements.
(i) Applicants providing service through individual facilities must
meet the eligibility requirements in Sec. 1942.17(b).
(ii) Rural Development must approve the form of agreement between
the owner and individual users for the installation, operation and
payment for individual facilities.
(iii) If taxes or assessments are not pledged as security, owners
providing service through individual facilities must obtain security as
necessary to assure collection of any sum the individual user is
obligated to pay the owner.
(iv) Notes representing indebtedness owed the owner by a user for an
individual facility will be scheduled for
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payment over a period not to exceed the useful life of the individual
facility or the loan, whichever is shorter. The interest rate will not
exceed the interest rate charged the owner on the Rural Development
indebtedness.
(v) Owners providing service through individual or cluster
facilities must obtain:
(A) Easements for the installation and ingress to and egress from
the facility; and
(B) An adequate method for denying service in the event of
nonpayment of user fees.
(11) Funds from other sources. Rural Development loan funds may be
used along with or in connection with funds provided by the applicant or
from other sources. Since ``matching funds'' is not a requirement for
Rural Development loans, shared revenues may be used with Rural
Development funds for project construction.
(k) Other Federal, State, and local requirements. Each application
shall contain the comments, necessary certifications and recommendations
of appropriate regulatory or other agency or institution having
expertise in the planning, operation, and management of similar
facilities. Proposals for facilities financed in whole or in part with
Rural Development funds will be coordinated with appropriate Federal,
State, and local agencies in accordance with the following:
(1) Compliance with special laws and regulations. Except as provided
in paragraph (k)(2) of this section applicants will be required to
comply with Federal, State, and local laws and any regulatory commission
rules and regulations pertaining to:
(i) Organization of the applicant and its authority to construct,
operate, and maintain the proposed facilities;
(ii) Borrowing money, giving security therefore, and raising
revenues for the repayment thereof;
(iii) Land use zoning; and
(iv) Health and sanitation standards and design and installation
standards unless an exception is granted by Rural Development.
(2) Compliance exceptions. If there are conflicts between this
subpart and state or local laws or regulatory commission regulations,
the provisions of this subpart will control.
(3) State Pollution Control or Environmental Protection Agency
Standards. Water and waste disposal facilities will be designed,
installed, and operated in such a manner that they will not result in
the pollution of water in the State in excess of established standards
and that any effluent will conform with appropriate State and Federal
Water Pollution Control Standards. A certification from the appropriate
State and Federal agencies for water pollution control standards will be
obtained showing that established standards are met.
(4) Consistency with other development plans. Rural Development
financed facilities will not be inconsistent with any development plans
of State, multijurisdictional areas, counties, or municipalities in
which the proposed project is located.
(5) State agency regulating water rights. Each Rural Development
financed facility will be in compliance with appropriate State agency
regulations which have control of the appropriation, diversion, storage
and use of water and disposal of excess water. All of the rights of any
landowners, appropriators, or users of water from any source will be
fully honored in all respects as they may be affected by facilities to
be installed.
(6) Civil Rights Act of 1964. All borrowers are subject to, and
facilities must be operated in accordance with, title VI of the Civil
Rights Act of 1964 and subpart E of part 1901 of this chapter,
particularly as it relates to conducting and reporting of compliance
reviews. Instruments of conveyance for loans and/or grants subject to
the Act must contain the covenant required by Sec. 1901.202(e) of
subpart E of part 1901 of this chapter.
(7) Title IX of the Education Amendments of 1972. No person in the
United States shall, on the basis of sex, be excluded from participation
in, be denied the benefits of, or be subjected to discrimination under
any education program or education activity receiving Agency financial
assistance except as otherwise provided for in the Education Amendments
of title IX. The State Director will provide guidance
[[Page 148]]
and technical assistance to carry out the intent of this paragraph.
(8) Section 504 of the Rehabilitation Act of 1973. Under section 504
of the Rehabilitation Act of 1973, as amended (29 U.S.C. 794), no
handicapped individual in the United States shall, solely by reason of
their handicap, be excluded from participation in, be denied the
benefits of, or be subjected to discrimination under any program or
activity receiving Agency financial assistance.
(9) Age Discrimination Act of 1975. This Act provides that no person
in the United States shall on the basis of age, be excluded from
participation in, be denied the benefits of, or be subjected to
discrimination under any program or activity receiving Federal financial
assistance. This Act also applies to programs or activities funded under
the State and Local Fiscal Assistance Act of 1972 (31 U.S.C. 1221 et.
seq.). This Act does not apply to: (i) age distinctions contained in
Federal, State or local statutes or ordinances adopted by an elected,
general purpose legislative body which provide benefits or assistance
based on age; (ii) establish criteria for participation in age-related
terms; (iii) describe intended beneficiaries or target groups in age-
related terms; and, (iv) any employment practice of any employer,
employment agency, labor organization, or any labor-management joint
apprenticeship training program except for any program or activity
receiving Federal financial assistance for public service employment
under the Comprehensive Employment and Training Act of 1974 (CETA) (29
U.S.C. 801 et. seq.).
(l) Professional services and contracts related to the facility--(1)
Professional services. Applicants will be responsible for providing the
services necessary to plan projects including design of facilities,
preparation of cost and income estimates, development of proposals for
organization and financing, and overall operation and maintenance of the
facility. Professional services of the following may be necessary:
Engineer, architect, attorney, bond counsel, accountant, auditor,
appraiser, and financial advisory or fiscal agent (if desired by
applicant). Contracts or other forms of agreement between the applicant
and its professional and technical representatives are required and are
subject to Agency concurrence. Form RD 1942-19, ``Agreement for
Engineering Services,'' may be used when appropriate. Guide 20,
``Agreement for Engineering Services (Agency/EPA--Jointly Funded
Projects)'' may be used on projects jointly funded by RD and EPA. Guide
14 may be used in the preparation of the legal services agreement.
(2) Bond counsel. Unless otherwise provided by Sec. 1942.19(b),
public bodies are required to obtain the service of recognized bond
counsel in the preparation of evidence of indebtedness.
(3) Contracts for other services. Contracts or other forms of
agreements for other services including management, operation, and
maintenance will be developed by the applicant and presented to the
Agency for review and approval. Management agreements should provide at
least those items in guide 24.
(4) Fees. Fees provided for in contracts or agreements shall be
reasonable. They shall be considered to be reasonable if not in excess
of those ordinarily charged by the profession for similar work when the
Agency financing is not involved.
(m) Applying for the Agency loans--(1) Preapplication. Applicants
desiring loans will file SF 424.2 and comments from the appropriate A-95
clearinghouse agency normally with the appropriate Agency County Office.
The County Supervisor will immediately forward all documents to the
District Office. The District Director has prime responsibility for all
community program loan making and servicing activities within the
District.
(2) Preapplication review. Upon receipt of the preapplication, RD
will tentatively determine eligibility including the likelihood of
credit elsewhere at reasonable rates and terms and availability of
agency loan funds. The determination as to availability of other credit
will be made after considering present rates and terms available for
similar proposals (not necessarily based upon rates and terms available
from Rural Development); the repayment potential of the applicant; long-
term cost to the applicant; and average user or other charges. In those
cases where Rural Development determines that loans at reasonable rates
and
[[Page 149]]
terms should be available from commercial sources, Rural Development
will notify the applicant so that it may apply for such financial
assistance. Such applicants may be reconsidered for Rural Development
loans upon their presenting satisfactory evidence of inability to obtain
commercial financing at reasonable rates and terms.
(3) Incurring obligations. Applicants should not proceed with
planning nor obligate themselves for expenditures until authorized by
Rural Development.
(4) Results of preapplication review. After Rural Development has
reviewed the preapplication material and any additional material that
may be requested, Form AD-622 will be sent to the applicant. Ordinarily
the review will not exceed 45 days.
(5) Application conference. Before starting to assemble the
application and after the applicant selects its professional and
technical representatives, it should arrange with Rural Development for
an application conference to provide a basis for orderly application
assembly. Rural Development will provide applicants with a list of
documents necessary to complete the application. Guide 15 may be used
for this purpose. Applications will be filed with the District Office.
(6) Application completion and assembling. This is the
responsibility of the applicant with guidance from Rural Development.
The applicant may utilize their professional and technical
representatives or other competent sources.
(7) Review of decision. If an application is rejected, the applicant
may request a review of this decision under subpart B of part 1900 of
this chapter.
(n) Actions prior to loan closing and start of construction--(1)
Excess Rural Development loan and grant funds. If there is a significant
reduction in project cost, the applicant's funding needs will be
reassessed before loan closing or the start of construction, whichever
occurs first. In such cases applicable Rural Development forms, the
letter of conditions, and other items will be revised. Decreases in
Rural Development funds will be based on revised project costs and
current number of users, however, other factors including Rural
Development regulations used at the time of loan/grant approval will
remain the same. Obligated loan or grant funds not needed to complete
the proposed project will be deobligated.
(2) Loan resolutions. Loan resolutions will be adopted by both
public and other-than-public bodies using Form RD 1942-47, ``Loan
Resolution (Public Bodies),'' or Form RD 1942-9, ``Loan Resolution
(Security Agreement).'' These resolutions supplement other provisions in
this subpart. The applicant will agree:
(i) To indemnify the Government for any payments made or losses
suffered by the Government on behalf of the association. Such
indemnification shall be payable from the same source of funds pledged
to pay the bonds or any other legally permissible source.
(ii) To comply with applicable local, State and Federal laws,
regulations, and ordinances.
(iii) To provide for the receipt of adequate revenues to meet the
requirements of debt service, operation and maintenance, establishment
of adequate reserves, and to continually operate and maintain the
facility in good condition. Except for utility-type facilities, free
service use may be permitted. If free services are extended no
distinctions will be made in the extension of those services because of
race, color, religion, sex, national origin, marital status, or physical
or mental handicap.
(iv) To acquire and maintain such insurance coverage including
fidelity bonds, as may be required by the Government.
(v) To establish and maintain such books and records relating to the
operation of the facility and its financial affairs and to provide for
required audit thereof in such a manner as may be required by the
Government and to provide the Government without its request, a copy of
each such audit and to make and forward to the Government such
additional information and reports as it may, from time to time,
require.
(vi) To provide the Government at all reasonable times, access to
all books and records relating to the facility and access to the
property of the system so
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that the Government may ascertain that the association is complying with
the provisions hereof and of the instruments incident to the making or
insuring of the loan.
(vii) To provide adequate service to all persons within the service
area who can feasibly and legally be served and to obtain Rural
Development's concurrence prior to refusing new or adequate services to
such persons. Upon failure of the applicant to provide services which
are feasible and legal, such person shall have a direct right of action
against the applicant organization.
(viii) To have prepared on its behalf and to adopt an ordinance or
resolution for the issuance of its bonds or notes or other debt
instruments or other such items and in such forms as are required by
State statutes and as are agreeable and acceptable to the Government.
(ix) To refinance the unpaid balance, in whole or in part, of its
debt upon the request of the Government if at any time it should appear
to the Government that the association is able to refinance its bonds by
obtaining a loan for such purposes from responsible cooperative or
private sources at reasonable rates and terms.
(x) To provide for, execute, and comply with Form RD 400-4,
``Assurance Agreement,'' and Form RD 400-1, ``Equal Opportunity
Agreement,'' including an ``Equal Opportunity Clause,'' which is to be
incorporated in or attached as a rider to each construction contract and
subcontract in excess of $10,000.
(xi)(A) To place the proceeds of the loan on deposit in a manner
approved by the Government. Funds must be deposited and maintained in
insured accounts whenever possible. Funds must be maintained in interest
bearing accounts, unless the following apply:
(1) The borrower receives less than $120,000 in Federal awards per
year;
(2) The best reasonably available interest-bearing account would not
be expected to earn interest in excess of $500 per year on Federal cash
balances;
(3) The depository would require an average or minimum balance so
high that it would not be feasible within the expected Federal and non-
Federal cash resources; and,
(4) A foreign government or banking system prohibits or precludes
interest bearing accounts.
(B) Interest earned on Federal payments deposited in interest-
bearing accounts must be remitted annually to the Department of Health
and Human Services, Payment Management System, Rockville, MD 20852.
Interest amounts up to $500 per year may be retained by the non-Federal
entity for administrative expense.
(xii) Not to sell, transfer, lease, or otherwise encumber the
facility or any portion thereof or interest therein, and not to permit
others to do so, without the prior written consent of the Government.
(xiii) Not to borrow any money from any source, enter into any
contract or agreement, or incur any other liabilities in connection with
making enlargements, improvements or extensions to, or for any other
purpose in connection with the facility (exclusive of normal
maintenance) without the prior written consent of the Government if such
undertaking would involve the source of funds pledged to repay the debt
to Rural Development.
(xiv) That upon default in the payments of any principal and accrued
interest on the bonds or in the performance of any covenant or agreement
contained herein or in the instruments incident to making or insuring
the loan, the Government, at its option, may:
(A) Declare the entire principal amount then outstanding and accrued
interest, due and payable;
(B) For the account of the association (payable from the source of
funds pledged to pay the bonds or notes or any other legally
permissiable source), incur and pay reasonable expenses for repair,
maintenance and operation of the facility and such other reasonable
expenses as may be necessary to cure the cause of default; and/or
(C) Take possession of the facility, repair, maintain and operate,
or otherwise dispose of the facility. Default under the provisions of
the resolution
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or any instrument incident to the making or insuring of the loan may be
construed by the Government to constitute default under any other
instrument held by the Government and executed or assumed by the
association and default under any such instrument may be construed by
the Government to constitute default hereunder.
(3) Interim financing. In all loans exceeding $50,000, where funds
can be borrowed at reasonable interest rates on an interim basis from
commercial sources for the construction period, such interim financing
will be obtained so as to preclude the necessity for multiple advances
of Rural Development funds. Guide 1 or guide 1a, as appropriate, may be
used to inform the private lender of Rural Development's commitment.
When interim commercial financing is used, the application will be
processed, including obtaining construction bids, to the stage where the
Rural Development loan would normally be closed, that is immediately
prior to the start of construction. The Rural Development loan should be
closed as soon as possible after the disbursal of all interim funds.
Interim financing may be for a fixed term provided the fixed term does
not extend beyond the time projected for completion of construction. For
this purpose, a fixed term is when the interim lender cannot be repaid
prior to the end of the stipulated term of the interim instruments. When
a Rural Development Water and Waste Disposal grant is included, any
interim financing involving a fixed term must be for the total Rural
Development loan amount. Multiple advances may be used in conjunction
with interim commercial financing when the applicant is unable to obtain
sufficient funds through interim commercial financing in an amount equal
to the loan. The Rural Development loan proceeds (including advances)
will be used to retire the interim commercial indebtedness. Before the
Rural Development loan is closed, the applicant will be required to
provide Rural Development with statements from the contractor, engineer,
architect, and attorney that they have been paid to date in accordance
with their contracts or other agreements and, in the case of the
contractor, that any suppliers and subcontractors have been paid. If
such statements cannot be obtained, the loan may be closed provided:
(i) Statements to the extent possible are obtained;
(ii) The interest of Rural Development can be adequately protected
and its security position is not impaired; and
(iii) Adequate provisions are made for handling the unpaid accounts
by withholding or escrowing sufficient funds to pay such claims.
(4) Obtaining closing instructions. After loan approval, the
completed docket will be reviewed by the State Director. The information
required by OGC will be transmitted to OGC with request for closing
instructions. Upon receipt of the closing instructions from OGC, the
State Director will forward them along with any appropriate instructions
to the District Director. Upon receipt of closing instructions, the
District Director will discuss with the applicant and its architect or
engineer, attorney, and other appropriate representatives, the
requirements contained therein and any actions necessary to proceed with
closing.
(5) Applicant contribution. An applicant contributing funds toward
the project cost shall deposit these funds in its construction account
on or before loan closing or start of construction, whichever occurs
first. Project costs paid prior to the required deposit time with
applicant funds shall be appropriately accounted for.
(6) Evidence of and disbursement of other funds. Applicants
expecting funds from other sources for use in completing projects being
partially financed with Rural Development funds will present evidence of
the commitment of these funds from such other sources. This evidence
will be available before loan closing, or the start of construction,
whichever occurs first. Ordinarily, the funds provided by the applicant
or from other sources will be disbursed prior to the use of Rural
Development loan funds. If this is not possible, funds will be disbursed
on a pro rata basis. Rural Development funds will not be used to pre-
finance funds committed to the project from other sources.
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(o) Loan closing--(1) Closing instructions. Loans will be closed in
accordance with the closing instructions issued by OGC.
(2) Obtaining insurance and fidelity bonds. Required property
insurance policies, liability insurance policies, and fidelity bonds
will be obtained by the time of loan closing or start of construction,
whichever occurs first.
(3) Distribution of recorded documents. The originals of the
recorded deeds, easements, permits, certificates of water rights,
leases, or other contracts and similar documents which are not to be
held by Rural Development will be returned to the borrower. The original
mortgage(s) and water stock certificates, if any, if not required by the
recorder's office will be retained by Rural Development.
(4) Review of loan closing. In order to determine that the loan has
been properly closed the loan docket will be reviewed by the State
Director and OGC.
(p) Project monitoring and fund delivery during construction--(1)
Coordination of funding sources. When a project is jointly financed, the
State Director will reach any needed agreement or understanding with the
representatives of the other source of funds on distribution of
responsibilities for handling various aspects of the project. These
responsibilities will include supervision of construction, inspections
and determinations of compliance with appropriate regulations concerning
equal employment opportunities, wage rates, nondiscrimination in making
services or benefits available, and environmental compliance. If any
problems develop which cannot be resolved locally, complete information
should be sent to the National Office for advice.
(2) Multiple advances. In the event interim commercial financing is
not legally permissible or not available, multiple advances of Rural
Development loan funds are required. An exception to this requirement
may be granted by the National Office when a single advance is
necessitated by State law or public exigency. Multiple advances will be
used only for loans in excess of $50,000. Advances will be made only as
needed to cover disbursements required by the borrower over a 30-day
period. Advances should not exceed 24 in number nor extend longer than
two years beyond loan closing. Normally, the retained percentage
withheld from the contractor to assure construction completion will be
included in the last advance.
(i) Section 1942.19 contains instructions for making multiple
advances to public bodies.
(ii) Advances will be requested by the borrower in writing. The
request should be in sufficient amounts to pay cost of construction,
rights-of-way and land, legal, engineering, interest, and other expenses
as needed. The applicant may use Form RD 440-11, ``Estimate of Funds
Needed for 30 Day Period Commencing ___,'' to show the amount of funds
needed during the 30-day period.
(iii) Rural Development loan funds obligated for a specific purpose,
such as the paying of interest, but not needed at the time of loan
closing will remain in the Finance Office until needed unless State
statutes require all funds to be delivered to the borrower at the time
of closing. Loan funds may be advanced to prepay costs under paragraph
(d)(1)(iv)(G) of this section. If all funds must be delivered to the
borrower at the time of closing to comply with State statutes, funds not
needed at loan closing will be handled as follows:
(A) Deposited in an appropriate borrower account, such as the debt
service account, or
(B) Deposited in a supervised bank account under paragraph (p)(3)(i)
of this section.
(3) Use and accountability of funds--(i) Supervised bank account.
Rural Development loan funds and any funds furnished by the applicant/
borrower to supplement the loan including contributions to purchase
major items of equipment, machinery, and furnishings may be deposited in
a supervised bank account if determined necessary as provided in subpart
A of part 1902 of this chapter. When Rural Development has a Memorandum
of Understanding with another agency that provides for the use of
supervised bank accounts, or when Rural Development is the primary
source of funds for a project and has determined that the use of a
supervised bank account is necessary,
[[Page 153]]
project funds from other sources may also be deposited in the supervised
bank account. Rural Development shall not be accountable to the source
of the other funds nor shall Rural Development undertake responsibility
to administer the funding program of the other entity. Supervised bank
accounts should not be used for funds advanced by an interim lender.
(ii) Other than supervised bank account. If a supervised bank
account is not used, arrangements will be agreed upon for the prior
concurrence by Rural Development of the bills or vouchers upon which
warrants will be drawn, so that the payments from loan funds can be
controlled and Rural Development records kept current. If a supervised
bank account is not used, use Rural Development 402-2, ``Statement of
Deposits and Withdrawals,'' or similar form to monitor funds. Periodic
reviews of nonsupervised accounts shall be made by Rural Development at
the times and in the manner as Rural Development prescribes in the
conditions of loan approval. State laws regulating the depositories to
be used shall be complied with.
(iii) Use of minority owned banks. Applicants are encouraged to use
minority banks (a bank which is owned at least 50 percent by minority
group members) for the deposit and disbursement of funds. A list of
minority owned banks can be obtained from the Office of Minority
Business Enterprise, Department of Commerce, Washington, DC 20230 and is
also available in all Rural Development offices.
(4) Development inspections. The District Director will be
responsible for monitoring the construction of all projects being
financed, wholly or in part, with Rural DevelopmentFmHA or its successor
agency under Public Law 103-354 funds. Technical assistance will be
provided by the State Director's staff. Project monitoring will include
construction inspections and a review of each project inspection report,
each change order and each partial payment estimate and other invoices
such as payment for engineering/architectural and legal fees and other
materials determined necessary to effectively monitor each project.
These activities will not be performed on behalf of the applicant/
borrower, but are solely for the benefit of Rural Development and in no
way are intended to relieve the applicant/borrower of corresponding
obligations to conduct similar monitoring and inspection activities.
Project monitoring will include periodic inspections to review partial
payment estimates prior to their approval and to review project
development in accordance with plans and specifications. Each inspection
will be recorded using Form RD 1924-12, ``Inspection Report.'' The
original Form RD 1924-12 will be filed in the project case folder and a
copy furnished to the State Director. The State Director will review
inspection reports and will determine that the project is being
effectively monitored. The District Director is authorized to review and
accept partial payment estimates prepared by the contractor and approved
by the borrower, provided the consulting engineer or architect, if one
is being utilized for the project, has approved the estimate and
certified that all material purchased or work performed is in accordance
with the plans and specifications, or if a consulting engineer or
architect is not being utilized, the District Director has determined
that the funds requested are for authorized purposes. If there is any
indication that construction is not being completed in accordance with
the plans and specifications or that any other problems exist, the
District Director should notify the State Director immediately and
withhold all payments on the contract.
(5) Payment for construction. Each payment for project costs must be
approved by the borrower's governing body. Payment for construction must
be for amounts shown on payment estimate forms. Form RD 1924-18,
``Partial Payment Estimate,'' may be used for this purpose or other
similar forms may be used with the prior approval of the State Director
or designee. However, the State Director or designee cannot require a
greater reporting burden than is required by Form RD 1924-18. Advances
for contract retainage will not be made until such retainage is due and
payable under the terms of the contract. The review and acceptance of
project costs, including construction partial payment estimates by
[[Page 154]]
the Agency, does not attest to the correctness of the amounts, the
quantities shown, or that the work has been performed under the terms of
agreements or contracts.
(6) Use of remaining funds. Funds remaining after all costs incident
to the basic project have been paid or provided for will not include
applicant contributions. Applicant contributions will be considered as
funds initially expended for the project. Funds remaining, with
exception of applicant contributions, may be considered in direct
proportion to the amount obtained from each source. Remaining funds will
be handled as follows:
(i) Agency loan and/or grant funds. Remaining funds may be used for
purposes authorized by paragraph (d) of this section, provided the use
will not result in major changes to the facility design or project and
that the purposes of the loan and/or grant remains the same.
(A) On projects that only involve an agency loan and no agency
grant, funds that are not needed will be applied as an extra payment on
the RD indebtedness unless other disposition is required by the bond
ordinance, resolution, or State statute.
(B) On projects that involve an agency grant, all remaining agency
funds will be considered to be grant funds up to the full amount of the
grant. Grant funds not expended under paragraph (p)(6)(i) of this
section will be deobligated.
(ii) Funds from other sources. Funds remaining from other sources
will be handled according to rules, regulations and/or the agreement
governing their participation in the project.
(q) Borrower accounting methods, management reporting and audits.
(1) Annual financial statements. Borrowers are required to provide the
Agency with annual financial statements for the life of the loan as
outlined in the Letter of Conditions issued by the Agency. The financial
statements are the responsibility of the borrower's governing body. The
type of statement required is dependent on the amount of Federal
financial assistance received during the borrower's fiscal year. Federal
financial assistance includes Federal assistance that a non-Federal
entity received or administered during the entity's fiscal year in the
form of grants, loans, and loan guarantees. A Federal award is Federal
financial assistance a non-Federal entity received directly from Federal
awarding agencies or indirectly from pass-through entities. Federal
awards expended generally pertain to events that require the non-Federal
entity to comply with Federal Statues, regulations, and terms and
conditions of federal awards, such as: expenditure/expense transactions
associated with grants, cost-reimbursement contracts, cooperative
agreements, and direct appropriations; the disbursement of funds passed
through to sub-recipients; the use of loan proceeds under loan and loan
guarantee programs; the receipt of property; the receipt of surplus
property; the receipt or use of program income; the distribution or
consumption of food commodities; the disbursement of amounts entitling
the non-Federal entity to an interest subsidy; and, the period when
insurance is in force.
(2) Method of accounting and preparation of financial statements.
Annual organization-wide financial statements must be prepared on the
accrual basis of accounting, in accordance with Generally Accepted
Accounting Principles (GAAP), unless State statute, tribal law or
regulatory agencies provide otherwise, or an exception is granted by the
Agency. An organization may maintain its accounting records on a basis
other than accrual accounting, and make the necessary adjustments so
that annual financial statements are presented on the accrual basis.
(3) Record retention. Each Applicant will retain all records, books,
and supporting material for 3 years after the issuance of the audit or
management reports, or for a time period required by other agencies or
common business practice, whichever is longer. Upon request, this
material will be made available to Rural Development, OIG, USDA, the
Comptroller General, or to their assignees.
(4) Audits. Any applicant that expends $750,000 or more in Federal
financial assistance during their fiscal year must submit an audit
report conducted in accordance with 2 CFR part 200, subpart F, ``Audit
Requirements.'' Applicants expending less than $750,000 in
[[Page 155]]
Federal financial assistance per fiscal year are exempt from 2 CFR part
200 audit requirements. All audits are to be performed in accordance
with the latest revision of the Generally Accepted Government Accounting
Standards (GAGAS), developed by the Comptroller General of the United
States. Further guidance on preparing an acceptable audit can be
obtained from any Agency office. It is not intended that audits required
by this part be separate and apart from audits performed in accordance
with State and local laws. To the extent feasible, the audit work should
be done in conjunction with those audits. Audits should be supplied to
the Processing Official within the timeframes stated in paragraph (f) of
this section. OMB Circulars and Agency Compliance Supplements are
available in any USDA/Agency office or OMB's Web site. Any state, local
government, or Indian tribe that is required by constitution or state
statute, in effect on January 1, 1987, to undergo its audits less
frequently than annually, is permitted to undergo its audits biennially,
pursuant to 2 CFR 200.504(a). This requirement must still be in effect
for the biennial period. Any nonprofit organization that had biennial
audits for all biennial periods ending between July 1, 1992, and January
1, 1995, is permitted to undergo its audits biennially, pursuant to 2
CFR 200.504(b). All biennial audits must cover both years within the
biennial period.
(5) Exemption from audits. Except as noted in 2 CFR 200.503,
Relation to other audit requirement, public bodies or nonprofits
expending less than $750,000 in Federal awards during its fiscal year,
whose payments are current, and are having no signs of operational or
financial difficulty may submit a management report. A management
report, at a minimum, will include a balance sheet and income and
expense statement. Financial information may be reported on Form RD 442-
2, ``Statement of Budget, Income and Equity'' and RD Form 442-3,
``Balance Sheet'', or similar. The following management data will be
submitted by the borrower to the servicing office. Records must be
available for review or audit by appropriate officials of the Federal
agency, pass-through entity, and Government Accountability Office (GAO).
(i) Annual management reports. Thirty days prior to the beginning of
each fiscal year the following will be submitted to the Servicing
Official:
(A) One copy of the proposed annual budget. The borrower will submit
two copies of Form RD 442-2, or equivalent, Statement of Budget, Income
and Equity, Schedule 1, page 1; and Schedule 2, Projected Cash Flow. The
only data required at this time is Schedule 1, page 1, Column 3, annual
budget, and all of Schedule 2, Projected Cash Flow.
(B) An annual audit report may be submitted in lieu of Forms RD 442-
2 and 442-3.
(ii) [Reserved]
(6) Deadlines for submitting audits and management reports. In
accordance with 2 CFR part 200, audits must be submitted no later than 9
months after the end of the fiscal year or 30 days after the borrower's
receipt of the auditor's reports, whichever is earlier. Management
reports must be submitted no later than 2 months after the end of the
borrower's fiscal year.
(7) Additional information to be submitted with audits and
management reports. (i) Insurance. Agency borrowers will maintain
adequate insurance coverage as required by the loan resolution and Sec.
1942.17(j)(3). The servicing official is required to monitor insurance
annually after the initial insurance verification.
(ii) Reserve account(s). Borrowers will provide documentation that
the Agency required reserve account(s) is properly funded;
(iii) Property tax information. If applicable, documentation that
property taxes have been paid and are current.
(iv) A list of directors and officers.
(8) Quarterly reports. A quarterly management report will be
required for the first full year of operations for new borrowers, and
existing borrowers operating a new facility, starting a new type of
operation or proposing a significant expansion of an existing facility.
Borrowers should submit the following to the Servicing Official:
(i) One copy of Form RD 442-2, or equivalent, Schedule 1, page 1,
columns
[[Page 156]]
4-6, as appropriate, and page 2. This information should be received in
the Servicing Office 30 days after the end of each of the first three
quarters of the fiscal year.
(ii) The Servicing Office may request a borrower experiencing
financial or management problems to submit quarterly copies of Form RD
442-2, or equivalent, Schedule 1, pages 1 and 2.
[50 FR 7296, Feb. 22, 1985]
Editorial Note: For Federal Register citations affecting Sec.
1942.17, see the List of CFR Sections Affected, which appears in the
Finding Aids section of the printed volume and at www.fdsys.gov.
Sec. 1942.18 Community facilities--Planning, bidding, contracting,
constructing.
(a) General. This section is specifically designed for use by owners
including the professional or technical consultants and/or agents who
provide assistance and services such as architectural, engineering,
inspection, financial, legal or other services related to planning,
bidding, contracting, and constructing community facilities. These
procedures do not relieve the owner of the contractual obligations that
arise from the procurement of these services. For this section, an owner
is defined as an applicant, borrower, or grantee.
(b) Technical services. Owners are responsible for providing the
engineering or architectural services necessary for planning, designing,
bidding, contracting, inspecting, and constructing their facilities.
Services may be provided by the owner's ``in house'' engineer or
architect or through contract, subject to Rural Development concurrence.
Architects and engineers must be licensed in the State where the
facility is to be constructed.
(c) Preliminary reports. Preliminary architectural and engineering
reports must conform with customary professional standards. Preliminary
report guidelines for water, sanitary sewer, solid waste, storm sewer,
and other essential community facilities are available from Rural
Development.
(d) Design policies. Facilities financed by Rural Development will
be designed and constructed in accordance with sound engineering and
architectural practices, and must meet the requirements of Federal,
State and local agencies.
(1) Natural resources. Facility planning should be responsive to the
owner's needs and should consider the long-term economic, social and
environmental needs as set forth in this section. Rural Development's
environmental considerations are under subpart G of part 1940 of this
chapter.
(i) Floodplains and wetlands. Facilities must avoid, to the extent
possible, the long- and short-term adverse impacts associated with the
occupancy and modification of floodplains and wetlands, and avoid direct
or indirect support of floodplain and wetland development whenever there
is a practicable alternative. This subject is more fully discussed in
Executive Order 11988, Executive Order 11990, and Water Resources
Council's Floodplain Management Guidelines (43 FR 6030) which is
available in all Rural Development offices. Facilities located in
special flood and mudslide prone areas must comply with the Rural
Development's eligibility and insurance requirements in subpart B of
part 1806 of this chapter (RD Instruction 426.2).
(ii) Coastal zone management. Facilities shall be designed and
constructed in a manner consistent with approved State management
programs, under the Coastal Zone Management Act of 1972 (Pub. L. 92-583
section 307 (c)(1) and (2)) as supplemented by the Department of
Commerce regulations 15 CFR part 930.
(iii) Wild and scenic rivers. Facilities shall be designed and
constructed in order that designated wild and scenic rivers be preserved
in free-flowing condition and that they and their immediate environments
be protected for the benefit and enjoyment of present and future
generations under the Wild and Scenic Rivers Act of 1978 (Pub. L. 95-
625).
(iv) Endangered species. Facilities shall be designed and
constructed in a manner to conserve, to the extent practicable, the
various endangered and threatened species of fish or wildlife and
plants, and will not jeopardize their continued existence and will not
result in destruction or modification of
[[Page 157]]
the habitat of species in the Endangered Species Act of 1973 (Pub. L.
93-205).
(2) Historic preservation. Facilities should be designed and
constructed in a manner which will contribute to the preservation and
enhancement of sites, structures, and objects of historical,
architectural, and archaeological significance. All facilities must
comply with the National Historic Preservation Act of 1966 (16 U.S.C
470) as supplemented by 36 CFR part 800 and Executive Order 11593,
``Protection and Enhancement of the Cultural Environment.'' subpart F of
part 1901 of this chapter sets forth procedures for the protection of
Historic and Archaeological Properties.
(3) Architectural barriers. All facilities intended for or
accessible to the public or in which physically handicapped persons may
be employed or reside must be developed in compliance with the
Architectural Barriers Act of 1968 (Pub. L. 90-480) as implemented by
the General Services Administration regulations 41 CFR 101-19.6 and
section 504 of the Rehabilitation Act of 1973 (Pub. L. 93-112) as
implemented by 7 CFR parts 15 and 15b.
(4) Health care facilities. The proposed facility must meet the
minimum standards for design and construction contained in the American
Institute of Architects Press Publication No. ISBN 0-913962-96-1,
``Guidelines for Construction and Equipment of Hospital and Medical
Facilities,'' 1987 Edition. The facility must also meet the life/safety
aspects of the 1985 edition of the National Fire Protection Association
(NFPA) 101 Life Safety Code, or any subsequent code that may be
designated by the Secretary of HHS. All publications referenced in this
section are available in all Rural Development State Offices. Under
Sec. 1942.17(j)(8)(ii) of this subpart, a statement by the responsible
regulatory agency that the facility meets the above standards will be
required. Any exceptions must have prior National Office concurrence.
(5) Energy conservation. Facility design should consider cost
effective energy saving measures or devices.
(6) Lead base paints. Lead base paints shall not be used in
facilities designed for human habitation. Owners must comply with the
Lead Base Paints Poisoning and Prevention Act of 1971 (42 U.S.C. 4801)
and the National Consumer Health Information and Health Promotion Act of
1976 (Pub. L. 94-317) with reference to paint specifications used
according to exhibit H of subpart A of part 1924 of this chapter.
(7) Fire protection. Water facilities must have sufficient capacity
to provide reasonable fire protection to the extent practicable.
(8) Growth capacity. Facilities must have sufficient capacity to
provide for reasonable growth to the extent practicable.
(9) Water conservation. Owners are encouraged, when economically
feasible, to incorporate water conservation practices into a facility's
design. For existing water systems, evidence must be provided showing
that the distribution system water losses do not exceed reasonable
levels.
(10) Water quality. All water facilities must meet the requirements
of the Safe Drinking Water Act (Pub. L. 93-523) and provide water of a
quality that meets the current Interim Primary Drinking Water
Regulations (40 CFR part 141).
(11) Combined sewers. New combined sanitary and storm water sewer
facilities will not be financed by Rural Development. Extensions to
existing combined systems can only be financed when separate systems are
impractical.
(12) Compliance. All facilities must meet the requirements of
Federal, State, and local agencies having the appropriate jurisdiction.
(13) Dam safety. Projects involving any artificial barrier which
impounds or diverts water, or the rehabilitation or improvement of such
a barrier, should comply with the provisions for dam safety as discussed
in the Federal Guidelines for Dam Safety (Government Printing Office
stock No. 041-001-00187-5) as prepared by the Federal Coordinating
Council for Science, Engineering and Technology.
(14) Pipe. All pipe used shall meet current American Society for
Testing Materials (ASTM) or American Water Works Association (AWWA)
standards.
(15) Water system testing. For new water systems or extensions to
existing
[[Page 158]]
water systems, leakage shall not exceed 10 gallons per inch of pipe
diameter per mile of pipe per 24 hours when tested at 1\1/2\ times the
working pressure or rated pressure of the pipe, whichever is greater.
(16) Metering devices. Water facilities financed by Rural
Development will have metering devices for each connection. An exception
to this requirement may be granted by the Rural Development's State
Director when the owner demonstrates that installation of metering
devices would be a significant economic detriment and that environmental
consideration would not be adversely affected by not installing such
devices.
(17) Seismic safety. (i) All new building construction shall be
designed and constructed in accordance with the seismic provisions of
one of the following model building codes or the latest edition of that
code providing an equivalent level of safety to that contained in latest
edition of the National Earthquake Hazard Reduction Program's (NEHRP)
Recommended Provisions for the Development of Seismic Regulations for
New Building (NEHRP Provisions):
(A) 1991 International Conference of Building Officials (ICBO)
Uniform Building Code;
(B) 1993 Building Officials and Code Administrators International,
Inc. (BOCA) National Building Code; or
(C) 1992 Amendments to the Southern Building Code Congress
International (SBCCI) Standard Building Code.
(ii) The date, signature, and seal of a registered architect or
engineer and the identification and date of the model building code on
the plans and specifications will be evidence of compliance with the
seismic requirements of the appropriate building code.
(e) Construction contracts. Contract documents must be sufficiently
descriptive and legally binding in order to accomplish the work as
economically and expeditiously as possible.
(1) Standard construction contract documents are available from
Rural Development. When Rural Development's standard construction
contract documents are used, it will normally not be necessary for the
Office of the General Counsel (OGC) to perform a detailed legal review.
If the construction contract documents utilized are not in the format of
guide forms previously approved by Rural Development, OGC's review of
the construction contract documents will be obtained prior to their use.
(2) Contract review and approval. The owner's attorney will review
the executed contract documents, including performance and payment
bonds, and will certify that they are adequate, and that the persons
executing these documents have been properly authorized to do so. The
contract documents, bids bonds, and bid tabulation sheets will be
forwarded to Rural Development for approval prior to awarding. All
contracts will contain a provision that they are not in full force and
effect until they have been approved by Rural Development. The Rural
Development State Director or designee is responsible for approving
construction contracts with the legal advice and guidance of the OGC
when necessary.
(3) Separate contracts. Arrangements which split responsibility of
contractors (separate contracts for labor and material, extensive
subcontracting and multiplicity of small contracts on the same job),
should be avoided whenever it is practical to do so. Contracts may be
awarded to suppliers or manufacturers for furnishing and installing
certain items which have been designed by the manufacturer and delivered
to the job site in a finished or semifinished state such as
perfabricated buildings and lift stations. Contracts may also be awarded
for material delivered to the job site and installed by a patented
process or method.
(f) Utility purchase contracts. Applicants proposing to purchase
water or other utility service from private or public sources shall have
written contracts for supply or service which are reviewed and approved
by the Rural Development State Director or designee. To the extent
practical, Rural Development review and approval of such contracts
should take place prior to their execution by the owner. Form RD 442-30,
``Water Purchase Contract,'' may be used when appropriate. If the Rural
Development loan will be repaid from system revenues, the contract will
be pledged to Rural Development
[[Page 159]]
as part of the security for the loan. Such contracts will:
(1) Include a commitment by the supplier to furnish, at a specified
point, an adequate quantity of water or other service and provide that,
in case of shortages, all of the supplier's users will proportionately
share shortages. If it is impossible to obtain a firm commitment for
either an adequate quantity or sharing shortages proportionately, a
contract may be executed and approved provided adequate evidence is
furnished to enable Rural Development to make a determination that the
supplier has adequate supply and/or treatment facilities to furnish its
other users and the applicant for the foreseeable future; and
(i) The supplier is subject to regulations of the Federal Energy
Regulatory Commission or other Federal or State agency whose
jurisdiction can be expected to prevent unwarranted curtailment of
supply; or
(ii) A suitable alternative supply could be arranged within the
repayment ability of the borrower if it should become necessary; or
(iii) Prior approval is obtained from the National Office. The
following information should be submitted to the National Office:
(A) Transmittal memorandum including:
(1) Alternative supplies considered; and
(2) Recommendations and comments; and
(3) Any other necessary supporting information.
(B) Copies of the following:
(1) Proposed letter of conditions; and
(2) Form RD 442-7, ``Operating Budget''; and
(3) Form RD 442-3, ``Balance Sheet''; and
(4) Preliminary Engineering Report; and
(5) Proposed Contract.
(C) Owner and Rural Development engineer's comments and
recommendations.
(D) Documentation and statement from the supplier that it has an
adequate supply and treatment facilities available to meet the needs of
its users and the owner for the foreseeable future.
(2) Set out the ownership and maintenance responsibilities of the
respective parties including the master meter if a meter is installed at
the point of delivery.
(3) Specify the initial rates and provide some kind of escalator
clause which will permit rates for the association to be raised or
lowered proportionately as certain specified rates for the supplier's
regular customers are raised or lowered. Provisions may be made for
altering rates in accordance with the decisions of the appropriate State
agency which may have regulatory authority.
(4) Run for a period of time which is at least equal to the
repayment period of the loan. State Directors may approve contracts for
shorter periods of time if the supplier cannot legally contract for such
period, or if the owner and supplier find it impossible or impractical
to negotiate a contract for the maximum period permissible under State
law, provided:
(i) The supplier is subject to regulations of the Federal Energy
Regulatory Commission or other Federal or State agency whose
jurisdiction can be expected to prevent unwarranted curtailment of
supply; or
(ii) The contract contains adequate provisions for renewal; or
(iii) A determination is made that in the event the contract is
terminated, there are or will be other adequate sources available to the
owner that can feasibly be developed or purchased.
(5) Set out in detail the amount of connection or demand charges, if
any, to be made by the supplier as a condition to making the service
available to the owner. However, the payment of such charges from loan
funds shall not be approved unless Rural Development determines that it
is more feasible and economical for the owner to pay such a connection
charge than it is for the owner to provide the necessary supply by other
means.
(6) Provide for a pledge of the contract to Rural Development as
part of the security for the loan.
(7) Not contain provisions for:
(i) Construction of facilities which will be owned by the supplier.
This does not preclude the use of money
[[Page 160]]
paid as a connection charge for construction to be done by the supplier.
(ii) Options for the future sale or transfer. This does not preclude
an agreement recognizing that the supplier and owner may at some future
date agree to a sale of all or a portion of the facility.
(g) Sewage treatment and bulk water sales contracts. Owners entering
into agreements with private or public parties to treat sewage or supply
bulk water shall have written contracts for such service and all such
contracts shall be subject to Rural Development concurrence. Paragraph
(f) of this section should be used as a guide to prepare such contracts.
(h) Performing construction. Owners are encouraged to accomplish
construction through contracts with recognized contractors. Owners may
accomplish construction by using their own personnel and equipment
provided the owners possess the necessary skills, abilities and
resources to perform the work and provided a licensed engineer or
architect prepares design drawings and specifications and inspects
construction and furnishes inspection reports as required by paragraph
(o) of this section. For other than utility-type facilities, inspection
services may be provided by individuals as approved by the Rural
Development State Director. In either case, the requirements of
paragraph (j) of this section apply. Payments for construction will be
handled under Sec. 1942.17(p)(5) of this part.
(i) Owner's contractual responsibility. This subpart does not
relieve the owner of any contractual responsibilities under its
contract. The owner is responsible for the settlement of all
contractural and administrative issues arising out of procurements
entered into in support of a loan or grant. These include, but are not
limited to: source evaluation, protests, disputes, and claims. Matters
concerning violation of laws are to be referred to the local, State, or
Federal authority as may have jurisdiction.
(j) Owner's procurement regulations. Owner's procurement regulations
must comply with the following standards:
(1) Code of conduct. Owners shall maintain a written code or
standards of conduct which shall govern the performance of their
officers, employees or agents engaged in the award and administration of
contracts supported by Rural Development funds. No employee, officer or
agent of the owner shall participate in the selection, award, or
administration of a contract supported by Rural Development funds if a
conflict of interest, real or apparent, would be involved. Examples of
such conflicts would arise when: the employee, officer or agent; any
member of their immediate family; their partner; or an organization
which employs, or is about to employ, any of the above; has a financial
or other interest in the firm selected for the award.
(i) The owner's officers, employees or agents shall neither solicit
nor accept gratuities, favors or anything of monetary value from
contractors, potential contractors, or parties of subagreements.
(ii) To the extent permitted by State or local law or regulations,
the owner's standards of conduct shall provide for penalties, sanctions,
or other disciplinary actions for violations of such standards by the
owner's officers, employees, agents, or by contractors or their agents.
(2) Maximum open and free competition. All procurement transactions,
regardless of whether by sealed bids or by negotiation and without
regard to dollar value, shall be conducted in a manner that provides
maximum open and free competition. Procurement procedures shall not
restrict or eliminate competition. Examples of what are considered to be
restrictive of competition include, but are not limited to: Placing
unreasonable requirements on firms in order for them to qualify to do
business; noncompetitive practices between firms; organizational
conflicts of interest; and unnecessary experience and bonding
requirements. In specifying material(s), the owner and its consultant
will consider all materials normally suitable for the project
commensurate with sound engineering practices and project requirements.
For a water or waste disposal facility, Rural Development shall consider
fully any recommendation made by the loan applicant or borrower
concerning the technical design and choice of materials to be used for
such a facility. If
[[Page 161]]
Rural Development determines that a design or material, other than those
that were recommended should be considered by including them in the
procurement process as an acceptable design or material in the water or
waste disposal facility, Rural Development shall provide such applicant
or borrower with a comprehensive justification for such a determination.
The justification will be documented in writing.
(3) Owner's review. Proposed procurement actions shall be reviewed
by the owner's officials to avoid the purchase of unnecessary or
duplicate items. Consideration should be given to consolidation or
separation of procurement items to obtain a more economical purchase.
Where appropriate, an analysis shall be made of lease versus purchase
alternatives, and any other appropriate analysis to determine which
approach would be the most economical. To foster greater economy and
efficiency, owners are encouraged to enter into State and local
intergovernmental agreements for procurement or use of common goods and
services.
(4) Solicitation of offers, whether by competitive sealed bids or
competitive negotiation, shall:
(i) Incorporate a clear and accurate description of the technical
requirements for the material, product, or service to be procured. The
description shall not, in competitive procurements, contain features
which unduly restrict competition. The description may include a
statement of the qualitative nature of the material, product or service
to be procured, and when necessary shall set forth those minimum
essential characteristics and standards to which it must conform if it
is to satisfy its intended use. Detailed product specifications should
be avoided if at all possible. When it is impractical or uneconomical to
make a clear and accurate description of the technical requirements, a
``brand name or equal'' description may be used to define the
performance or other salient requirements of a procurement. The specific
features of the named brands which must be met by offerors shall be
clearly stated.
(ii) Clearly specify all requirements which offerors must fulfill
and all other factors to be used in evaluating bids or proposals.
(5) Small, minority, and women's businesses and labor surplus area
firms. (i) affirmative steps should be taken to assure that small and
minority businesses are utilized when possible as sources of supplies,
equipment, construction and services. Affirmative steps shall include
the following:
(A) Include qualified small and minority businesses on solicitation
lists.
(B) Assure that small and minority businesses are solicited whenever
they are potential sources.
(C) When economically feasible, divide total requirements into
smaller tasks or quantities so as to permit maximum small and minority
business participation.
(D) Where the requirement permits, establish delivery schedules
which will encourage participation by small and minority businesses.
(E) Use the services and assistance of the Small Business
Administration and the Office of Minority Business Enterprise of the
Department of Commerce.
(F) If any subcontracts are to be let, require the prime contractor
to take the affirmative steps in paragraphs (j)(5)(i) (A) through (E) of
this section.
(ii) Owners shall take similar appropriate affirmative action in
support of women's businesses.
(iii) Owners are encouraged to procure goods and services from labor
surplus areas.
(iv) Owners shall submit a written statement or other evidence to
Rural Development of the steps taken to comply with paragraphs (j)(5)(i)
(A) through (F), (j)(5)(ii), and (j)(5)(iii) of this section.
(6) Contract pricing. Cost plus a percentage of cost method of
contracting shall not be used.
(7) Unacceptable bidders. The following will not be allowed to bid
on, or negotiate for, a contract or subcontract related to the
construction of the project:
(i) An engineer or architect as an individual or firm who has
prepared plans and specifications or who will be responsible for
monitoring the construction;
(ii) Any firm or corporation in which the owner's architect or
engineer is an
[[Page 162]]
officer, employee, or holds or controls a substantial interest;
(iii) The governing body's officers, employees, or agents;
(iv) Any member of the immediate family or partners in paragraphs
(j)(7)(i), (j)(7)(ii), or (j)(7)(iii) of this section; or
(v) An organization which employs, or is about to employ, any person
in paragraph (j)(7)(i), (j)(7)(ii), (j)(7)(iii) or (j)(7)(iv) of this
section.
(8) Contract award. Contracts shall be made only with responsible
parties possessing the potential ability to perform successfully under
the terms and conditions of a proposed procurement. Consideration shall
include but not be limited to matters such as integrity, record of past
performance, financial and technical resources, and accessibility to
other necessary resources. Contracts shall not be made with parties who
are suspended or debarred.
(k) Procurement methods. Procurement shall be made by one of the
following methods: small purchase procedures; competitive sealed bids
(formal advertising); competitive negotiation; or noncompetitive
negotiation. Competitive sealed bids (formal advertising) is the
preferred procurement method for construction contracts.
(1) Small purchase procedures. Small purchase procedures are those
relatively simple and informal procurement methods for securing
services, supplies or other property, costing in the aggregate not more
than the Simplified Acquisition Threshold. If small purchase procedures
are used for a procurement, written price or rate quotations shall be
obtained from an adequate number of qualified sources.
(2) Competitive sealed bids. In competitive sealed bids (formal
advertising), sealed bids are publicly solicited and a firm-fixed-price
contract (lump sum or unit price) is awarded to the responsible bidder
whose bid, conforming with all the material terms and conditions of the
invitation for bids, is lowest, price and other factors considered. When
using this method the following shall apply:
(i) At a sufficient time prior to the date set for opening of bids,
bids shall be solicited from an adequate number of qualified sources. In
addition, the invitation shall be publicly advertised.
(ii) The invitation for bids, including specifications and perinent
attachments, shall clearly define the items or services needed in order
for the bidders to properly respond to the invitation under paragraph
(j)(4) of this section.
(iii) All bids shall be opened publicly at the time and place stated
in the invitation for bids.
(iv) A firm-fixed-price contract award shall be made by written
notice to that responsible bidder whose bid, conforming to the
invitation for bids, is lowest. When specified in the bidding documents,
factors such as discounts and transportation costs shall be considered
in determining which bid is lowest.
(v) Any or all bids may be rejected by the owner when it is in their
best interest.
(3) Competitive negotiation. In competitive negotiations, proposals
are requested from a number of sources and the Request for Proposal is
publicized. Negotiations are normally conducted with more than one of
the sources submitting offers. Competitive negotiation may be used if
conditions are not appropriate for the use of formal advertising and
where discussions and bargaining with a view to reaching agreement on
the technical quality, price, other terms of the proposed contract and
specifications may be necessary. If competitive negotiation is used for
a procurement, the following requirements shall apply:
(i) Proposals shall be solicited from an adequate number of
qualified sources to permit reasonable competition consistent with the
nature and requirements of the procurement. The Request for Proposal
shall be publicized and reasonable requests by other sources to compete
shall be honored to the maximum extent practicable.
(ii) The Request for Proposal shall identify all significant
evaluation factors, including price or cost where required, and their
relative importance.
(iii) The owner shall provide mechanisms for technical evaluation of
the proposals received, determination of responsible offerors for the
purpose of
[[Page 163]]
written or oral discussions, and selection for contract award.
(iv) Award may be made to the responsible offeror whose proposal
will be most advantageous to the owner, price and other factors
considered. Unsuccessful offerors should be promptly notified.
(v) Owners may utilize competitive negotiation procedures for
procurement of architectural/engineering and other professional
services, whereby competitors' qualifications are evaluated and the most
qualified competitor is selected, subject to negotiations of fair and
reasonable compensation.
(4) Noncompetitive negotiation. Noncompetitive negotiation is
procurement through solicitation of a proposal from only one source, or
after solicitation of a number of sources competition is determined
inadequate. Noncompetitive negotiation may be used when the award of a
contract is not feasible under small purchase, competitive sealed bids
(formal advertising) or competitive negotiation procedures.
Circumstances under which a contract may be awarded by noncompetitive
negotiations are limited to the following:
(i) The item is available only from a single source; or
(ii) There exists a public exigency or emergency and the urgency for
the requirement will not permit a delay incident to competitive
solicitation; or
(iii) After solicitation of a number of sources, competition is
determined inadequate; or
(iv) No acceptable bids have been received after formal advertising;
or
(v) The procurement of architectural/engineering and other
professional services.
(vi) The aggregate amount does not exceed $50,000.
(5) Additional procurement methods. Additional innovative
procurement methods may be used by the owner with prior written approval
of the Rural Development National Office.
(l) Alternate contracting methods. The services of the consulting
engineer or architect and the general construction contractor shall
normally be procured from unrelated sources in accordance with paragraph
(j)(7) of this section. Alternate contracting methods which combine or
rearrange design, inspection or construction services (such as design/
build or construction management/constructor) may be used with Rural
Development written approval.
(1) The owner will request Rural Development approval by providing
the following information to the State Office for review and approval by
the State Architect:
(i) The owner's written request to use an unconventional contracting
method with a description of the proposed method.
(ii) A proposed scope of work describing in clear, concise terms the
technical requirements for the contract. This would include a
nontechnical statement summarizing the work to be performed by the
contractor, the expected results, the sequence in which the work is to
be performed, and a proposed construction schedule.
(iii) A proposed firm-fixed-price contract for the entire project
which provides that the contractor shall be responsible for any extra
cost which may result from errors or omissions in the services provided
under the contract and compliance with all Federal, State, and local
requirements effective on the contract execution date.
(iv) An evaluation of the contractor's performance on previous
similar projects in which the contractor acted in a similar capacity.
(v) A detailed listing and cost estimate of equipment and supplies
not included in the construction contract but which are necessary to
properly operate the facility.
(vi) Evidence that a qualified construction inspector who is
independent of the contractor has or will be hired.
(vii) Preliminary plans and outline specifications. However, final
plans and specifications must be completed and reviewed by Rural
Development prior to the start of construction.
(viii) The owner's attorney's opinion and comments regarding the
legal adequacy of the proposed contract documents and evidence that the
owner has the legal authority to enter into and fulfill the contract.
(2) The State Office may approve design/build or construction
management/constructor projects if the contract amount is equal to or
less than $250,000.
[[Page 164]]
(3) If the contract amount exceeds $250,000, National Office prior
concurrence must be obtained in accordance with Sec. 1942.9(b) of this
subpart. Additional information, such as plans and specifications, may
be requested by the National Office.
(4) The Design/Build method of construction is one in which the
architectural and engineering services, normally provided by an
independent consultant to the owner, are combined with those of the
General Contractor under a single source contract. These services are
commonly provided by a Design/Build firm, a joint venture between an
architectural firm and a construction firm, or a company providing pre-
engineered buildings and design services.
(5) The Construction Management/constructor (CMc), acts in the
capacity of a General Contractor and is actually responsible for the
construction. This type of construction management is also referred to
as Construction Manager ``At Risk.'' The construction contract is
between the owner and the CMc. The CMc, in turn, may subcontract for
some or all of the work.
(6) The National Office may approve other alternative contact
methods, such as Construction Management/advisor (CMa), with a
recommendation from the State Office. The recommendation shall indicate
the circumstances which prove this method advantageous to the applicant
and the Government. A CMa acts in an advisory capacity to the owner, and
the actual contract for construction is between the owner and a prime
contractor or multiple prime contractors. When a contract for an
architect and a CMa are being provided, it is important to make sure
that separate professionals are not being paid to provide similar
services. Further, paragraph (e)(3) of this section discourages separate
contracts for construction.
(7) All alternate contracting method projects must comply with the
requirements for ``maximum open and free competition'' in paragraph
(j)(2) of this section. Choosing an alternate contracting method is not
a way to avoid competition. Further information on procurement methods,
which must be followed, is provided in paragraph (k) of this section.
(m) Contracts awarded prior to preapplications. Owners awarding
construction or other procurement contracts prior to filing a pre-
application with Rural Development must comply with the following:
(1) Evidence. Provide conclusive evidence that the contract was
entered into without intent to circumvent the requirements of Rural
Development regulations. The evidence will consist of at least the
following:
(i) The lapse of a reasonable period of time between the date of
contract award and the date of filing the preapplication which clearly
indicates an irreconcilable failure of previous financial arrangements;
or
(ii) A written statement explaining initial plans for financing the
project and reasons for failure to obtain the planned credit.
(2) Modifications. Modify the outstanding contract to conform with
the provisions of this subpart. Where this is not possible,
modifications will be made to the extent practicable and, as a minimum,
the contract must comply with all State and local laws and regulations
as well as statutory requirements and executive orders related to the
Rural Development financing. When all construction is complete and it is
impracticable to modify the contracts, the owner must provide the
certification required by paragraph (m)(4) of this section.
(3) Consultant's certification. Provide a certification by an
engineer or architect that any construction performed complies fully
with the plans and specifications.
(4) Owner's certification. Provide a certification by the owner that
the contractor has complied with all statutory and executive
requirements related to Rural Development financing for construction
already performed even though the requirements may not have been
included in the contract documents.
(n) Contract provisions. In addition to provisions defining a sound
and complete contract, any recipient of Rural Development funds shall
include the following contract provisions or conditions in all
contracts:
[[Page 165]]
(1) Remedies. Contracts other than small purchases shall contain
provisions or conditions which will allow for administrative,
contractual, or legal remedies in instances where contractors violate or
breach contract terms, and provide for such sanctions and penalties as
may be appropriate. A realistic liquidated damage provision should also
be included.
(2) Termination. All contracts exceeding $10,000, shall contain
provisions for termination by the owner including the manner by which it
will be affected and the basis for settlement. In addition, such
contracts shall describe conditions under which the contract may be
terminated for default as well as conditions when the contract may be
terminated because of circumstances beyond the control of the
contractor.
(3) Surety. In all contracts for construction or facility
improvements awarded exceeding $100,000, the owner shall require bonds,
a bank letter of credit or cash deposit in escrow assuring performance
and payment, each in the amount of 100 percent of the contract cost. The
surety will normally be in the form of performance bonds and payment
bonds; however, when other methods of surety may be necessary, bid
documents must contain provisions for such alternative types of surety.
The use of surety other than performance bonds and payment bonds
requires concurrence by the National Office after submission of a
justification by the State Director together with the proposed form of
escrow agreement or letter of credit. For contracts of lesser amounts,
the owner may require surety. When a surety is not provided, contractors
will furnish evidence of payment in full for all materials, labor, and
any other items procured under the contract. Form RD 1924-10, ``Release
by Claimants,'' and Form RD 1924-9, ``Certificate of Contractor's
Release,'' may be obtained at the local Rural Development office and
used for this purpose. The United States, acting through Rural
Development, will be named as co-obligee on all surety unless prohibited
by State law. Companies providing performance bonds and payment bonds
must hold a certificate of authority as an acceptable surety on Federal
bonds as listed in Treasury Circular 570 as amended and be legally doing
business in the State where the facility is located.
(4) Equal Employment Opportunity. All contracts awarded in excess of
$10,000 by owners shall contain a provision requiring compliance with
Executive Order 11246, entitled, ``Equal Employment Opportunity,'' as
amended by Executive Order 11375, and as supplemented by Department of
Labor regulations 41 CFR part 60.
(5) Anti-kickback. All contracts for construction shall include a
provision for compliance with the Copeland ``Anti-Kickback'' Act (18
U.S.C. 874). This Act provides that each contractor shall be prohibited
from inducing, by any means, any person employed in the construction,
completion, or repair of public work, to give up any part of the
compensation to which they are otherwise entitled. The owner shall
report all suspected or reported violations to Rural Development.
(6) Records. All negotiated contracts (except those of $2,500 or
less) awarded by owners shall include a provision to the effect that the
owner, Rural Development, the Comptroller General of the United States,
or any of their duly authorized representatives, shall have access to
any books, documents, papers, and records of the contractor which are
directly pertinent to a specific Federal loan program for the purpose of
making audits, examinations, excerpts, and transcriptions. Owners shall
require contractors to maintain all required records for three years
after owners make final payments and all other pending matters are
closed.
(7) State Energy Conservation Plan. Contracts shall recognize
mandatory standards and policies relating to energy efficiency which are
contained in the State energy conservation plan issued in compliance
with the Energy Policy and Conservation Act (Pub. L. 94-163).
(8) Change orders. The construction contract shall require that all
contract change orders be approved in writing by Rural Development.
(9) Rural Development concurrence. All contracts must contain a
provision that they shall not be effective unless and until the Rural
Development State
[[Page 166]]
Director or designee concurs in writing.
(10) Retainage. All construction contracts shall contain adequate
provisions for retainage. No payments will be made that would deplete
the retainage nor place in escrow any funds that are required for
retainage nor invest the retainage for the benefit of the contractor.
The retainage shall not be less than an amount equal to 10 percent of an
approved partial payment estimate until 50 percent of the work has been
completed. If the job is proceeding satisfactory at 50 percent
completion, further partial payments may be made in full, however,
previously retained amounts shall not be paid until construction is
substantially complete. Additional amounts may be retained if the job is
not proceeding satisfactorily, but in no event shall the total retainage
be more than 10 percent of the value of the work completed.
(11) Other compliance requirements. Contracts in excess of $100,000
shall contain a provision which requires compliance with all applicable
standards, orders, or requirements issued under section 306 of the Clean
Air Act (42 U.S.C. 1857(h)), section 508 of the Clean Water Act (33
U.S.C. 1368), Executive Order 11738, and Environmental Protection Agency
(EPA) regulations 40 CFR part 15, which prohibit the use under non-
exempt Federal contracts, grants or loans of facilities included on the
EPA List of Violating Facilities. The provision shall require reporting
of violations to Rural Development and to the U.S. Environmental
Protection Agency, Assistant Administrator for Enforcement.
Solicitations and contract provisions shall include the requirements of
40 CFR part 15.4(c) as set forth in guide 18 of this subpart which is
available in all Rural Development offices.
(o) Contract administration. Owners shall be responsible for
maintaining a contract administration system to monitor the contractors'
performance and compliance with the terms, conditions, and
specifications of the contracts.
(1) Preconstruction conference. Prior to beginning construction, the
owner will schedule a preconstruction conference where Rural Development
will review the planned development with the owner, its architect or
engineer, resident inspector, attorney, contractor(s), and other
interested parties. The conference will thoroughly cover applicable
items included in Form RD 1924-16, ``Record of Preconstruction
Conference,'' and the discussion and agreements will be documented. Form
RD 1924-16 may be used for this purpose.
(2) Monitoring reports. Each owner will be required to monitor and
provide reports to Rural Development on actual performance during
construction for each project financed, or to be financed, in whole or
in part with Rural Development funds to include:
(i) A comparison of actual accomplishments with the construction
schedule established for the period. The partial payment estimate may be
used for this purpose.
(ii) A narrative statement giving full explanation of the following:
(A) Reasons why established goals were not met.
(B) Analysis and explanation of cost overruns or high unit costs and
how payment is to be made for the same.
(iii) If events occur between reports which have a significant
impact upon the project, the owner will notify Rural Development as soon
as any of the following conditions are met:
(A) Problems, delays, or adverse conditions which will materially
affect the ability to attain program objectives or prevent the meeting
of project work units by established time periods. This disclosure shall
be accompanied by a statement of the action taken, or contemplated, and
any Federal assistance needed to resolve the situation.
(B) Favorable developments or events which enable meeting time
schedules and goals sooner than anticipated or producing more work units
than originally projected or which will result in cost underruns or
lower unit costs than originally planned and which may result in less
Rural Development assistance.
(3) Inspection. Full-time resident inspection is required for all
construction unless a written exception is made by Rural Development
upon written request of the owner. Unless otherwise agreed, the resident
inspector will be provided by the consulting architect/
[[Page 167]]
engineer. Prior to the preconstruction conference, the architect/
engineer will submit a resume of qualifications of the resident
inspector to the owner and to Rural Development for acceptance in
writing. If the owner provides the resident inspector, it must submit a
resume of the inspector's qualifications to the project architect/
engineer and Rural Development for acceptance in writing prior to the
preconstruction conference. The resident inspector will work under the
general supervision of the project architect/engineer. A guide format
for preparing daily inspection reports (Guide 11 of this subpart) and
Form RD 1924-18, ``Partial Payment Estimate,'' are available on request
from Rural Development.
(4) Inspector's daily diary. The resident inspector will maintain a
record of the daily construction progress in the form of a daily diary
and daily inspection reports as follows:
(i) A complete set of all daily construction records will be
maintained and the original set furnished to the owner upon completion
of construction.
(ii) All entries shall be legible and shall be made in ink.
(iii) Daily entries shall include but not be limited to the date,
weather conditions, number and classification of personnel working on
the site, equipment being used to perform the work, persons visiting the
site, accounts of substantive discussions, instructions given to the
contractors, directions received, all significant or unusual happenings
involving the work, any delays, and daily work accomplished.
(iv) The daily entries shall be made available to Rural Development
personnel and will be reviewed during project inspections.
(5) Prefinal inspections. A prefinal inspection will be made by the
owner, resident inspector, project architect or engineer,
representatives of other agencies involved, the District Director and a
Rural Development State Office staff representative, preferably the
State Staff architect or engineer. Prefinal inspections may be made
without Rural Development State Office staff participation if the State
Director or a designee determines that the facility does not utilize
complicated construction techniques, materials or equipment for
facilities such as small fire stations, storage buildings or minor
utility extensions, and that an experienced District Office staff
representative will be present. The inspection results will be recorded
on Form RD 1924-12, ``Inspection Report,'' and a copy provided to all
appropriate parties.
(6) Final inspection. A final inspection will be made by Rural
Development before final payment is made.
(7) Change is development plans. (i) Changes in development plans
may be approved by Rural Development when requested by owners, provided:
(A) Funds are available to cover any additional costs; and
(B) The change is for an authorized loan purpose; and
(C) It will not adversely affect the soundness of the facility
operation or Rural Development's security; and
(D) The change is within the scope of the contract.
(ii) Changes will be recorded on Form RD 1924-7, ``Contract Change
Order,'' or, other similar forms may be used with the prior approval of
the State Director or designee. Regardless of the form, change orders
must be approved by the Rural Development State Director or a designated
representative.
(iii) Changes should be accomplished only after Rural Development
approval on all changes which affect the work and shall be authorized
only by means of contract change order. The change order will include
items such as:
(A) Any changes in labor and material and their respective cost.
(B) Changes in facility design.
(C) Any decrease or increase in quantities based on final
measurements that are different from those shown in the bidding
schedule.
(D) Any increase or decrease in the time to complete the project.
(iv) All changes shall be recorded on chronologically numbered
contract change orders as they occur. Change orders will not be included
in payment estimates until approved by all parties.
[50 FR 7296, Feb. 22, 1985, as amended at 52 FR 8035, Mar. 13, 1987; 53
FR 6791, Mar. 3, 1988; 54 FR 14334, Apr. 11, 1989; 54 FR 18883, May 3,
1989; 61 FR 65156, Dec. 11, 1996; 77 FR 29539, May 18, 2012; 79 FR
76008, Dec. 19, 2014]
[[Page 168]]
Sec. 1942.19 Information pertaining to preparation of notes or bonds
and bond transcript documents for public body applicants.
(a) General. This section includes information for use by public
body applicants in the preparation and issuance of evidence of debt
(bonds, notes, or debt instruments, herein referred to as bonds). This
section is made available to applicants as appropriate for application
processing and loan docket preparation.
(b) Policies related to use of bond counsel. Preparation of the
bonds and the bond transcript documents will be the responsibility of
the applicant. Public body applicants will obtain the services and
opinion of recognized bond counsel with respect to the validity of a
bond issue, except as provided in (b) (1) through (3) below. The
applicant normally will be represented by a local attorney who will
obtain the assistance of a recognized bond counsel firm which has
experience in municipal financing with such investors as investment
dealers, banks, and insurance companies.
(1) Issues of $250,000 or less. At the option of the applicant for
issues of $250,000 or less, bond counsel may be used for the issuance of
a final opinion only and not for the preparation of the bond transcript
and other documents when the applicant, Rural Development, and bond
counsel have agreed in advance as to the method of preparation of the
bond transcript documents. Under such circumstances the applicant will
be responsible for the preparation of the bond transcript documents.
(2) Issues of $50,000 or less. At the option of the applicant and
with the prior approval of the Rural Development State Director, the
applicant need not use bond counsel if:
(i) The amount of the issue does not exceed $50,000 and the
applicant recognizes and accepts the fact that processing the
application may require additional legal and administrative time.
(ii) There is a significant cost saving to the applicant
particularly with reference to total legal fees after determining what
bond counsel would charge as compared with what the local attorney will
charge without bond counsel.
(iii) The local attorney is able and experienced in handling this
type of legal work.
(iv) The applicant understands that, if it is required by Rural
Development to refinance its loan pursuant to the statutory refinancing
requirements, it will probably have to obtain at its expense a bond
counsel's opinion at that time.
(v) All bonds will be prepared in accordance with this regulation
and will conform as nearly as possible to the preferred methods of
preparation stated in paragraph (e) of this section but still be
consistent with State law.
(vi) Many matters necessary to comply with Rural Development
requirements such as land rights, easements, and organizational
documents will be handled by the applicant's local attorney. Specific
closing instructions will be issued by the Office of the General Counsel
of the U.S. Department of Agriculture for the guidance of Rural
Development.
(3) For loans of less than $500,000. The applicant shall not be
required to use bond counsel in a straight mortgage-note situation where
competitive bidding is not required for the sale of the debt instrument,
unless a complicated financial situation exists with the applicant. In
addition, if there is a known backlog in a particular OGC regional
office the applicant will be advised of such backlog and it will be
suggested to the applicant that the appointment of bond counsel may be
more expeditious. However, it will be the decision of the applicant
whether or not to appoint bond counsel. The applicant must comply with
(b)(2) (iii) through (vi) of this section.
(c) Bond transcript documents. Any questions with respect to Rural
Development requirements should be discussed with the Rural Development
representatives. The bond counsel (or local counsel where no bond
counsel is involved) is required to furnish at least two complete sets
of the following to the applicant, who will furnish one complete set to
Rural Development:
(1) Copies of all organizational documents.
[[Page 169]]
(2) Copies of general incumbency certificate.
(3) Certified copies of minutes or excerpts therefrom of all
meetings of the applicant's governing body at which action was taken in
connection with the authorization and issuance of the bonds.
(4) Certified copies of documents evidencing that the applicant has
complied fully with all statutory requirements incident to calling and
holding of a favorable bond election, if such an election is necessary
in connection with bond issuance.
(5) Certified copies of the resolution or ordinances or other
documents, such as the bond authorizing resolutions or ordinance and any
resolution establishing rates and regulating the use of the improvement,
if such documents are not included in the minutes furnished.
(6) Copies of official Notice of Sale and affidavit of publication
of Notice of Sale where a public sale is required by State statute.
(7) Specimen bond, with any attached coupons.
(8) Attorney's no-litigation certificate.
(9) Certified copies of resolutions or other documents pertaining to
the bond award.
(10) Any additional or supporting documents required by bond
counsel.
(11) For loans involving multiple advances of Rural Development loan
funds a preliminary approving opinion of bond counsel (or local counsel
if no bond counsel is involved) if a final unqualified opinion cannot be
obtained until all funds are advanced. The preliminary opinion for the
entire issue shall be delivered on or before the first advance of loan
funds and state that the applicant has the legal authority to issue the
bonds, construct, operate and maintain the facility, and repay the loan
subject only to changes during the advance of funds such as litigation
resulting from the failure to advance loan funds, and receipt of closing
certrificates.
(12) Preliminary approving opinion, if any, and final unqualified
approving opinion of recognized bond counsel (or local counsel if no
bond counsel is involved) including opinion regarding interest on bonds
being exempt from Federal and any State income taxes. On approval of the
Administrator, a final opinion may be qualified to the extent that
litigation is pending relating to Indian claims that may affect title to
land or validity of the obligation. It is permissible for such opinions
to contain language referring to the last sentence of section 306(a)(1)
or to section 309A(h) of the Consolidated Farm and Rural Development Act
[7 U.S.C. 1926(a)(1) or 1929a(h)], and providing that if the bonds
evidencing the indebtedness in question are required by the Federal
Government and sold on an insured basis from the Agriculture Credit
Insurance Fund, or the Rural Development Insurance Fund, the interest on
such bonds will be included in gross income for the purpose of the
Federal income tax statutes.
(d) Interim financing from commercial sources during construction
period for loans of $50,000 or more. In all cases where it is possible
for funds to be borrowed at current market interest rates on an interim
basis from commercial sources, such interim financing will be obtained
so as to preclude the necessity for multiple advances of Rural
Development funds.
(e) Permanent instruments for Rural Development loans to repay
interim commercial financing. Rural Development loans will be evidenced
by the following types of instruments chosen in accordance with the
following order of preference:
(1) First preference--Form RD 440-22, ``Promissory Note (Association
or Organization)''. If legally permissible use Form RD 440-22 for
insured loans.
(2) Second preference--single instruments with amortized
installments. If Form RD 440.22 is not legally permissible, use a single
instrument providing for amortized installments. Show the full amount of
the loan on the face of the document and provide for entering the date
and amount of each Rural Development advance on the reverse thereof or
on an attachment to the instrument. Form RD 440-22 should be followed to
the extent possible. When principal payment is deferred, no attempt
should be made to compute in dollar terms the amount of interest due on
these installment dates. Rather
[[Page 170]]
the instrument should provide that ``interest only'' is due on these
dates. The appropriate amortized installment computed as follows will be
shown due on the installment date thereafter.
(i) Annual payments--Subtract the due date of the last annual
interest only installment from the due date of the final installment to
determine the number of annual payments applicable. When there are no
interest only installments, the number of annual payments will equal the
number of years over which the loan is amortized. Then multiply the
amount of the note by the applicable amortization factor shown in Rural
Development Amortization Tables and round to the next higher dollar.
Example of Computation of Annual Payment:
Date of Loan Closing: 7-5-1976
Amount of Loan: $100,000.00
Interest Rate: 5%
Amortization Period: 40 years
Interest Only Installments: 7-5-1977 and 7-5-1978
First Regular Installment: 7-5-1979
Final Installment: 7-5-2016
Computation:
2016 - 1978 = 38 annual payments
$100,000.00 x .05929 = $5,929.00 annual payment due
(ii) Semiannual payments--Multiply by two the number of years
between the due date of the last annual interest only installment and
the due date of the final installment to determine the correct number of
semiannual periods applicable. When there are no interest only
installments, multiply by two the number of years over which the loan is
amortized. Then multiply the amount of the note by the applicable
amortization factor shown in Rural Development Amortization Tables and
round to the next higher dollar. Example of Computation of Semiannual
Payment:
Date of Loan Closing: 7-5-1976
Amount of Loan: $100,000.00
Interest Rate: 5%
Amortization Period: 40 years
Interest Only Installments: 7-5-1977 and 7-5-1978
First Regular Installment: 7-5-1979
Final Installment: 7-5-2016
Computation:
2016 - 1978 = 38 x 2 = 76 semiannual periods
$100,000.00 x .02952 = $2,952.00 semiannual payment due
(iii) Monthly payments--Multiply by twelve the number of years
between the due date of the last annual interest only installment and
the final installment to determine the number of monthly payments
applicable. When there are no interest only installments, multiply by
twelve the number of years over which the loan is amortized. Then
multiply the amount of the note by the applicable amortization factor
shown in Rural Development Amortization Tables and round to the next
higher dollar. Example of Computation of Monthly Payment:
Date of Loan Closing: 7-5-1976
Amount of Loan: $100,000.00
Interest Rate: 5%
Amortization Period: 40 years
Interest Only Installments: 7-5-1977 and 7-5-1978
First Regular Installment: 7-5-1979
Final Installment: 7-5-2016
Computation:
2016 - 1978 = 38 x 12 = 456 monthly payments
$100,000.00 x .00491 = $491.00 monthly payment due
(3) Third preference--single instrument with installments of
principal plus interest. If a single instrument with amortized
installments is not legally permissible, use a single instrument
providing for installments of principal plus interest accrued on the
unmatured principal balance. The principal should be in an amount best
adapted to making principal retirement and interest payments which
closely approximate equal installments of combined interest and
principal as required by the first two preferences.
(i) The repayment terms concerning interest only installments
described in paragraph (e)(2) of this section, ``Second perference''
applies.
(ii) The instrument shall contain in substance the following
provisions:
(A) A statement of principal maturities and due dates.
(B) Payments made on indebtedness evidenced by this instrument shall
be applied to the interest due through the next installment due date and
the balance to principal in accordance with the terms of the bond.
Payments on delinquent accounts will be applied in the following
sequence:
(1) Billed delinquent interest,
(2) Past due interest installments,
[[Page 171]]
(3) Past due principal installments,
(4) Interest installment due, and
(5) Principal installment due.
Extra payments and payments made from security depleting sources shall
be applied to the principal last to come due or as specified in the bond
instrument.
(4) Fourth preference--serial bonds with installments of principal
plus interest. If instruments described under the first, second, and
third preferences are not legally permissible, use serial bonds with a
bond or bonds delivered in the amount of each advance. Bonds will be
delivered in the order of their numbers. Such bonds will conform with
the minimum requirements of paragraph (h) of this section. Rules for
application of payments on serial bonds will be the same as those for
principal installment single bonds as set out in the preceding paragraph
(e)(3) of this section.
(f) Multiple advances of Rural Development funds using permanent
instruments. Where interim financing from commercial sources is not
available, Rural Development loan proceeds will be disbursed on an ``as
needed by borrower'' basis in amounts not to exceed the amount needed
during 30-day periods.
(g) Multiple advances of Rural Development funds using temporary
debt instrument. When none of the instruments described in paragraph (e)
of this section are legally permissible or practical, a bond
anticipation note or similar temporary debt instrument may be used. The
debt instrument will provide for multiple advance of Rural Development
loan funds and will be for the full amount of the Rural Development
loan. The instrument will be prepared by bond counsel (or local counsel
if bond counsel is not involved) and approved by the State Director and
OGC. At the same time Rural Development delivers the last advance, the
borrower will deliver the permanent bond instrument and the canceled
temporary instrument will be returned to the borrower. The approved debt
instrument will show at least the following:
(1) The date from which each advance will bear interest.
(2) The interest rate.
(3) A payment schedule providing for interest on outstanding
principal at least annually.
(4) A maturity date which shall be no earlier than the anticipated
issuance date of the permanent instrument(s).
(h) Minimum bond specifications. The provisions of this paragraph
are minimum specifications only, and must be followed to the extent
legally permissible.
(1) Type and denominations. Bond resolutions or ordinances will
provide that the instrument(s) be either a bond representing the total
amount of the indebtedness or serial bonds in denominations customarily
accepted in municipal financing (ordinarily in multiples of not less
than $1000). Single bonds may provide for repayment of principal plus
interest or amortized installments; amortized installments are
preferable from the standpoint of Rural Development. Coupon bonds will
not be used unless required by State statute.
(i) To compute the value of each coupon when the bond denomination
is consistent:
(A) Multiply the amount of the loan or advance by the interest rate
and divide the product by 365 days.
(B) Multiply the daily accrual factor determined in (A) by the
number of days from the date of advance or last installment date to the
next installment date.
(C) Divide the interest computed in (B) by the number of bonds
securing the advance; this is the individual coupon amount.
(ii) to compute the value of each coupon when the bond denomination
varies:
(A) Multiply the denomination of the bond by the interest rate and
divide the product by 365 days.
(B) Multiply the daily accrual factor determined in (A) by the
number of days from the date of advance or last installment date to the
next installment due date; this is the individual coupon amount.
(2) Bond registration. Bonds will contain provisions permitting
registration as to both principal and interest. Bonds purchased by Rural
Development will be registered in the name of ``United States of
America, Rural Development,'' and will remain so registered at all times
while the bonds are held or
[[Page 172]]
insured by the United States. The address of Rural Development for
registration purposes will be that of the appropriate Rural Development
State Office.
(3) Size and quality. Size of bonds and coupons should conform to
standard practice. Paper must be of sufficient quality to prevent
deterioration through ordinary handling over the life of the loan.
(4) Date of bond. Bonds will preferably be dated as of the day of
delivery, however, may be dated another date at the option of the
borrower and subject to approval by Rural Development. If the date of
delivery is other than the date of the bond, the date of delivery will
be stated in the bond. In all cases, interest will accrue from the date
of delivery of the funds.
(5) Payment date. Loan payments will be scheduled to coincide with
income availability and be in accordance with State law. If consistent
with the foregoing, monthly payments will be required and will be
enumerated in the bond, other evidence of indebtedness, or other
supplemental agreement. However, if State law only permits principal
plus interest (P&I) type bonds, annual or semiannual P&I bonds will be
used. Insofar as practical monthly payments will be scheduled one full
month following the date of loan closing; or semiannual or annual
payments will be scheduled six or twelve full months, respectively,
following the date of loan closing or any deferment period. Due dates
falling on the 29th, 30th or 31st day of the month will be avoided.
(6) [Reserved]
(7) Redemptions. Bonds should contain customary redemption
provisions, subject, however, to unlimited right of redemption without
premium of any bonds held by Rural Development except to the extent
limited by the provisions under the ``Third Preference'' and ``Fourth
Preference'' in paragraph (e) of this section.
(8) Additional revenue bonds. Parity bonds may be issued to complete
the project. Otherwise, parity bonds may not be issued unless the net
revenues (that is, unless otherwise defined by the State statute, gross
revenues less essential operation and maintenance expense) for the
fiscal year preceding the year in which such parity bonds are to be
issued, were 120 percent of the average annual debt service requirements
on all bonds then outstanding and those to be issued; provided, that
this limitation may be waived or modified by the written consent of
bondholders representing 75 percent of the then outstanding principal
indebtedness. Junior and subordinate bonds may be issued in accordance
with the loan agreement.
(9) Scheduling of Rural Development payments when joint financing is
involved. In all cases in which Rural Development is participating with
another lender in the joint financing of the project to supply funds
required by one applicant, the Rural Development payments of principal
and interest should approximate amortized installments.
(10) Precautions. The following types of provisions in debt
instruments should be avoided.
(i) Provisions for the holder to manually post each payment to the
instrument.
(ii) Provisions for returning the permanent or temporary debt
instrument to the borrower in order that it, rather than Rural
Development, may post the date and amount of each advance or repayment
on the instrument.
(iii) Defeasance provisions in loan or bond resolutions. When a bond
issue is defeased, a new issue is sold which supersedes the contractual
provisions of the prior issue, including the refinancing requirement and
any lien on revenues. Since defeasance in effect precludes Rural
Development from requiring graduation before the final maturity date, it
represents a violation of the statutory refinancing requirement,
therefore it is disallowed.
(iv) Provisions that amend convenants contained in Forms RD 1942-47,
``Loan Resolution (Public Bodies),'' or FmHA 1942-9, ``Loan Resolution
Security Agreement.''
(11) Multiple Loan Instruments. The following will be adhered to
when preparing debt instruments:
(i) When more than one loan type is used in financing a project,
each type of loan will be evidenced by a separate debt instrument or
series of debt instruments.
[[Page 173]]
(ii) Loan funds obligated in different fiscal years and those
obligated with different interest rates or terms in the same fiscal year
will be evidenced by separate debt instruments.
(iii) Loan funds obligated for the same loan type in the same fiscal
year at the same interest rate and term may be combined in the same debt
instrument; provided the borrower has been notified on Form RD 1940-1,
``Request for Obligation of Funds'', of the action.
(i) Bidding by Rural Development. Bonds offered for public sale
shall be offered in accordance with State law, in such a manner to
encourage public bidding. Rural Development will not submit a bid at the
advertised sale unless required by State law, nor will reference to
Rural Development's rates and terms be included. If no acceptable bid is
received, Rural Development will negotiate the purchase of the bonds.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6791, Mar. 3, 1988; 54
FR 18883, May 3, 1989; 56 FR 29168, June 26, 1991; 68 FR 61331, Oct. 28,
2003]
Sec. 1942.20 Community Facility Guides.
(a) The following documents are attached and made part of this
subpart and may be used by officials in administering this program.
(1) Guide 1 and 1a--Guide Letter for Use in Informing Private Lender
of Agency's Commitment.
(2) Guide 2--Water Users Agreement.
(3) Guide 3--Service Declination Statement.
(4) Guide 4--Bylaws.
(5) Guide 5--Financial Feasibility Report.
(6) Guide 6--Preliminary Architectural Feasibility Report.
(7) Guide 7--Preliminary Engineering Report Water Facility.
(8) Guide 8--Preliminary Engineering Report Sewerage Systems.
(9) Guide 9--Preliminary Engineering Report Solid Waste Disposal
Systems.
(10) Guide 10--Preliminary Engineering Report Storm Waste-Water
Disposal.
(11) Guide 11--Daily Inspection Report.
(12) Guide 12--Memorandum of Understanding Between the Economic
Development Administration--Department of Commerce and the Department of
Agriculture Pertaining to EDA Public Works Projects Assisted by an
Agency loan.
(13) Guide 13--Memorandum of Understanding Between the Economic
Development Administration--Department of Commerce and the Department of
Agriculture Regarding Supplementary Grant Assistance for the
Construction of Public Works and Development Facilities.
(14) Guide 14--Legal Services Agreement.
(15) Guide 15--Community Facility Borrower's Application.
(16) Guide 16--Community Facility Loan Docket.
(17) Guide 17--Construction Contract Documents--Short Form.
(18) Guide 18--Agency Supplemental General Conditions.
(19) Guide 19--Construction Contract Documents.
(20) Guide 20--Agreement for Engineering Services (Agency/EPA
Jointly Funded Projects).
(21) Guide 21--Review of Audit Reports.
(22) Guide 22--Delinquent Accounts Positive Action Plan.
(23) Guide 23--Agreement for Joint Use of Electric System Poles.
(24) Guide 24--Minimum Suggested Contents of Management Agreements.
(25) Guide 25--Joint Policy Statement Between Environmental
Protection Agency and the Agency.
(26) Guide 26--Community Programs Project Selection Criteria.
(27) Exhibit A--Circular No. A-128.
(28) Exhibit B--Department of Agriculture Regional Inspector General
(OIG).
(b) These guides and exhibits are for use by Agency officials,
applicants and applicant's officials and/or agents on certain matters
related to the planning, development, and operation of essential
community facilities which involve the use of loans and/or grants from
Agency. This includes activities related to applying for and obtaining
such financial assistance. These guides and exhibits are not published
in the Federal Register, however, they are available in any Agency
office.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6787, Mar. 3, 1988]
[[Page 174]]
Sec. 1942.21 Statewide nonmetropolitan median household income.
Statewide nonmetropolitan median household income means the median
household income of the State's nonmetropolitan counties and portions of
metropolitan counties outside of cities, towns or places, of 50,000 or
more population.
[69 FR 65519, Nov. 15, 2004]
Sec. Sec. 1942.22-1942.49 [Reserved]
Sec. 1942.50 OMB control number.
The reporting and recordkeeping requirements contained in this
regulation have been approved by the Office of Management and Budget
(OMB) and have been assigned OMB control number 0575-0015. Public
reporting burden for this collection of information is estimated to vary
from five minutes to 15 hours per response, with an average of 2.7 hours
per response, including time for reviewing instructions, searching
existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information. Send comments
regarding this burden estimate or any other aspect of this collection of
information, including suggestions for reducing this burden to the
Department of Agriculture, Clearance Officer, OIRM, Ag Box 7630,
Washington, DC 20250; and to the Office of Management and Budget,
Paperwork Reduction Project (OMB 0575-0015), Washington, DC 20503.
[60 FR 11019, Mar. 1, 1995]
Subpart B [Reserved]
Subpart C_Fire and Rescue and Other Small Community Facilities Projects
Source: 52 FR 43726, Nov. 16, 1987, unless otherwise noted.
Sec. 1942.101 General.
This subpart provides the policies and procedures for making and
processing insured Community Facilities (CF) loans for facilities that
will primarily provide fire or rescue services and other small essential
community facility projects and applies to fire and rescue and other
Community Facilities loans for projects costing $300,000 and under. Any
processing or servicing activity conducted pursuant to this subpart
involving authorized assistance to Rural Development employees, members
of their families, known close relatives, or business or close personal
associates, is subject to the provisions of subpart D of part 1900 of
this chapter. Applicants for this assistance are required to identify
any known relationship or association with a Rural Development employee.
Community Facilities loans for other types of facilities, and those
costing in excess of $300,000, are defined in subpart A of this part.
[68 FR 65830, Nov. 24, 2003]
Sec. 1942.102 Nondiscrimination.
(a) Federal statutes provide for extending Agency financial programs
without regard to race, color, religion, sex, national origin, marital
status, age, or physical/mental handicap. The participants must possess
the capacity to enter into legal contracts under State and local
statutes.
(b) Indian tribes on Federal and State reservations and other
Federally recognized Indian tribes are eligible to apply for and are
encouraged to participate in this program. Such tribes might not be
subject to State and local laws or jurisdiction. However, any
requirements of this subpart that affect applicant eligibility, the
adequacy of RD's security or the adequacy of service to users of the
facility and all other requirements of this subpart must be met.
Sec. 1942.103 Definitions.
Agency. The Rural Housing Service (RHS), an agency of the U.S.
Department of Agriculture.
Approval official. An official who has been delegated loan or grant
approval authorities within applicable programs, subject to certain
dollar limitations.
Construction. The act of building or putting together a facility
that is a part of, or physically attached to, real estate. This does not
include procurement of major equipment even though the equipment may be
custom built to meet the owner's requirements.
Owner. An applicant or borrower.
[[Page 175]]
Processing office. The office designated by the State program
official to accept and process applications for Community Facilities
projects.
Regional Attorney or OGC. The head of a Regional Office of the
General Counsel (OGC).
Small Community Facilities projects. Community Facilities loans
costing $300,000 and under.
[68 FR 65830, Nov. 24, 2003]
Sec. 1942.104 Application processing.
(a) General. Prospective applicants should request assistance by
filing SF 424.2, ``Application for Federal Assistance (For
Construction),'' with the Local or Area Rural Development Office. When
practical, approval officials should meet with prospective applicants
before an application is filed to discuss eligibility and Rural
Development requirements and processing procedures. Throughout loan
processing, Rural Development should confer with applicant officials as
needed to ensure that applicant officials understand the current status
of the processing of their application, what steps and determinations
are necessary, and what is required from them. Rural Development should
assist the applicant as needed and generally try to develop and maintain
a cooperative working relationship with the applicant.
(b) Unfavorable decision. If, at any time prior to loan approval, it
is decided that favorable action will not be taken on an application,
the approval official will notify the applicant, in writing, of the
reasons why the request was not favorably considered. The notification
to the applicant will state that a review of this decision by Rural
Development may be requested by the applicant in accordance with subpart
B of part 1900 of this chapter. The following statement will also be
made on all notifications of adverse action:
The Federal Equal Credit Opportunity Act prohibits creditors from
discriminating against credit applicants on the basis of race, color,
religion, national origin, sex, marital status, age (provided that the
applicant has the capacity to enter into a binding contract); because
all or part of the applicant's income is derived from any public
assistance program; or because the applicant has in good faith exercised
any right under the Consumer Credit Protection Act. The Federal agency
that administers compliance with this law is the Federal Trade
Commission, Equal Credit Opportunity, Washington, DC 20580.
[52 FR 43726, Nov. 16, 1987, as amended at 54 FR 47197, Nov. 13, 1989;
55 FR 13504, Apr. 11, 1990; 68 FR 65830, Nov. 24, 2003; 68 FR 69001,
Dec. 11, 2003]
Sec. 1942.105 Environmental review
RD must conduct and document an environmental review for each
proposed project in accordance with subpart G of part 1940 of this
chapter. The review should be completed as soon as possible after
receipt of an application. The loan approving official must determine an
adequate environmental review has been completed before requesting an
obligation of funds.
Sec. 1942.106 Intergovernmental review.
(a) Loans under this subpart are subject to intergovernmental review
requirements set forth in U. S. Department of Agriculture regulations 7
CFR 3015, subpart V and RD Instruction 1970-I, `Intergovernmental
Review,' available in any Agency office or on the Agency's Web site.
(b) State intergovernmental review agencies that have selected
community facility loans as a program they want to review may not be
interested in reviewing proposed loans for fire and rescue facilities.
In such cases, the State Director should obtain a letter from the State
single point of contact exempting fire and rescue loans from
intergovernmental consultation review. A copy of the letter should be
placed in the case file for each fire and rescue facility application in
lieu of completing the intergovernmental review process.
(c) When an application is filed and adverse comments are not
expected, the District Director should proceed with application
processing pending intergovernmental review. The loan should not be
obligated until any required review process has been completed.
(d) Funds allocated for use under this subpart are also for the use
of eligible Indian tribes within the State, regardless of whether State
development strategies include Indian reservations. Eligible Indian
tribes must have equal
[[Page 176]]
opportunity to participate in the program as compared with other
residents of the State.
[52 FR 43726, Nov. 16, 1987, as amended at 61 FR 6309, Feb. 20, 1996; 76
FR 80730, Dec. 27, 2011]
Sec. 1942.107 Priorities.
(a) Eligible applications must be selected for processing in
accordance with Sec. 1942.17(c) of subpart A of this part 1942.
(b) The District Director must score each eligible application in
accordance with Sec. 1942.17(c)(2)(iii) of subpart A of this part 1942.
The District Director must then notify the State Director of the score,
proposed loan amount, and other pertinent data. The State Director
should determine as soon as possible if the project has sufficient
priority for further processing and notify the District Director.
Normally, this consultation should be handled by telephone and
documented in the running record.
(c) Applicants who appear eligible but do not have the priority
necessary for further consideration at this time should be notified that
funds are not available, requested to advise whether they wish to have
their application maintained for future consideration and given the
following notice:
You are advised against incurring obligations which would limit the
range of alternatives to be considered, or which cannot be fulfilled
without Agency funds until the funds are actually made available.
Therefore, you should refrain from such actions as initiating
engineering and legal work, taking actions which would have an adverse
effect on the environment, taking options on land rights, developing
detailed plans and specifications, or inviting construction bids until
notified by RD to proceed.
Sec. 1942.108 Application docket preparation and review.
(a) Guides. Application dockets should be developed in accordance
with Sec. 1942.2(c) of subpart A of this part 1942.
(b) [Reserved]
(c) Budgets. All applicants must complete Form RD 442-7, ``Operating
Budget,'' except as provided in this paragraph. Applicants with annual
incomes not exceeding $100,000 may, with concurrence of the District
Director, use Form RD 1942-52, ``Cash Flow Projection,'' instead of Form
RD 442-7. Projections should be provided for the current year and each
year thereafter until the facility is expected to have been in operation
for a full year and a full annual installment paid on the loan.
(d) Letter of conditions. The District Director should prepare and
issue a letter of conditions in accordance with Sec. 1942.5 (a)(1) and
(c) of subpart A of this part 1942.
(e) Organizational review. As early in the application process as
practical, the approval official should obtain copies of organization
documents from each applicant and forward them through the State Office
to the Regional Attorney for review and comments. The Regional
Attorney's comments should be received and considered before obligation
of funds.
(f) National Office review. Applications that require National
Office review will be submitted in accordance with Sec. 1942.5(b) of
subpart A of this part 1942.
(g) State Office review. The State Office must monitor fire and
rescue and other small community facility project loanmaking and
servicing and provide guidance, assistance, and training as necessary to
ensure the activities are accomplished in an orderly manner consistent
with the Agency's regulations. The processing office should request
advice and assistance from the State Office as needed. The State
Director may require all or part of a specific application docket to be
submitted to the State Office for review at any time. The State Director
may determine that one or more of the processing office staffs do not
have adequate training and expertise to routinely complete application
dockets without State Office review. In such cases, the State Director
should establish guidelines by memorandum or by State supplement to the
subpart for the necessary State Office reviews.
(h) Loan approval and fund obligation. Loans must be approved and
obligated in accordance with Sec. 1942.5(d) of subpart A of this part
1942 and subpart A of part 1901 of this chapter.
[52 FR 43726, Nov. 16, 1987, as amended at 54 FR 47197, Nov. 13, 1989;
67 FR 60854, Sept. 27, 2002; 68 FR 65830, Nov. 24, 2003]
[[Page 177]]
Sec. Sec. 1942.109-1942.110 [Reserved]
Sec. 1942.111 Applicant eligibility.
(a) General. Loans under this subpart are subject to the provisions
of Sec. 1942.17(b) of subpart A of this part 1942.
(b) Credit elsewhere determinations. The approval official must
determine whether financing from commercial sources at reasonable rates
and terms is available. If credit elsewhere is indicated, the approval
official should inform the applicant and recommend the applicant apply
to commercial sources for financing. To provide a basis for referral of
only those applicants who may be able to finance projects through
commercial sources, approval officials should maintain liaison with
representatives of lenders in the area. The State Director should keep
approval officials informed regarding lenders outside the area who might
make loans in the area. Approval officials should maintain criteria for
determining applications that should be referred to commercial lenders
and maintain a list of lender representatives interested in receiving
such referrals.
(c) Public use. Loans under this subpart are subject to the
provisions of Sec. 1942.17(e) of subpart A of this part 1942.
[52 FR 43726, Nov. 16, 1987, as amended at 68 FR 65830, Nov. 24, 2003]
Sec. 1942.112 Eligible loan purposes.
(a) Funds may be used:
(1) To construct, enlarge, extend, or otherwise improve essential
community facilities primarily providing fire or rescue services
primarily to rural residents and rural business. Rural businesses would
include facilities such as educational and other publicly owned
facilities. ``Otherwise improve'' includes but is not limited to the
following:
(i) The purchase of major equipment, such as fire trucks and
ambulances, which will, in themselves, provide an essential service to
rural residents.
(ii) The purchase of existing facilities when it is necessary either
to improve or to prevent a loss of service.
(iii) The construction or development of an essential community
facility requisite to the beneficial and orderly development of a
community operated on a nonprofit basis in accordance with Sec.
1942.17(d) of this subpart. This subpart includes those projects meeting
the definition of a small community facility project.
(2) To pay the following expenses, but only when such expenses are a
necessary part of a loan to finance facilities authorized in paragraph
(a)(1) of this section:
(i) Reasonable fees and costs such as legal, engineering,
architectural, fiscal advisory, recording, environmental impact
analyses, archaeological surveys and possible salvage or other
mitigation measures, planning, establishing or acquiring rights.
(ii) Interest on loans until the facility is self-supporting but not
for more than 3 years unless a longer period is approved by the National
Office; interest on loans secured by general obligation bonds until tax
revenues are available for payment, but not for more than 2 years unless
a longer period is approved by the National Office; and interest on
interim financing, including interest charges on interim financing from
sources other than RD.
(iii) Costs of acquiring interest in land, rights such as water
rights, leases, permits, rights-of-way, and other evidence of land or
water control necessary for development of the facility.
(iv) Purchasing or renting equipment necessary to install, maintain,
extend, protect, operate, or utilize facilities.
(v) Initial operating expenses for a period ordinarily not exceeding
1 year when the borrower is unable to pay such expenses.
(vi) Refinancing debts incurred by, or on behalf of, a community
when all of the following conditions exist:
(A) The debts being refinanced are a secondary part of the total
loan;
(B) The debts are incurred for the facility or service being
financed or any part thereof; and
(C) Arrangements cannot be made with the creditors to extend or
modify the terms of the debts so that a sound basis will exist for
making a loan.
(3) To pay obligations for construction or procurement incurred
before loan approval. Construction work or
[[Page 178]]
procurement actions should not be started and obligations for such work
or materials should not be incurred before the loan is approved.
However, if there are compelling reasons for proceeding with
construction or procurement before loan approval, applicants may request
Agency approval to pay such obligations. Such requests may be approved
if RD determines that:
(i) Compelling reasons exist for incurring obligations before loan
approval; and
(ii) The obligations will be incurred for authorized loan purposes;
and
(iii) Contract documents have been approved by RD; and
(iv) All environmental requirements applicable to RD and the
applicant have been met; and
(v) The applicant has the legal authority to incur the obligations
at the time proposed, and payment of the debts will remove any basis for
any mechanic, material or other liens that may attach to the security
property. RD may authorize payment of such obligations at the time of
loan closing. RD's authorization to pay such obligations, however, is on
the condition that it is not committed to make the loan; it assumes no
responsibility for any obligations incurred by the applicant; and the
applicant must subsequently meet all loan approval requirements. The
applicant's request and Agency authorization for paying such obligations
shall be in writing. If construction or procurement is started without
Agency approval, post approval in accordance with this section may be
considered.
(b) Funds may not be used to finance:
(1) Facilities which are not modest in size, design, and cost.
(2) Loan finder's fees.
(3) Projects located within the Coastal Barriers Resource system
that do not qualify for an exception as defined in section 6 of the
Coastal Barriers Resource Act, Pub. L. 97-348.
[52 FR 43726, Nov. 16, 1987, as amended at 57 FR 21195, May 19, 1992; 68
FR 65831, Nov. 24, 2003]
Sec. 1942.113 Rates and terms.
Rates and terms for loans under this subpart are as set out in Sec.
1942.17(f) of subpart A of this part 1942.
Sec. 1942.114 Security.
Specific requirements for security for each loan will be included in
the letter of conditions. Loans must be secured by the best security
position practicable, in a manner which will adequately protect the
interest of RD during the repayment period of the loan, and in
accordance with the following;
(a) Security must include one of the following:
(1) A pledge of revenue and a lien on all real estate and major
equipment purchased or developed with the Agency loan; or
(2) General obligation bonds or bonds pledging other taxes.
(b) Additional security may be required as determined necessary by
the loan approval official. In determining the need for additional
security the loan approval official should carefully consider:
(1) The estimated market value of real estate and equipment
security.
(2) The adequacy and dependability of the applicant's revenues,
based on the applicant's financial records, the project financial
feasibility report, and the project budgets.
(3) The degree of community commitment to the project, as evidenced
by items such as active broad based membership, aggressive leadership,
broad based fund drives, or contributions by local public bodies.
(c) Additional security may include, but is not limited to, the
following:
(1) Liens on additional real estate or equipment.
(2) A pledge of revenues from additional sources.
(3) An assignment of assured income in accordance with Sec.
1942.17(g)(3)(iii)(A)(1) of subpart A of this part 1942.
(d) Review and approval or concurrence in the State Office is
required if the security will not include a pledge of taxes and the
applicant cannot provide evidence of the financially successful
operation of a similar facility for the 5 years immediately prior to
loan application.
(e) Review and concurrence in the National Office is required if the
security will not include a pledge of taxes, the applicant cannot
provide evidence of the financially successful operation
[[Page 179]]
of a similar facility for the 5 years immediately prior to loan
application, and the amount of the loan will exceed $250,000.
(f) Loans under this subpart are subject to the provisions of Sec.
1942.17(g)(1) of subpart A of this part 1942, regarding security for
projects utilizing joint financing.
[52 FR 43726, Nov. 16, 1987; 52 FR 47097, Dec. 11, 1987]
Sec. 1942.115 Reasonable project costs.
Applicants are responsible for determining that prices paid for
property rights, construction, equipment, and other project development
are reasonable and fair. RD may require an appraisal by an independent
appraiser or Agency employee.
Sec. 1942.116 Economic feasibility requirements.
All projects financed under this section must be based on taxes,
assessments, revenues, fees, or other satisfactory sources of revenues
in an amount sufficient to provide for facility operation and
maintenance, a reasonable reserve, and debt payment. An overall review
of the applicant's financial status, including a review of all assets
and liabilities, will be a part of the docket review process by the
Agency staff and approval official. All applicants will be expected to
provide a financial feasibility report. These financial feasibility
reports will normally be:
(a) Included as part of the preliminary engineer/architectural
report using guide 6 to subpart A of this part 1942 (available in any RD
Office), or
(b) Prepared by the applicant using Form RD 1942-54, ``Applicant's
Feasibility Report.''
Sec. 1942.117 General requirements.
(a) Reserve requirements. Loans under this subpart are subject to
the provisions of Sec. 1942.17 (i) of subpart A of this part 1942.
(b) Membership authorization. The membership of organizations other
than public bodies must authorize the project and its financing except
the District Director may, with the concurrence of the State Director
(with advice of OGC as needed), accept the loan resolution without such
membership authorization when State statutes and the organization
charter and bylaws do not require such authorization.
(c) Insurance and bonding. Loans under this subpart are subject to
the provisions of Sec. 1942.17(j)(3) of subpart A of this part 1942.
(d) Acquisition of land and rights. Loans under this subpart are
subject to the provisions of Sec. 1942.17(j)(4) of subpart A of this
part 1942.
(e) Lease agreements. Loans under this subpart are subject to the
provisions of Sec. 1942.17(j)(5) of subpart A of this part 1942.
(f) Notes and bonds. Loans under this subpart are subject to the
provisions of Sec. Sec. 1942.17(j)(6) and 1942.19 of subpart A of this
part 1942.
(g) Public information. Loans under this subpart are subject to the
provisions of Sec. 1942.17 (j)(9) of subpart A of this part 1942.
(h) Joint funding. Loans under this subpart are subject to the
provisions of Sec. Sec. 1942.2 (e) and 1942.17 (j)(11) of subpart A of
this part 1942.
Sec. 1942.118 Other Federal, State, and local requirements.
(a) Loans under this subpart are subject to the provisions of Sec.
1942.17 (k) of subpart A of this part 1942.
(b) An initial compliance review should be completed under subpart E
of part 1901 of this chapter.
Sec. 1942.119 Professional services and borrower contracts.
(a) Loans under this subpart are subject to the provisions of Sec.
1942.17 (l) of subpart A of this part 1942.
(b) The District Director will, with assistance as necessary by the
State Director and OGC, concur in agreements between borrowers and third
parties such as contracts for professional and technical services. The
State Director may require State Office review of such documents in
accordance with Sec. 1942.108 (g) of this subpart. State Directors are
expected to work closely with representatives of engineering and
architectural societies, bar associations, commercial lenders,
accountant associations, and others in developing standard forms of
agreements, where needed, and other
[[Page 180]]
matters to expedite application processing, minimize referrals to OGC,
and resolve problems which may arise. Standard forms should be reviewed
by and approved by OGC.
Sec. Sec. 1942.120-1942.121 [Reserved]
Sec. 1942.122 Actions prior to loan closing and start of construction.
(a) Excess Agency loan funds. Loans under this subpart are subject
to the provisions of Sec. 1942.17 (n)(1) of subpart A of this part
1942.
(b) Loan resolutions. Loans under this subpart are subject to the
provisions of Sec. 1942.17 (n)(2) of subpart A of this part 1942.
(c) Interim financing. Loans under this subpart are subject to the
provisions of Sec. 1942.17 (n)(3) of subpart A of this part 1942.
(d) Applicant contribution. Loans under this subpart are subject to
the provisions of Sec. 1942.17 (n)(5) of subpart A of this part 1942
this chapter.
(e) Evidence of and disbursement of other funds. Loans under this
subpart are subject to the provisions of Sec. 1942.17 (n)(6) of subpart
A of this part 1942.
(f) Assurance agreement. All applicants must execute Form RD 400-4,
``Assurance Agreement,'' at or before loan closing.
Sec. 1942.123 Loan closing.
(a) Ordering loan checks. Checks will not be ordered until:
(1) Form RD 440-57, ``Acknowledgement of Obligated Funds/Check
Request,'' has been received from the Finance Office.
(2) The applicant has complied with approval conditions and any
closing instructions, except for those actions which are to be completed
on the date of loan closing or subsequent thereto.
(3) The applicant is ready to start construction or funds are needed
to pay interim financing obligations.
(b) Public bodies and Indian tribes. (1) After loan approval the
completed docket will be reviewed by the State Director. The information
required by OGC will be transmitted to OGC with a request for closing
instructions. Upon receipt of the closing instructions from OGC, the
State Director will forward them along with any appropriate instructions
to the District Director. Upon receipt of closing instructions, the
District Director will discuss with the applicant and its architect or
engineer, attorney, and other appropriate representatives, the
requirements contained therein and any actions necessary to proceed with
closing.
(2) Loans will be closed in accordance with the closing instructions
issued by OGC and Sec. 1942.19 of subpart A of this part 1942.
(c) Organizations other than public bodies and Indian tribes.
District Directors are authorized to close loans to organizations other
than public bodies and Indian tribes without closing instructions from
OGC. State Directors, in consultation with OGC, should develop standard
closing procedures and forms as needed. Assistance with loan closing and
a certification regarding the validity of the note and mortgage or other
debt instruments should be provided by the applicant's attorney.
Appropriate title opinion or title insurance is required as provided in
Sec. 1942.17 (j)(4)(i)(B) of subpart A of this part 1942.
(d) Authority to execute, file, and record legal instruments.
District Office employees are authorized to execute and file or record
any legal instruments necessary to obtain or preserve security for
loans. This includes, as appropriate, mortgages and other lien
instruments, as well as affidavits, acknowledgements, and other
certificates.
(e) Mortgages. Unless otherwise required by State law or unless an
exception is approved by the State Director with advice of the OGC, only
one mortgage will be taken even though the indebtedness is to be
evidenced by more than one instrument. The real estate or chattel
mortgages or security instruments will be delivered to the recording
office for recordation or filing, as appropriate. A copy of such
instruments will be delivered to the borrower. The original instrument,
if returnable after recording or filing, will be retained in the
borrower's case folder.
(f) Notes and bonds. When the debt instrument is a note or single
instrument bond fully registered as to principal and interest a
conformed copy will be
[[Page 181]]
sent to the Finance Office immediately after loan closing and the
original instrument will be stored in the District Office. When other
types of bonds are used, the original bond(s) will be forwarded to the
Finance Office immediately after loan closing.
(g) Disposition of title evidence. All title evidence other than the
opinion of title and mortgage title insurance policy, will be returned
to the borrower when the loan has been closed.
(h) Multiple advances. When temporary paper, such as bond
anticipation notes or interim receipts, is used to conform with the
multiple advance requirement, the original temporary paper will be
forwarded to the Finance Office after each advance is made to the
borrower. The borrower's case number will be entered in the upper right-
hand corner of such paper by the Distict Office. The permanent debt
instrument(s) should be forwarded to the Finance Office as soon as
possible after the last advance is made, except that for notes and
single instrument bonds fully registered as to principal and interest
the original will be retained in the District Office and a copy will be
forwarded to the Finance Office. The following actions will be taken
prior to issuance of the permanent instruments:
(1) The Finance Office will be notified of the anticipated date for
the retirement of the interim instruments and the issuance of permanent
instruments of debt.
(2) The Office of the Deputy Chief Financial Officer will prepare a
statement of account including accrued interest through the proposed
date of retirement and also show the daily interest accrual. The
statement of account and the interim financing instruments will be
forwarded to the Rural Development Manager.
(3) The Rural Development Manager will collect interest through the
actual date of the retirement and obtain the permanent instrument(s) of
debt in exchange for the interim financing instruments. The permanent
instruments and the cash collection will be forwarded to the Office of
the Deputy Chief Financial Officer immediately, except that for notes
and single instrument bonds fully registered as to principal and
interest the original will be retained in the Area Office and a copy
will be forwarded to the Office of the Deputy Chief Financial Officer.
In developing the permanent instruments, the sequence of preference set
out Sec. 1942.19(e) of Subpart A of Part 1942 of this chapter will be
followed.
(i) Bond registration record. Form RD 442-28, ``Bond Registration
Book,'' may be used as a guide to assist borrowers in the preparation of
a bond registration book in those cases where a registration book is
required and a book is not provided in connection with the printing of
the bonds.
(j) Loan disbursements. Whenever a loan disbursement is received,
lost, or destroyed, the Rural Development Manager will take the
appropriate actions outlined in Rural Development Instruction 2018-D.
(k) Safeguarding bond shipments. Agency personnel will follow the
procedures for safeguarding mailings and deliveries of bonds and coupons
outlined in RD Instruction 2018-E (available in any RD office), whenever
they mail or deliver these items.
(l) Review of loan closing. When the loan has been closed, the Rural
Development Manager will submit the completed loan closing documents and
a statement showing what was done in closing the loan to the State
Director. The State Director will review the documents and the Rural
Development Manager's statement to determine whether the transaction was
closed properly. For loans to public bodies or Indian tribes the State
Director will forward all documents, along with a statement that all
administrative requirements have been met, to the Regional Attorney. The
Regional Attorney will review the submitted material to determine
whether all legal requirements have been met. The Regional Attorney
should review Rural Development standard forms only for proper
execution, unless the State Director brings attention to specific
questions. Facility development should not be held up pending receipt of
the Regional Attorney opinion. When the review of the State Director has
been completed, and for public bodies and Indian tribes the Regional
Attorney's opinion has been received, the State Director must
[[Page 182]]
advise the Rural Development Manager of any deficiencies that must be
corrected and return all material that was submitted for review.
(m) Loan cancellation. Loans under this subpart are subject to the
provisions of Sec. 1942.12 of subpart A of this part 1942.
[52 FR 43726, Nov. 16, 1987, as amended at 59 FR 54788, Nov. 2, 1994; 70
FR 19254, Apr. 13, 2005]
Sec. Sec. 1942.124-1942.125 [Reserved]
Sec. 1942.126 Planning, bidding, contracting, constructing, procuring.
(a) General. This section provides procedures and requirements for
planning, bidding, contracting, constructing and procuring facilities
financed under this subpart. These procedures do not relieve the owner
of contractual obligations that arise from procurement of services.
(b) Technical services. Owners are responsible for providing the
engineering or architectural services necessary for planning, designing,
bidding, contracting, inspecting and constructing their facilities.
Services may be provided by the owner's ``in-house'' engineer or
architect or through contract, subject to Agency concurrence. Architects
and engineers must be licensed in the State where the facility is to be
located.
(1) Preliminary reports. A preliminary architectural or engineering
report conforming with customary professional standards is required for
all construction, except that RD may waive the requirement for a
preliminary architectural/engineering report or accept a brief report if
the cost of the construction does not exceed $100,000. Guide 6 to
subpart A of this part 1942 (available in any RD office) may be used.
(2) Final reports. Detailed final plans and specifications are
required for all construction and must receive Agency concurrence. When
negotiated procurement is used for construction costing not more than
$100,000 the final plans and specifications may be provided by the
contractor who submits the successful proposal. The plans and
specifications must be prepared by or under the supervision of an
architect or engineer who is licensed in the State where the facility is
to be located and should include all materials and work to be provided
under the contract. Some work and material may be omitted from the
contract provided the owner furnishes detailed cost estimates for
whatever is needed to fully complete the facility and will complete the
facility in accordance with paragraph (e) of this section and the small
purchase procedures set out in Sec. 1942.18(k)(1) of subpart A of this
part 1942. In such cases, RD may determine that it is not necessary to
require the applicant to hire a consulting architect/engineer; however,
if a second contract that does not qualify for small purchase procedures
is needed to complete the facility, the owner must provide for an
architect/engineer to design the entire facility. When the contractor
provides the plans and specifications, the contract will be considered a
design/build procurement method under Sec. 1942.18(1) of subpart A of
this part 1942.
(3) Major equipment. An architect/engineer is not required for major
equipment if RD determines the owner has the ability to develop an
adequate request for proposal and evaluate the proposals received or can
obtain adequate assistance from other sources, such as State or Federal
agencies or trade associations.
(c) Design policies. Facilities financed by RD must be designed and
constructed in accordance with sound engineering and architectural
practices, and must meet the requirements of Federal, State and local
agencies. All facilities intended for or accessible to the public or in
which physically handicapped persons may be employed or reside must be
developed in compliance with the Architectural Barriers Act of 1968
(Pub. L. 90-480) as implemented by the General Services Administration
regulations 41 CFR 101-19.6 and section 504 of the Rehabilitation Act of
1973 (Pub. L. 93-112) as implemented by 7 CFR parts 15 and 15b.
(d) Construction contracts. Contract documents must be sufficiently
descriptive and legally binding to accomplish the work as economically
and expeditiously as possible.
(1) Standard construction contract documents. When standard
construction
[[Page 183]]
contract documents available from RD are used, or when the amount of the
contract does not exceed $100,000, it will normally not be necessary for
the Regional Attorney to perform a detailed legal review. If
construction contract documents used are not in the format of guide
forms approved by RD, and the contract amount exceeds $100,000, the
Regonal Attorney must review the documents before their use.
(2) Contract review and approval. The owner's attorney will review
executed contract documents, including performance and payment bonds,
and certify that they are adequate, legal and binding, and that the
persons executing the documents have been authorized to do so. The
contract documents, bid bonds, and bid tabulation sheets will be
forwarded to RD for approval prior to awarding. All contracts will
contain a provision that they are not in full force and effect until
they have been approved by RD. The Agency District Director is
responsible for approving construction contracts with advice and
guidance of the State Director and Regional Attorney when necessary.
(3) Separate contracts. Arrangements which split responsibility of
contractors (separate contracts for labor and material, extensive
subcontracting and multiplicity of small contracts on the same job)
should be avoided whenever it is practical to do so. Contracts may be
awarded to suppliers or manufacturers for furnishing and installing
certain items which have been designed by the manufacturer and delivered
to the job site in a finished or semifinished state such as
prefabricated buildings. Contracts may also be awarded for material
delivered to the job site and installed by a patented process or method.
(e) Performing construction. Owners are encouraged to accomplish
construction through contracts with recognized contractors. Owners may
accomplish construction by using their own personnel and equipment
provided the owners possess the necessary skills, abilities and
resources to perform the work and provided a licensed engineer or
architect prepares design drawings and specifications and inspection is
provided in accordance with paragraph (l)(3) of this section.
(f) Owner's contractual responsibility. Loans under this subpart are
subject to the provisions of Sec. 1942.18(i) of subpart A of this part
1942.
(g) Owner's procurement regulations. Loans under this subpart are
subject to the provisions of Sec. 1942.18(j) of subpart A of this part
1942.
(h) Procurement methods. Unless the Agency National Office gives
prior written approval of another method, procurement must be made by
one of the following methods:
(1) Small purchase procedures as provided in Sec. 1942.18(k)(1) of
subpart A of this part 1942.
(2) Competitive sealed bids as provided in Sec. 1942.18(k)(2) of
subpart A of this part 1942. Competitive sealed bids is the preferred
procurement method of construction projects, except for buildings
costing $100,000 or less when the owner desires to use a
``preengineered'' or ``packaged'' building.
(3) Competitive negotiation as provided in Sec. 1942.18(k)(3) of
subpart A of this part 1942. Competitive negotiation is the preferred
procurement method of buildings not exceeding $100,000 in cost when the
owner desires to use a ``pre-engineered'' or ``packaged'' building and
for major equipment.
(4) Noncompetitive negotiation as provided in Sec. 1942.18(k)(4) of
subpart A of this part 1942.
(i) Contracting methods. Loans under this subpart are subject to the
provisions of Sec. 1942.18(1) of subpart A of this part 1942.
(j) Contracts awarded prior to preapplications. Loans under this
subpart are subject to the provisions of Sec. 1942.18(m) of subpart A
of this part 1942.
(k) Construction contract provisions. Construction contracts for
loans under this subpart are subject to the provisions of Sec.
1942.18(n) of subpart A of this part 1942. Construction contracts for
loans under this subpart are also subject to the provisions of Sec.
1901.205 of subpart E of part 1901 of this chapter, regarding
nondiscrimination in construction, except that guides 18 and 17 or 19 to
subpart A of this part 1942 of this chapter will normally be used
instead of Form RD 1924-5, ``Invitation for Bid (Construction
Contract),'' and
[[Page 184]]
Form RD 1924-6, ``Construction Contract.'' When guide 18 is used with a
design/build type contract, section 4, ``Conflict of Interest,'' may
need revision.
(l) Construction contract administration. Owners shall be
responsible for maintaining a contract administration system to monitor
the contractors' performance and compliance with the terms, conditions,
and specifications of the contracts.
(1) Preconstruction conference. Prior to beginning construction the
owner will schedule a preconstruction conference where RD will review
the planned development with the owner, its architect or engineer,
project inspector, attorney, contractor(s), and other interested
parties. The conference will thoroughly cover applicable items included
in Form RD 1924-16, ``Record of Preconstruction Conference,'' and the
discussions and agreements will be documented. Form RD 1924-16 may be
used for this purpose.
(2) Monitoring reports. Each owner will be required to monitor and
provide reports to RD on actual performance during construction for each
project financed, or to be financed, in whole or in part with Agency
funds. The reports are to include:
(i) A comparison of actual accomplishments with the construction
schedule established for the period. The partial payment estimate may be
used for this purpose.
(ii) A narrative statement giving full explanation of the following:
(A) Reasons why established goals were not met.
(B) Analysis and explanation of cost overruns or high unit costs and
how payment is to be made for the same.
(iii) If events occur between reports which have a significant
impact upon the project, the owner will notify RD as soon as any of the
following conditions are known:
(A) Problems, delays, or adverse conditions which will materially
affect the ability to attain program objectives or prevent the meeting
of project work units by established time periods. This disclosure shall
be accompanied by a statement of the action taken, or contemplated, and
any Federal assistance needed to resolve the situation.
(B) Favorable developments or events which enable meeting time
schedules and goals sooner than anticipated or producing more work units
than originally projected or which will result in cost underruns or
lower unit costs than originally planned and which may result in less
Agency assistance.
(3) Inspection. The borrower must provide for inspection of all
construction. When the borrower enters into an agreement for technical
services with an engineer/architect, the agreement should provide for
general engineering/architectural inspection of the construction work.
When no such agreement exists, or RD or the borrower determines the
inspection services of the engineer/architect may not be sufficient, the
owner must provide a project inspector. Prior to the preconstruction
conference, the borrower must submit a r[eacute]sum[eacute] of
qualifications of the project inspector to RD for acceptance in writing.
The project inspector will be responsible for making inspections
necessary to protect the borrower's interest and for providing written
inspection reports to the borrower with copies to the Agency District
Director. Guide 11 of subpart A of this part 1942 (available in any
Rural Development office) may be used as a guide format for inspection
reports. For new buildings, additions to existing buildings, and
rehabilitation of existing buildings, the project inspector should make
inspections at the following stages of construction and at other stages
of construction as determined by the District Director and the borrower.
Inspections by RD are solely for its benefit as lender.
(i) An initial inspection should be made just prior to or during the
placement of concrete footings or monolithic footings and floor slabs.
At this point, foundation excavations are complete, forms or trenches
and steel are ready for concrete placement and the subsurface
installation is roughed in. If the building design does not include
concrete footings the initial inspection should be made just after or
during the placement of poles or other foundation materials.
[[Page 185]]
(ii) An inspection should be made when the building is enclosed,
structural members are still exposed, roughing in for heating, plumbing
and electrical work is in place and visible, and wall insulation and
vapor barriers are installed.
(iii) A final inspection should be made when all development of the
structure has been completed and the structrure is ready for its
intended use.
(4) Prefinal inspections. A prefinal inspection will be made by the
owner, project inspector, owner's architect or engineer, representatives
of other agencies involved, and the District Director. The inspection
results will be recorded on Form RD 1924-12, ``Inspection Report,'' and
a copy provided to all interested parties, including the Agency State
Director.
(5) Final inspection. A final inspection will be made by RD before
final payment is made.
(6) Changes in development plans. (i) Changes in development plans
may be approved by RD when requested by owners, provided:
(A) Funds are available to cover any additional costs; and
(B) The change is for an authorized loan purpose; and
(C) It will not adversely affect the soundness of the facility
operation or RD's security; and
(D) The change is within the scope of the contract; and
(E) Any applicable requirements of subpart G of part 1940 of this
chapter have been met.
(ii) Changes will be recorded on Form RD 1924-7, ``Contract Change
Order,'' or other similar forms may be used with the prior approval of
the District Director. Regardless of the form, change orders must be
approved by the Agency District Director.
(iii) Changes should be accomplished only after Agency approval on
all changes which affect the work and shall be authorized only by means
of contract change order. The change order will include items such as:
(A) Any changes in labor and material and their respective cost.
(B) Changes in facility design.
(C) Any decrease or increase in quantities based on final
measurements that are different from those shown in the bidding
schedule.
(D) Any increase or decrease in the time to complete the project.
(iv) All changes shall be recorded on chronologically numbered
contract change orders as they occur. Change orders will not be included
in payment estimates until approved by all parties.
[52 FR 43726, Nov. 16, 1987; 52 FR 47097, Dec. 11, 1987]
Sec. 1942.127 Project monitoring and fund delivery.
(a) Coordination of funding sources. When a project is jointly
financed, the District Director will reach any needed agreement or
understanding with the representatives of the other source of funds on
distribution of responsibilities for handling various aspects of the
project. These responsibilities will include supervision of
construction, inspections and determination of compliance with
appropriate regulations concerning equal employment opportunities, wage
rates, nondiscrimination in making services or benefits available, and
environmental compliance. If any problems develop which cannot be
resolved locally, complete information should be sent to the State
Office for advice.
(b) Multiple advances. Loans under this subpart are subject to the
provisions of Sec. 1942.17 (p)(2) of subpart A of this part 1942.
(c) Use and accountability of funds. Loans under this subpart are
subject to the provisions of Sec. 1942.17 (p)(3) of subpart A of this
part 1942.
(d) Development inspections. Loans under this subpart are subject to
the provisions of Sec. 1942.17(p)(4) of subpart A of this part 1942.
(e) Payment for project costs. Each payment for project costs must
be approved by the borrower's governing body.
(1) Construction. Payment for construction must be for amounts shown
on payment estimate forms. Form RD 1924-18, ``Partial Payment
Estimate,'' may be used for this purpose or other similar forms may be
used with the prior approval of the District Director. However, the
District Director cannot require more reporting burden than is required
by Form RD 1924-18. Advances
[[Page 186]]
for contract retainage will not be made until such retainage is due and
payable under the terms of the contract. The review and acceptance of
project cost, including construction partial payment estimates, by RD
does not attest to the correctness of the amounts, the quantities shown,
or that the work has been performed under the terms of agreements or
contracts.
(2) Major equipment. Payment for major equipment should generally
coincide with delivery of the usable equipment, along with any necessary
title or certifications, to the borrower. Borrowers may not use Agency
loan funds to make deposits on equipment not ready for delivery. If a
borrower purchases a truck chassis from one supplier and another
supplier will complete the development of a fire or rescue vehicle, RD
may release funds to pay for the chassis when title to the chassis is
transferred to the borrower.
(f) Use of remaining funds. Loans under this subpart are subject to
the provisions of Sec. 1942.17 (p)(6) of subpart A of this part 1942.
[52 FR 43726, Nov. 16, 1987; 52 FR 47097, Dec. 11, 1987]
Sec. 1942.128 Borrower accounting methods, management reports and audits.
(a) Loans under this subpart are subject to the provisions of Sec.
1942.17(q) of subpart A of this part 1942 except as provided in this
section.
(b) Borrowers with annual incomes not exceeding $100,000 may, with
concurrence of the District Director, use Form RD 1942-53, ``Cash Flow
Report,'' instead of page one of schedule one and schedule two of Form
RD 442-2, ``Statement of Budget, Income, and Equity.'' When used for
budgeting, the cash statement should be projected for the upcoming
fiscal year. When used for quarterly or annual reports, the cash flow
report should include current year projections and actual data for the
prior year, the quarter just ended, and the current year to date.
Sec. 1942.129 Borrower supervision and servicing.
Loans under this subpart are subject to the provisions of Sec.
1942.17(r) of subpart A of this part 1942 and subpart E of part 1951 of
this chapter.
Sec. Sec. 1942.130-1942.131 [Reserved]
Sec. 1942.132 Subsequent loans.
Subsequent loans will be processed under this subpart.
Sec. 1942.133 Delegation and redelegation of authority.
Loan approval authority is in subpart A of part 1901 of this
chapter. State Directors may delegate approval authority to District
Directors to approve fire and rescue loans regardless of whether
authority to approve other community facility loans is delegated. Except
for loan approval authority, District Directors may redelegate their
duties to qualified staff members.
Sec. 1942.134 State supplements and guides.
State Directors will obtain National Office clearance for all State
supplements and guides under RD Instruction 2006-B (available in any
Rural Development office).
(a) State supplements. State Directors may supplement this subpart
to meet State and local laws and regulations and to provide for orderly
application processing and efficient service to applicants. State
supplements shall not contain any requirements pertaining to bids,
contract awards, and materials more restrictive than those in this
subpart.
(b) State guides. State Directors may develop guides for use by
applicants if the guides to this subpart and subpart A of part 1942 are
not adequate. State Directors may prepare guides for items needed for
the application; items necessary for the docket; and items required
prior to loan closing or construction starts.
Sec. Sec. 1942.135-1942.149 [Reserved]
Sec. 1942.150 OMB control number.
The collection of information requirements in this regulation have
been approved by the Office of Management and Budget and have been
assigned OMB control number 0575-0120.
Subparts D-H [Reserved]
[[Page 187]]
PART 1943 [RESERVED]--Table of Contents
PART 1944_HOUSING--Table of Contents
Subpart A [Reserved]
Subpart B_Housing Application Packaging Grants
Sec.
1944.51 Objective.
1944.52 Definitions.
1944.53 Grantee eligibility.
1944.54-1944.61 [Reserved]
1944.62 Authorized representative of the applicant.
1944.63 Authorized use of grant funds.
1944.64-1944.65 [Reserved]
1944.66 Administrative requirements.
1944.67 Ineligible activities.
1944.68 [Reserved]
1944.69 Agency point of contact.
1944.70 Targeting of HAPG funds to States.
1944.71 Term of grant.
1944.72 Application packaging orientation and training.
1944.73 Package submission.
1944.74 Debarment or suspension.
1944.75 Exception authority.
1944.76-1944.99 [Reserved]
1944.100 OMB control number.
Exhibit A to Subpart B of Part 1944 [Reserved]
Exhibit B to Subpart B of Part 1944--Housing Application Packaging Grant
(HAPG) Fee Processing
Exhibit C to Subpart B of Part 1944--Requirements for Housing
Application Packages
Exhibit D to Subpart B of Part 1944--Designated Counties for Housing
Application Packaging Grants
Subparts C-E [Reserved]
Subpart F_Congregate Housing Services Program
1944.251 Purpose.
1944.252 Definitions.
1944.253 Notice of funding availability, application process and
selection.
1944.254 Program costs.
1944.255 Eligible supportive services.
1944.256 Eligibility for services.
1944.257 Service coordinator.
1944.258 Professional assessment committee.
1944.259 Participatory agreement.
1944.260 Cost distribution.
1944.261 Program participant fees.
1944.262 Grant agreement and administration.
1944.263 Eligibility and priority for 1978 Act recipients.
1944.264 Evaluation of Congregate Housing Services Programs.
1944.265 Reserve for supplemental adjustment.
1944.266 Other Federal requirements.
Subparts G-H [Reserved]
Subpart I_Self-Help Technical Assistance Grants
1944.401 Objective.
1944.402 Grant purposes.
1944.403 Definitions.
1944.404 Eligibility.
1944.405 Authorized use of grant funds.
1944.406 Prohibited use of grant funds.
1944.407 Limitations.
1944.408 [Reserved]
1944.409 Executive Order 12372.
1944.410 Processing preapplications, applications, and completing grant
dockets.
1944.411 Conditions for approving a grant.
1944.412 Docket preparation.
1944.413 Grant approval.
1944.414 [Reserved]
1944.415 Grant approval and other approving authorities.
1944.416 Grant closing.
1944.417 Servicing actions after grant closing.
1944.418 [Reserved]
1944.419 Final grantee evaluation.
1944.420 Extension or revision of the grant agreement.
1944.421 Refunding of an existing grantee.
1944.422 Audit and other report requirements.
1944.423 Loan packaging and 502 RH application submittal.
1944.424 Dwelling construction and standards.
1944.425 Handling and accounting for borrower loan funds.
1944.426 Grant closeout.
1944.427 Grantee self-evaluation.
1944.428-1944.449 [Reserved]
1944.450 OMB control number.
Exhibit A to Subpart I of Part 1944--Self-Help Technical Assistance
Grant Agreement
Exhibit B to Subpart I of Part 1944--Evaluation Report of Self-Help
Technical Assistance (TA) Grants
Exhibit B-1 to Subpart I of Part 1944--Instructions for Preparation of
Evaluation Report of Self-Help Technical Assistance Grants
Exhibit B-2 to Subpart I of Part 1944--Breakdown of Construction
Development for Determining Percentage Construction Completed
Exhibit B-3 to Subpart I of Part 1944--Pre-Construction and Construction
Phase Breakdown
Exhibit C to Subpart I of Part 1944--Amendment to Self-Help Technical
Assistance Grant Agreement
[[Page 188]]
Exhibit D to Subpart I of Part 1944--Self-Help Technical Assistance
Grant Predevelopment Agreement
Exhibit E to Subpart I of Part 1944--Guidance for Recipients of Self-
Help Technical Assistance Grants (Section 523 of Housing Act
of 1949)
Exhibit F to Subpart I of Part 1944--Site Option Loan to Technical
Assistance Grantees
Subpart J [Reserved]
Subpart K_Technical and Supervisory Assistance Grants
1944.501 General.
1944.502 Policy.
1944.503 Objectives.
1944.504-1944.505 [Reserved]
1944.506 Definitions.
1944.507-1944.509 [Reserved]
1944.510 Applicant eligibility.
1944.511 [Reserved]
1944.512 Authorized representative of the applicant.
1944.513 [Reserved]
1944.514 Comprehensive TSA grant projects.
1944.515 [Reserved]
1944.516 Grant purposes.
1944.517 [Reserved]
1944.518 Term of grant.
1944.519 [Reserved]
1944.520 Ineligible activities.
1944.521 [Reserved]
1944.522 Equal opportunity requirements.
1944.523 Other administrative requirements.
1944.524 [Reserved]
1944.525 Targeting of TSA funds to States.
1944.526 Preapplication procedure.
1944.527 [Reserved]
1944.528 Preapplication submission deadline.
1944.529 Project selection.
1944.530 [Reserved]
1944.531 Applications submission.
1944.532 [Reserved]
1944.533 Grant approval and announcement.
1944.534 [Reserved]
1944.535 Cancellation of an approved grant.
1944.536 Grant closing.
1944.537 [Reserved]
1944.538 Extending and revising grant agreements.
1944.539 [Reserved]
1944.540 Requesting TSA checks.
1944.541 Reporting requirements.
1944.542 [Reserved]
1944.543 Grant monitoring.
1944.544 [Reserved]
1944.545 Additional grants.
1944.546 [Reserved]
1944.547 Management assistance.
1944.548 Counseling consent by Rural Development single family housing
borrowers.
1944.549 Grant evaluation, closeout, suspension, and termination.
1944.550 [Reserved]
Exhibit A to Subpart K of Part 1944--Grant Agreement--Technical and
Supervisory Assistance
Exhibit B to Subpart K of Part 1944--Administrative Instructions for
State Offices Regarding Their Responsibilities in the
Administration of the Technical and Supervisory Assistance
Grant Program
Exhibit C to Subpart K of Part 1944--Instructions for District Offices
Regarding Their Responsibilities in the Administration of the
Technical and Supervisory Assistance Grant Program
Exhibit D to Subpart K of Part 1944--Amendment to Technical and
Supervisory Assistance Grant Agreement
Exhibit E to Subpart K of Part 1944--Guide Letter to Delinquent FmHA or
Its Successor Agency Under Public Law 103-354 Single Family
Housing Loan Borrowers
Subparts L-M [Reserved]
Subpart N_Housing Preservation Grants
1944.651 General.
1944.652 Policy.
1944.653 Objective.
1944.654 Debarment and suspension--drug-free workplace.
1944.655 [Reserved]
1944.656 Definitions.
1944.657 Restrictions on lobbying.
1944.658 Applicant eligibility.
1944.659 Replacement housing.
1944.660 Authorized representative of the HPG applicant and Rural
Development point of contact.
1944.661 Individual homeowners--eligibility for HPG assistance.
1944.662 Eligibility of HPG assistance on rental properties or co-ops.
1944.663 Ownership agreement between HPG grantee and rental property
owner or co-op.
1944.664 Housing preservation and replacement housing assistance.
1944.665 Supervision and inspection of work.
1944.666 Administrative activities and policies.
1944.667 Relocation and displacement.
1944.668 Term of grant.
1944.669 [Reserved]
1944.670 Project income.
1944.671 Equal opportunity requirements and outreach efforts.
1944.672 Environmental requirements.
1944.673 Historic preservation and replacement housing requirements and
procedures.
1944.674 Public participation and intergovernmental review.
1944.675 Allocation of HPG funds to States and unused HPG funds.
[[Page 189]]
1944.676 Preapplication procedures.
1944.677 [Reserved]
1944.678 Preapplication submission deadline.
1944.679 Project selection criteria.
1944.680 Limitation on grantee selection.
1944.681 Application submission.
1944.682 Preapplication/application review, grant approval, and
requesting HPG funds.
1944.683 Reporting requirements.
1944.684 Extending grant agreement and modifying the statement of
activities.
1944.685 [Reserved]
1944.686 Additional grants.
1944.687 [Reserved]
1944.688 Grant evaluation, closeout, suspension, and termination.
1944.689 Long-term monitoring by grantee.
1944.690 Exception authority.
1944.691-1944.699 [Reserved]
1944.700 OMB control number.
Exhibit A to Subpart N of Part 1944--Housing Preservation Grant
Agreement
Exhibit B to Subpart N of Part 1944--Amendment to Housing Preservation
Grant Agreement
Exhibit C to Subpart N of Part 1944 [Reserved]
Exhibit D to Subpart N of Part 1944--Project Selection Criteria-Outline
Rating Form
Exhibit E to Subpart N of Part 1944--Guide for Quarterly Performance
Report
Authority: 5 U.S.C. 301; 42 U.S.C. 1480.
Editorial Note: Nomenclature changes to part 1944 appear at 80 FR
9885, Feb. 24, 2015.
Subpart A [Reserved]
Subpart B_Housing Application Packaging Grants
Source: 58 FR 58643, Nov. 3, 1993, unless otherwise noted.
Sec. 1944.51 Objective.
This subpart states the policies and procedures for making grants
under section 509 of the Housing Act of 1949, as amended (42 U.S.C.
1479). Grants reimburse eligible organizations for part or all of the
costs of conducting, administering, and coordinating an effective
housing application packaging program in colonias and designated
counties. Eligible organizations will aid very low- and low-income
individuals and families in obtaining benefits from Federal, State, and
local housing programs. The targeted groups are very low- and low-income
families without adequate housing who will receive priority for
recruitment and participation and nonprofit organizations able to
propose rental or housing rehabilitation assistance benefitting such
families. These funds are available only in the areas defined in exhibit
D of this subpart. Participants will assist very low- and low-income
families in solving their housing needs. One way of assisting is to
package single family housing applications for families wishing to buy,
build, or repair houses for their own use. Another way is to package
applications for organizations wishing to develop rental units for lower
income families. The intent is to make Rural Development housing
assistance programs available to very low- and low-income rural
residents in colonias and designated counties. Rural Development will
reimburse eligible organizations packaging loan/grant applications
without discrimination because of race, color, religion, sex, national
origin, age, familial status, or handicap if such an organization has
authority to contract.
Sec. 1944.52 Definitions.
References in this subpart to County, District, State, National and
Finance Offices, and to County Supervisor, District Director, State
Director, and Administrator refer to Rural Development offices and
officials and should be read as prefaced by Rural Development. Terms
used in this subpart have the following meanings:
Colonias. As defined in exhibit C of subpart L of part 1940 of this
chapter.
Complete application package (hereafter called package). The package
submitted to the appropriate Rural Development office which is
considered acceptable in accordance with exhibit C of this subpart.
Cost reimbursement. Amount determined by the Administrator that
equals the customary and reasonable costs incurred in preparing a
package for a loan or grant. These amounts are included in exhibit B of
this subpart.
Designated counties. These counties are listed in exhibit D of this
subpart. The counties meet the following criteria:
(1) Twenty percent or more of the county population is at or below
the poverty level based on the most recent
[[Page 190]]
5-year survey of the American Community Survey of the Census Bureau or
other Census Bureau data if needed; and
(2) Ten percent or more of the occupied housing units are
substandard based on the most recent decennial Census of the United
States.
Organization. Any of the following entities which are legally
authorized to work in designated counties and/or colonias and are:
(1) A State, State agency, or unit of general local government or;
(2) A private nonprofit organization or corporation that is owned
and controlled by private persons or interests, is organized and
operated for purposes other than making gains or profits for the
corporation, and is legally precluded from distributing any gains or
profits to its members.
Packager. Any eligible organization which is reimbursed with Housing
Application Packaging Grants (HAPG) funds.
Technical assistance. Any assistance necessary to carry out housing
efforts by or for very low- and low-income individuals/families to
improve the quality and/or quantity of housing available to meet their
needs. Such assistance must include, but is not limited to:
(1) Contacting and assisting very low- and low-income families in
need of adequate housing by:
(i) Implementing an organized outreach program using available media
and personal contacts;
(ii) Explaining available housing programs and alternatives to
increase the awareness of very low- and low-income families and to
educate the community as to the benefits from improved housing;
(iii) Assisting very low- and low-income families in locating
adequate housing; and
(iv) Developing and packaging loan/grant applications for new
construction and/or rehabilitation, or repair of existing housing.
(2) Contacting and assisting eligible applicants to develop multi-
family housing loan/grant applications for new construction,
rehabilitation, or repair to serve very low- and low-income families.
[58 FR 58643, Nov. 3, 1993, as amended at 80 FR 9885, Feb. 24, 2015]
Sec. 1944.53 Grantee eligibility.
An eligible grantee is an organization as defined in Sec. 1944.52
of this subpart and has received a current ``Certificate of Training''
pertaining to the type of application being packaged. In addition, the
grantee must:
(a) Have the financial, legal, and administrative capacity to carry
out the responsibilities of packaging housing applications for very low-
and low-income applicants. To meet this requirement it must have the
necessary background and experience with proven ability to perform
responsibly in the field of housing application packaging, low-income
housing development, or other business or administrative ventures which
indicate an ability to perform responsibly in this field of housing
application packaging.
(b) Legally obligate itself to administer grant funds, provide
adequate accounting of the expenditure of such funds, and comply with
Rural Development regulations.
(c) If the organization is a private nonprofit corporation, be a
corporation that:
(1) Is organized under State and local laws.
(2) Is qualified under section 501(c)(3) of the Internal Revenue
Code of 1986.
(3) Has as one of its purposes assisting very low- and low-income
families to obtain affordable housing.
Sec. Sec. 1944.54-1944.61 [Reserved]
Sec. 1944.62 Authorized representative of the applicant.
RHS or its successor agency under Public Law 103-354 will deal only
with authorized representatives designated by the applicant. The
authorized representatives must have no pecuniary interest in the award
of the architectural or construction contracts, the purchase of
equipment, or the purchase of the land for the housing site.
[58 FR 58643, Nov. 3, 1993, as amended at 61 FR 39851, July 31, 1996]
[[Page 191]]
Sec. 1944.63 Authorized use of grant funds.
Grant funds may only be used to reimburse a packager for delivered
packages. Payment will be made for each complete package received and
accepted in accordance with exhibit C of this subpart.
Sec. Sec. 1944.64-1944.65 [Reserved]
Sec. 1944.66 Administrative requirements.
The following policies and regulations apply to grants made under
this subpart:
(a) Grantees must comply with all provisions of the Fair Housing Act
of 1988 and subpart E of part 1901 of this chapter which states in part,
that no person in the United States shall, on the grounds of race,
color, national origin, sex, religion, familial status, handicap, or
age, be excluded from participating in, be denied the benefits of, or be
subject to discrimination in connection with the use of grant funds.
(b) The policies and regulations contained in RD Instruction 1940-Q
(available in any Agency office), Departmental Regulation 2400-5, 2 CFR
part 200 as adopted by USDA through 2 CFR part 400 apply to grantees
under this subpart.
(c) Grantees should be aware of the policies and regulations
contained in subpart G of part 1940 of this chapter. They will supply
needed information requested by the local Agency Office in connection
with the loan/grant application.
(d) The grantee will retain records for 3 years from the date
Standard Form (SF)-269A, ``Financial Status Report (Short Form),'' is
submitted. These records will be accessible to RHS and other Federal
officials in accordance with 2 CFR part 200 as adopted by USDA through 2
CFR part 400.
(e) Annual audits will be completed if the grantee has received more
than $25,000 of Federal assistance in the year in which HAPG funds were
received. These audits will be due 13 months after the end of the fiscal
year in which funds were received.
(1) States, State agencies, or units of general local government
will complete an audit in accordance with 2 CFR part 200 as adopted by
USDA through 2 CFR part 400 and OMB Circular A-128.
(2) Nonprofit organizations will complete an audit in accordance
with 2 CFR part 200 as adopted by USDA through 2 CFR part 400.
(f) Performance reports, as required, will be submitted in
accordance with 2 CFR part 200 as adopted by USDA through 2 CFR part
400.
[58 FR 58643, Nov. 3, 1993, as amended at 61 FR 39851, July 31, 1996; 79
FR 76008, Dec. 19, 2014]
Sec. 1944.67 Ineligible activities.
The packager may not charge fees or accept compensation or
gratuities directly or indirectly from the very low- and low-income
families being assisted under this program. The packager may not
represent or be associated with anyone else, other than the applicant,
who may benefit in any way in the proposed transaction. If the packager
is compensated for this service from other sources, then the packager is
not eligible for compensation from this source except as permitted by
Agency. Grantees who are funded to do Self-Help Housing, may not be
reimbursed for packaging applications for participation in the Self-Help
Housing effort.
[58 FR 58643, Nov. 3, 1993, as amended at 61 FR 39851, July 31, 1996]
Sec. 1944.68 [Reserved]
Sec. 1944.69 Agency point of contact.
Grantees must submit packages to the appropriate Agency office
serving the designated county and/or colonias. Packages for Single
Family Housing loans/grants are submitted to the appropriate County
Office. All other packages are submitted to the appropriate District
Office. The applicable forms required to develop a package can be
obtained in any District or County Office. Packagers should coordinate
their packaging activity with the appropriate District and County
Offices.
[58 FR 58643, Nov. 3, 1993, as amended at 61 FR 39851, July 31, 1996]
[[Page 192]]
Sec. 1944.70 Targeting of HAPG funds to States.
(a) HAPG funds will be distributed administratively by the
Administrator to achieve the success of the program. Allocations will be
distributed to States as set forth in Attachment 2 of exhibit A of
subpart L of part 1940 of this chapter.
(b) The State Director will determine based on the housing funds
available and the personnel available, how many applications can be
processed for each program during the fiscal year in each Agency office
serving a designated county and/or colonias. The number of applications
will be published in the advertisement required under Sec. 1944.72 of
this subpart.
[58 FR 58643, Nov. 3, 1993, as amended at 61 FR 39851, July 31, 1996]
Sec. 1944.71 Term of grant.
(a) For Single Family Housing loans/grants, HAPG funds will be
specifically available for designated counties. Packages may be
submitted after the annual housing application packaging orientation and
training is held. The grant period will end when sufficient packages are
received for each designated county or colonia or on September 30, of
the fiscal year, whichever is earlier. The State Director must send
notification, in the form of a letter, to all packagers who attended the
packaging orientation and training that the number of applications
specified in the advertisement required under Sec. 1944.72 of this
subpart have been received. Any packages submitted after this date will
be paid for only if the grantee can demonstrate the package was prepared
in good faith and prior to receipt of the above notification.
(b) For Multi-Family Housing loans/grants, HAPG funds will be
available for designated areas or colonias to the extent specified in
Rural Development's advertisement. Preapplications approved in one
fiscal year, for which grant funds were obligated, may have the balance
disbursed in a later fiscal year when the application is submitted and
approved.
Sec. 1944.72 Application packaging orientation and training.
Agency approval officials will orient and train organizations on how
to package. A newspaper advertisement will be published by Agency
offices serving designated counties and/or colonias after October 1. The
advertisement will announce that application packaging services are
being requested and specify the date of the certification training. All
eligible organizations may attend this training. This date will be no
more than 30 days after the advertisement appears in the newspaper and
no later than December 31 of any year. The advertisement will include
the estimated number of packages needed by loan type, i.e., Single
Family, Multi-Family, etc. Exhibit A of this subpart (available in any
Agency office) is an example of an appropriate advertisement.
``Certificates of Training'' as required under Sec. 1944.53 of this
subpart will be signed by the State Director and given after completion
of the training. Efforts will be made by the appropriate Agency office
to complete this training process and certify packagers as quickly as
possible. Grantees must attend this training each year in order to
qualify for assistance.
[58 FR 58643, Nov. 3, 1993, as amended at 61 FR 39851, July 31, 1996]
Sec. 1944.73 Package submission.
(a) When submitting its first package to a Rural Development office,
in addition to the item in paragraph (b) of this section and the
information set forth in exhibit C of this subpart, the organization
must submit the following. A file of these documents will be established
in the Rural Development office and retained in accordance with RD
Instruction 2033-A (available in any Rural Development office).
(1) Proof of their nonprofit status under section 501(c)(3) or
section 501(c)(4) of the Internal Revenue Code of 1986 or of their
existence as a state agency or unit of general local government legally
authorized to work in the designated county and/or colonias. If the
Rural Development approval official is in doubt about the legal status
of the organization, the evidence will
[[Page 193]]
be sent to the State Director. The State Director may, if needed, submit
the above documents with any comments or questions to the Office of
General Counsel (OGC) for an opinion as to whether the applicant is a
legal organization of the type required by these regulations.
(2) An original and copy of Forms RD 400-1, ``Equal Opportunity
Agreement,'' and RD 400-4, ``Assurance Agreement.''
(3) A copy of a current ``Certificate of Training'' pertaining to
the type of application package submitted.
(b) All packages must contain a signed statement which states,
``Neither the organization nor any of its employees have charged,
received or accepted compensation from any source other than Rural
Development for packaging this application and are not associated with
or represent anyone other than the applicant in this transaction.''
(c) Form SF-270, ``Request for Advance or Reimbursement'' will be
submitted with each application package for the amount authorized for
the specific loan type in exhibit B of this subpart.
(d) The Rural Development approval official will review each package
for completeness, accuracy, and conformance to program policy and
regulations. Cost reimbursement will be made in accordance with exhibit
B of this subpart. Packagers that submit ``incomplete'' packages for
sections 502 and 504 loans/grants will be sent a letter within 5 working
days after submission of the ``incomplete'' package advising of
additional information needed. Payment will be held until all the
information is received. Packagers for sections 502 loans and 504 loans/
grants will not be paid for packages submitted on applicants who are
obviously ineligible for the programs. For example, a grantee would not
be reimbursed for submitting a package for a section 502 loan applicant
with an adjusted income exceeding the limits of Appendix 9 of HB-1-3550
(available in any Rural Development office) or who already owns adequate
housing. Likewise, a grantee would not be reimbursed for submitting a
package for a section 504 loan/grant when the adjusted family income
exceeds the very low-income limits of Appendix 9 of HB-1-3550 (available
in any Rural Development office) or when the applicant does not own and
occupy his/her property, or for a section 504 grant when the applicant
is not 62 years of age or older.
(e) Submissions for sections 514/516, 515, and 524 loans/grants will
be reviewed and, if incomplete, a letter sent within 15 working days
advising of additional information required.
(f) Form SF-269A, will be submitted within 15 days of the end of the
fiscal year.
[58 FR 58643, Nov. 3, 1993, as amended at 67 FR 78328, Dec. 24, 2002]
Sec. 1944.74 Debarment or suspension.
Certified packagers whose actions or acts warrant they not be
allowed to participate in the program are to be investigated in
accordance with agency procedures (available in any Rural Development
office).
[70 FR 7651, Feb. 15, 2005]
Sec. 1944.75 Exception authority.
The Administrator may, in individual cases, make an exception to any
requirement or provision of this subpart which is not inconsistent with
the authorizing statute or other applicable law if the Administrator
determines that the Government's interest would be adversely affected.
The Administrator will exercise this authority only at the request of
the State Director and recommendation of the Deputy Administrator,
Single Family Housing. Requests for exceptions must be in writing by the
State Director and supported with documentation to explain the adverse
effect on the Government's interest and/or impact on the applicant,
borrower, or community, proposed alternative courses of action, and show
how the adverse effect will be eliminated or minimized if the exception
is granted.
[58 FR 58643, Nov. 3, 1993, as amended at 67 FR 78328, Dec. 24, 2002]
Sec. Sec. 1944.76-1944.99 [Reserved]
Sec. 1944.100 OMB control number.
The reporting and recordkeeping requirements contained in this
regulation have been approved by the Office
[[Page 194]]
of Management and Budget and have been assigned OMB control number 0575-
0157. Public reporting burden for this collection of information is
estimated to vary from 30 minutes to five hours per response, with an
average of 3 hours per response including time for reviewing
instruction, searching existing data sources, gathering and maintaining
the data needed, and completing and reviewing the collection of
information. Send comments regarding this burden estimate or any other
aspect of this collection of information, including suggestions for
reducing this burden, to Department of Agriculture, Clearance Officer,
OIRM, Room 404-W, Washington, DC 20250; and to the Office of Management
and Budget, Paperwork Reduction Project (OMB 0575-0157), Washington, DC
20503.
Sec. Exhibit A to Subpart B of Part 1944 [Reserved]
Sec. Exhibit B to Subpart B of Part 1944--Housing Application Packaging
Grant (HAPG) Fee Processing
The Farmers Home Administration (FmHA) or its successor agency under
Public Law 103-354 approval official will execute and distribute Form
FmHA or its successor agency under Public Law 103-354 1940-1, ``Request
for Obligation of Funds,'' in accordance with the Forms Manual Insert
(FMI). HAPG funds will be used for the fees except as otherwise noted in
paragraphs II (A) and (B) of this exhibit. Funds for all loan and/or
grant application packages will be paid as follows.
I. For all Single Family Housing loans (Sections 502, 504, and 514
(``on'' farm labor housing only) of the Housing Act of 1949, checks will
be ordered when complete application packages as defined in Sec.
1944.73 of this subpart and exhibit C of this subpart are received. The
fees are as follows:
(A) Section 502 Single Family Housing Loans--$500
(B) Section 504 Rural Housing Loans and Grants--$500
(C) Section 514 ``On'' Farm Labor Housing Loans--$500
II. For all Multi-Family Housing loans and grants (sections 514/516,
515, 524, and 533 of the Housing Act of 1949), the entire amount of the
fee coming from HAPG funds will be obligated when the packager has met
all the requirements of the preapplication stage, however, payments will
be made in accordance with the following schedules:
(A) Sections 514/516 Farm Labor Housing Loans and Grants
``Off'' farm labor housing loans/grants--fees paid in accordance
with the schedule for section 515 Rural Rental Housing loans.
(B) Section 515 Rural Rental Housing Loans.
(1) The scale for packaging fees is based on the percentage of the
total development cost as follows:
Up to $400,000--1.6 percent
For additional amounts between:
$400,001 and $800,000--add 1.2 percent
$800,001 and $1,200,000--add 1.0 percent
$1,200,001 and $1,600,000--add .7 percent
$1,600,001 and $2,000,000--add .5 percent
Over $2,000,001--No additional amount
(2) Twenty-five percent paid from HAPG funds when Form AD-622,
``Notification of Preapplication Review Action,'' is sent inviting
submission of a complete application.
(3) Twenty percent paid from HAPG funds when a complete application
is filed including plans and specifications.
(4) The 55 percent balance paid when the loan is approved. Funds for
this 55 percent will be drawn from loan funds in accordance with 7 CFR
3560.53 (o).
(C) Section 524 Rural Housing Site Loans--total fee is 1 percent of
the loan amount payable in two installments.
(1) Thirty percent paid after FmHA or its successor agency under
Public Law 103-354's review of the preapplication under Sec.
1822.271(a) of subpart G of part 1822 of this chapter (paragraph XI A of
FmHA Instruction 444.8).
(2) Seventy percent paid upon the completion of the docket in
accordance with Sec. 1822.271(c) of subpart G of part 1822 of this
chapter (paragraph XI C of FmHA Instruction 444.8).
(D) Section 533 Housing Preservation Grants--total fee is 2 percent
of the grant amount paid in two installments.
(1) Forty percent will be paid when the Form AD-622, inviting
submission of a complete application, is sent.
(2) Sixty percent will be paid after grant closes.
[58 FR 58643, Nov. 3, 1993, as amended at 69 FR 69104, Nov. 26, 2004]
Sec. Exhibit C to Subpart B of Part 1944--Requirements for Housing
Application Packages
A package will consist of the following requirements for the
respective program.
A. Section 502--Complete application packages will be submitted in
accordance with the requirements of 7 CFR part 3550. The package must
also include the following:
[[Page 195]]
Form RD 410-9--``Statement Required by the Privacy Act''
Form RD 1910-11--``Applicant Certification Federal Collection Policies
for Consumer or Commercial Debts''
Form RD 1944-3--``Budget and/or Financial Statement''
B. Section 504--Complete application packages will be submitted in
accordance with 7 CFR part 3550. The package must include the forms
listed in paragraph A. of this exhibit and the following:
The appropriate Agency application form for Rural Housing assistance
(non-farm tract) (available in any Rural Development office).
The appropriate Agency form to request verification of employment
(available in any Rural Development office).
The appropriate Agency Rural Housing Loan application package
(available in any Rural Development office).
Evidence of ownership in accordance with 7 CFR part 3550.
Cost estimates or bid prices for removal of health or safety hazards
in accordance with 7 CFR part 3550.
C. Section 514/516--Complete application packages will be submitted
in accordance with the Notice of Funding Availability that will be
published in the Federal Register each Fiscal Year.
D. Section 515--Complete application packages will be submitted in
accordance with the Notice of Funding Availability that will be
published in the Federal Register each Fiscal Year.
E. Section 524--Complete application packages will be submitted in
accordance with Sec. 1822.271(a) of subpart G of part 1822 of this
chapter (paragraph XI.A. of RD Instruction 444.8). After Rural
Development's review and as instructed, the application should be
completed in accordance with Sec. 1822.271(c) of subpart G of part 1822
of this chapter (paragraph XI.C. of RD Instruction 444.8).
F. Section 533--Complete application packages will be submitted in
accordance with the requirements of subpart N of part 1944 of this
chapter.
[69 FR 69104, Nov. 26, 2004]
[[Page 196]]
Sec. Exhibit D to Subpart B of Part 1944--Designated Counties for
Housing Application Packaging Grants
[GRAPHIC] [TIFF OMITTED] TR25MY05.036
[[Page 197]]
[GRAPHIC] [TIFF OMITTED] TR25MY05.037
[[Page 198]]
[GRAPHIC] [TIFF OMITTED] TR25MY05.038
[[Page 199]]
[GRAPHIC] [TIFF OMITTED] TR25MY05.039
[70 FR 29927, May 25, 2005]
Subparts C-E [Reserved]
Subpart F_Congregate Housing Services Program
Source: 61 FR 42943, 42949, Aug. 19, 1996, unless otherwise noted.
Sec. 1944.251 Purpose.
The requirements of this subpart augment the requirements of section
802 of the National Affordable Housing Act of 1990 (approved November
28, 1990, Public Law 101-625) (42 U.S.C. 8011), (hereinafter, section
802), as amended by the Housing and Community Development Act of 1992
(Public Law 102-550, approved October 28, 1992), which authorizes the
Congregate Housing Services Program (hereinafter, CHSP or Program).
Sec. 1944.252 Definitions.
In addition to the definitions in section 802(k), the following
definitions apply to CHSP:
Activity of Daily Living (ADL) means an activity regularly necessary
for personal care.
(1) The minimum requirements of ADLs include:
(i) Eating (may need assistance with cooking, preparing or serving
food, but must be able to feed self);
(ii) Dressing (must be able to dress self, but may need occasional
assistance);
(iii) Bathing (may need assistance in getting in and out of the
shower or tub, but must be able to wash self);
(iv) Grooming (may need assistance in washing hair, but must be able
to take care of personal appearance);
(v) Getting in and out of bed and chairs, walking, going outdoors,
using the toilet; and
[[Page 200]]
(vi) Household management activities (may need assistance in doing
housework, grocery shopping or laundry, or getting to and from one
location to another for activities such as going to the doctor and
shopping, but must be mobile. The mobility requirement does not exclude
persons in wheelchairs or those requiring mobility devices.)
(2) Each of the Activities of Daily Living noted in paragraph (1) of
this definition includes a requirement that a person must be able to
perform at a specified minimal level (e.g., to satisfy the eating ADL,
the person must be able to feed himself or herself). The determination
of whether a person meets this minimal level of performance must include
consideration of those services that will be performed by a person's
spouse, relatives or other attendants to be provided by the individual.
For example, if a person requires assistance with cooking, preparing or
serving food plus assistance in feeding himself or herself, the
individual would meet the minimal performance level and thus satisfy the
eating ADL, if a spouse, relative or attendant provides assistance with
feeding the person. Should such assistance become unavailable at any
time, the owner is not obligated at any time to provide individualized
services beyond those offered to the resident population in general. The
Activities of Daily Living analysis is relevant only with regard to
determination of a person's eligibility to receive supportive services
paid for by CHSP and is not a determination of eligibility for
occupancy;
Adjusted income means adjusted income as defined in 24 CFR parts 813
or 913.
Applicant means a State, Indian tribe, unit of general local
government, public housing authority (PHA), Indian housing authority
(IHA) or local nonprofit housing sponsor. A State, Indian tribe, or unit
of general local government may apply on behalf of a local nonprofit
housing sponsor or a for-profit owner of eligible housing for the
elderly.
Area agency on aging means the single agency designated by the State
Agency on Aging to administer the program described in Title III of the
Older Americans Act of 1965 (45 CFR chapter 13).
Assistant Secretary means the HUD Assistant Secretary for Housing-
Federal Housing Commissioner or the HUD Assistant Secretary for Public
and Indian Housing.
Case management means implementing the processes of: establishing
linkages with appropriate agencies and service providers in the general
community in order to tailor the needed services to the program
participant; linking program participants to providers of services that
the participant needs; making decisions about the way resources are
allocated to an individual on the basis of needs; developing and
monitoring of case plans in coordination with a formal assessment of
services needed; and educating participants on issues, including, but
not limited to, supportive service availability, application procedures
and client rights.
Eligible housing for the elderly means any eligible project
including any building within a mixed-use project that was designated
for occupancy by elderly persons, or persons with disabilities at its
inception or, although not so designated, for which the eligible owner
or grantee gives preference in tenant selection (with HUD approval) for
all units in the eligible project (or for a building within an eligible
mixed-use project) to eligible elderly persons, persons with
disabilities, or temporarily disabled individuals. For purposes of this
subpart, this term does not include projects assisted under the Low-Rent
Housing Homeownership Opportunity program (Turnkey III (24 CFR part 905,
subpart G)).
Eligible owner means an owner of an eligible housing project.
Excess residual receipts mean residual receipts of more than $500
per unit in the project which are available and not committed to other
uses at the time of application to HUD for CHSP. Such receipts may be
used as matching funds and may be spent down to a minimum of $500/unit.
For-profit owner of eligible housing for the elderly means an owner
of an eligible housing project in which some part of the project's
earnings lawfully inure to the benefit of any private shareholder or
individual.
[[Page 201]]
Grantee or Grant recipient means the recipient of funding under
CHSP. Grantees under this Program may be states, units of general local
government, Indian tribes, PHAs, IHAs, and local nonprofit housing
sponsors.
Local nonprofit housing sponsor means an owner or borrower of
eligible housing for the elderly; no part of the net earnings of the
owning organization shall lawfully inure to the benefit of any
shareholder or individual.
Nonprofit includes a public housing agency as that term is defined
in section 3(b)(6) of the United States Housing Act of 1937.
Person with disabilities means a household composed of one or more
persons, at least one of whom is an adult who has a disability.
(1) A person shall be considered to have a disability if such person
is determined under regulations issued by the Secretary to have a
physical, mental, or emotional impairment which:
(i) Is expected to be of long-continued and indefinite duration;
(ii) Substantially impedes his or her ability to live independently;
and
(iii) Is of such a nature that the person's ability could be
improved by more suitable housing conditions.
(2) A person shall also be considered to have a disability if the
person has a developmental disability as defined in section 102(5) of
the Developmental Disabilities Assistance and Bill of Rights Act (42
U.S.C. 6001-7). Notwithstanding the preceding provisions of this
paragraph, the terms person with disabilities or temporarily disabled
include two or more persons with disabilities living together, one or
more such persons living with another person who is determined (under
regulations prescribed by the Secretary of HUD) to be essential to their
care or well-being, and the surviving member or members of any household
where at least one or more persons was an adult with a disability who
was living, in a unit assisted under this section, with the deceased
member of the household at the time of his or her death.
Program participant (participant) means any project resident as
defined in section 802(e)(1) who is formally accepted into CHSP,
receives CHSP services, and resides in the eligible housing project
served by CHSP grant.
Qualifying supportive services means those services described in
section 802(k)(16). Under this Program, health-related services mean
non-medical supervision, wellness programs, preventive health screening,
monitoring of medication consistent with state law, and non-medical
components of adult day care. The Secretary concerned may also approve
other requested supportive services essential for achieving and
maintaining independent living.
Rural Housing Service (RHS) means a credit agency for rural housing
and rural development in the U.S. Department of Agriculture (USDA).
Secretary concerned means (1) The Secretary of Housing and Urban
Development, with respect to eligible federally assisted housing
administered by HUD; and
(2) The Secretary of Agriculture with reference to programs
administered by the Administrator of the Rural Housing Service.
Service coordinator means CHSP staff person responsible for
coordinating Program services as described in section 1944.130.
Service provider means a person or organization licensed or
otherwise approved in writing by a State or local agency (e.g.,
Department of Health, Department of Human Services or Welfare) to
provide supportive services.
State agency means the State or an agency or instrumentality of the
State.
State agency on aging means the single agency designated by the
Governor to administer the program described in Title III of the Older
Americans Act of 1965 (See 45 CFR part 13).
Sec. 1944.253 Notice of funding availability, application process and selection.
(a) Notice of funding availability. A Notice of Funding Availability
(NOFA) will be published periodically in the Federal Register by the
Secretary concerned containing the amounts of funds available,
allocation or distribution of funds available among eligible applicant
groups, where to obtain and submit applications, the deadline for
submissions, and further explanation of
[[Page 202]]
the selection criteria, review and selection process. The Secretary
concerned will designate the maximum allowable size for grants.
(b) Selection criteria are set forth in section 802(h)(1) and shall
include additional criteria specified by the Secretary concerned.
Sec. 1944.254 Program costs.
(a) Allowable costs. (1) Allowable costs for direct provision of
supportive services includes the provision of supportive services and
others approved by the Secretary concerned for:
(i) Direct hiring of staff, including a service coordinator;
(ii) Supportive service contracts with third parties;
(iii) Equipment and supplies (including food) necessary to provide
services;
(iv) Operational costs of a transportation service (e.g., mileage,
insurance, gasoline and maintenance, driver wages, taxi or bus
vouchers);
(v) Purchase or leasing of vehicles;
(vi) Direct and indirect administrative expenses for administrative
costs such as annual fiscal review and audit, telephones, postage,
travel, professional education, furniture and equipment, and costs
associated with self evaluation or assessment (not to exceed one percent
of the total budget for the activities approved); and
(vii) States, Indian tribes and units of general local government
with more than one project included in the grant may receive up to 1% of
the total cost of the grant for monitoring the projects.
(2) Allowable costs shall be reasonable, necessary and recognized as
expenditures in compliance with OMB Cost Policies, i.e., OMB Circular A-
87, 24 CFR 85.36, and OMB Circular A-128.
(b) Nonallowable costs. (1) CHSP funds may not be used to cover
expenses related to any grantee program, service, or activity existing
at the time of application to CHSP.
(2) Examples of nonallowable costs under the program are:
(i) Capital funding (such as purchase of buildings, related
facilities or land and certain major kitchen items such as stoves,
refrigerators, freezers, dishwashers, trash compactors or sinks);
(ii) Administrative costs that represent a non-proportional share of
costs charged to the Congregate Housing Services Program for rent or
lease, utilities, staff time;
(iii) Cost of supportive services other than those approved by the
Secretary concerned;
(iv) Modernization, renovation or new construction of a building or
facility, including kitchens;
(v) Any costs related to the development of the application and plan
of operations before the effective date of CHSP grant award;
(vi) Emergency medical services and ongoing and regular care from
doctors and nurses, including but not limited to administering
medication, purchase of medical supplies, equipment and medications,
overnight nursing services, and other institutional forms of service,
care or support;
(vii) Occupational therapy and vocational rehabilitation services;
or
(viii) Other items defined as unallowable costs elsewhere in this
subpart, in CHSP grant agreement, and OMB Circular A-87 or 122.
(c) Administrative cost limitation. Grantees are subject to the
limitation in section 802(j)(4).
Sec. 1944.255 Eligible supportive services.
(a) Supportive services or funding for such services may be provided
by state, local, public or private providers and CHSP funds. A CHSP
under this section shall provide meal and other qualifying services for
program participants (and other residents and nonresidents, as described
in Sec. 1944.125(a)) that are coordinated on site.
(b) Qualifying supportive services are those listed in section
802(k)(16) and in section 1944.105.
(c) Meal services shall meet the following guidelines:
(1) Type of service. At least one meal a day must be served in a
group setting for some or all of the participants; if more than one meal
a day is provided, a combination of a group setting and carry-out meals
may be utilized.
(2) Hot meals. At least one meal a day must be hot. A hot meal for
the purpose of this program is one in which the principal food item is
hot at the time of serving.
[[Page 203]]
(3) Special menus. Grantees shall provide special menus as necessary
for meeting the dietary needs arising from the health requirements of
conditions such as diabetes and hypertension. Grantees should attempt to
meet the dietary needs of varying religious and ethnic backgrounds.
(4) Meal service standards. Grantees shall plan for and provide
meals which are wholesome, nutritious, and each of which meets a minimum
of one-third of the minimum daily dietary allowances as established by
the Food and Nutrition Board of the National Academy of Sciences-
National Research Council (or State or local standards, if these
standards are higher). Grantees must have an annual certification,
prepared and signed by a registered dietitian, which states that each
meal provided under CHSP meets the minimum daily dietary allowances.
(5) Food stamps and agricultural commodities. In providing meal
services grantees must apply for and use food stamps and agricultural
commodities as set forth in section 802(d)(2)(A).
(6) Preference for nutrition providers: In contracting for or
otherwise providing for meal services grantees must follow the
requirements of section 802(d)(2)(B). These requirements do not preclude
a grantee or owner from directly preparing and providing meals under its
own auspices.
Sec. 1944.256 Eligibility for services.
(a) Participants, other residents, and nonresidents. Such
individuals are eligible either to participate in CHSP or to receive
CHSP services, if they qualify under section 802(e)(1), (4) and (5).
Under this paragraph, temporarily disabled persons are also eligible.
(b) Economic need. In providing services under CHSP, grantees shall
give priority to very low income individuals, and shall consider their
service needs in selecting program participants.
Sec. 1944.257 Service coordinator.
(a) Each grantee must have at least one service coordinator who
shall perform the responsibilities listed in section 802(d)(4).
(b) The service coordinator shall comply with the qualifications and
standards required by the Secretary concerned. The service coordinator
shall be trained in the subject areas set forth in section 802(d)(4),
and in any other areas required by the Secretary concerned.
(c) The service coordinator may be employed directly by the grantee,
or employed under a contract with a case management agency on a fee-for-
service basis, and may serve less than full-time. The service
coordinator or the case management agency providing service coordination
shall not provide supportive services under a CHSP grant or have a
financial interest in a service provider agency which intends to provide
services to the grantee for CHSP.
(d) The service coordinator shall:
(1) Provide general case management and referral services to all
potential participants in CHSP. This involves intake screening, upon
referral from the grantee of potential program participants, and
preliminary assessment of frailty or disability, using a commonly
accepted assessment tool. The service coordinator then will refer to the
professional assessment committee (PAC) those individuals who appear
eligible for CHSP;
(2) Establish professional relationships with all agencies and
service providers in the community, and develop a directory of providers
for use by program staff and program participants;
(3) Refer proposed participants to service providers in the
community, or those of the grantee;
(4) Serve as staff to the PAC;
(5) Complete, for the PAC, all paperwork necessary for the
assessment, referral, case monitoring and reassessment processes;
(6) Implement any case plan developed by the PAC and agreed to by
the program participant;
(7) Maintain necessary case files on each program participant,
containing such information and kept in such form as HUD and RHS shall
require;
(8) Provide the necessary case files to PAC members upon request, in
connection with PAC duties;
(9) Monitor the ongoing provision of services from community
agencies and keep the PAC and the agency providing
[[Page 204]]
the supportive service informed of the progress of the participant;
(10) Educate grant recipient's program participants on such issues
as benefits application procedures (e.g. SSI, food stamps, Medicaid),
service availability, and program participant options and
responsibilities;
(11) Establish volunteer support programs with service organizations
in the community;
(12) Assist the grant recipient in building informal support
networks with neighbors, friends and family; and
(13) Educate other project management staff on issues related to
``aging-in-place'' and services coordination, to help them to work with
and assist other persons receiving housing assistance through the
grantee.
(e) The service coordinator shall tailor each participant's case
plan to the individual's particular needs. The service coordinator shall
work with community agencies, the grantee and third party service
providers to ensure that the services are provided on a regular,
ongoing, and satisfactory basis, in accordance with the case plan
approved by the PAC and the participant.
(f) Service coordinators shall not serve as members of the PAC.
Sec. 1944.258 Professional assessment committee.
(a) General. (1) A professional assessment committee (PAC), as
described in this section, shall recommend services appropriate to the
functional abilities and needs of each eligible project resident. The
PAC shall be either a voluntary committee appointed by the project
management or an agency in the community which provides assessment
services and conforms to section 802(e)(3)(A) and (B). PAC members are
subject to the conflict of interest provisions in section 1944.175(b).
(2) The PAC shall utilize procedures that ensure that the process of
determining eligibility of individuals for congregate services affords
individuals fair treatment, due process, and a right of appeal of the
determination of eligibility, and shall ensure the confidentiality of
personal and medical records.
(3) The dollar value of PAC members' time spent on regular
assessments after initial approval of program participants may be
counted as match. If a community agency discharges the duties of the
PAC, staff time is counted as its imputed value, and if the members are
volunteers, their time is counted as volunteer time, according to
sections 1944.145(c)(2) (ii) and (iv).
(b) Duties of the PAC. The PAC is required to:
(1) Perform a formal assessment of each potential elderly program
participant to determine if the individual is frail. To qualify as
frail, the PAC must determine if the elderly person is deficient in at
least three ADLs, as defined in section 1944.105. This assessment shall
be based upon the screening done by the service coordinator, and shall
include a review of the adequacy of the informal support network (i.e.,
family and friends available to the potential participant to assist in
meeting the ADL needs of that individual), and may include a more in-
depth medical evaluation, if necessary;
(2) Determine if non-elderly disabled individuals qualify under the
definition of person with disabilities under section 1944.105. If they
do qualify, this is the acceptance criterion for them for CHSP. Persons
with disabilities do not require an assessment by the PAC;
(3) Perform a regular assessment and updating of the case plan of
all participants;
(4) Obtain and retain information in participant files, containing
such information and maintained in such form, as HUD or RHS shall
require;
(5) Replace any members of the PAC within 30 days after a member
resigns. A PAC shall not do formal assessments if its membership drops
below three, or if the qualified medical professional leaves the PAC and
has not been replaced.
(6) Notify the grantee or eligible owner and the program
participants of any proposed modifications to PAC procedures, and
provide these parties with a process and reasonable time period in which
to review and comment, before adoption of a modification;
(7) Provide assurance of nondiscrimination in selection of CHSP
participants, with respect to race, religion, color, sex, national
origin, familial status or type of disability;
[[Page 205]]
(8) Provide complete confidentiality of information related to any
individual examined, in accordance with the Privacy Act of 1974;
(9) Provide all formal information and reports in writing.
(c) Prohibitions relating to the PAC. (1) At least one PAC member
shall not have any direct or indirect relationship to the grantee.
(2) No PAC member may be affiliated with organizations providing
services under the grant.
(3) Individuals or staff of third party organizations that act as
PAC members may not be paid with CHSP grant funds.
(d) Eligibility and admissions. (1) Before selecting potential
program participants, each grantee (with PAC assistance) shall develop a
CHSP application form. The information in the individual's application
is crucial to the PAC's ability to determine the need for further
physical or psychological evaluation.
(2) The PAC, upon completion of a potential program participant's
initial assessment, must make a recommendation to the service
coordinator for that individual's acceptance or denial into CHSP.
(3) Once a program participant is accepted into CHSP, the PAC must
provide a supportive services case plan for each participant. In
developing this plan, the PAC must take into consideration the
participant's needs and wants. The case plan must provide the minimum
supportive services necessary to maintain independence.
(e) Transition-out procedures. The grantee or PAC must develop
procedures for providing for an individual's transition out of CHSP to
another setting. Transition out is based upon the degree of supportive
services needed by an individual to continue to live independently. If a
program participant leaves the program, but wishes to retain supportive
services, he or she may do so, as long as he or she continues to live in
an eligible project, pays the full cost of services provided, and
management agrees (section 802(e)(4) and (5)). A participant can be
moved out of CHSP if he or she:
(1) Gains physical and mental health and is able to function without
supportive services, even if only for a short time (in which case
readmission, based upon reassessment to determine the degree of frailty
or the disability, is acceptable);
(2) Requires a higher level of care than that which can be provided
under CHSP; or
(3) Fails to pay services fees.
(f) Procedural rights of participants. (1) The PAC must provide an
informal process that recognizes the right to due process of individuals
receiving assistance. This process, at a minimum, must consist of:
(i) Serving the participant with a written notice containing a clear
statement of the reasons for termination;
(ii) A review of the decision, in which the participant is given the
opportunity to present written or oral objections before a person other
than the person (or a subordinate of that person) who made or approved
the termination decision; and
(iii) Prompt written notification of the final decision to the
participant.
(2) Procedures must ensure that any potential or current program
participant, at the time of initial or regular assessment, has the
option of refusing offered services and requesting other supportive
services as part of the case planning process.
(3) In situations where an individual requests additional services,
not initially recommended by the PAC, the PAC must make a determination
of whether the request is legitimately a needs-based service that can be
covered under CHSP subsidy. Individuals can pay for services other than
those recommended by the PAC as long as the additional services do not
interfere with the efficient operation of the program.
Sec. 1944.259 Participatory agreement.
(a) Before actual acceptance into CHSP, potential participants must
work with the PAC and the service coordinator in developing supportive
services case plans. A participant has the option of accepting any of
the services under the case plan.
(b) Once the plan is approved by the PAC and the program
participant, the participant must sign a participatory agreement
governing the utilization of
[[Page 206]]
the plan's supportive services and the payment of supportive services
fees. The grantee annually must renegotiate the agreement with the
participant.
Sec. 1944.260 Cost distribution.
(a) General. (1) Grantees, the Secretary concerned, and participants
shall all contribute to the cost of providing supportive services
according to section 802(i)(A)(i). Grantees must contribute at least 50
percent of program cost, participants must contribute fees that in total
are at least 10 percent of program cost, and the Secretary concerned
will provide funds in an amount not to exceed 40 percent.
(2) Section 802(i)(1)(B)(ii) creates a cost-sharing provision
between grantee and the Secretary concerned if total participant fees
collected over a year are less than 10 percent of total program cost.
This provision is subject to availability of appropriated grant funds.
If funds are not available, the grantee must assume the funding
shortfall.
(b) Prohibition on substitution of funds and maintenance of existing
supportive services. Grantees shall maintain existing funding for and
provision of supportive services prior to the application date, as set
forth in section 802(i)(1)(D). The grantee shall ensure that the
activities provided to the project under a CHSP grant will be in
addition to, and not in substitution for, these previously existing
services. The value of these services do not qualify as matching funds.
Such services must be maintained either for the time the participant
remains in CHSP, or for the duration of CHSP grant. The grantee shall
certify compliance with this paragraph to the Secretary concerned.
(c) Eligible matching funds. (1) All sources of matching funds must
be directly related to the types of supportive services prescribed by
the PAC or used for administration of CHSP.
(2) Matching funds may include:
(i) Cash (which may include funds from Federal, State and local
governments, third party contributions, available payments authorized
under Medicaid for specific individuals in CHSP, Community Development
Block Grants or Community Services Block Grants, Older American Act
programs or excess residual funds with the approval of the Secretary
concerned),
(ii) The imputed dollar value of other agency or third party-
provided direct services or staff who will work with or provide services
to program participants; these services must be justified in the
application to assure that they are the new or expanded services of CHSP
necessary to keep the program participants independent. If services are
provided by the state, Indian tribe, unit of general local government,
or local nonprofit housing sponsor, IHA, PHA, or for-profit or not-for-
profit owner, any salary paid to staff from governmental sources to
carry out the program of the grantee and any funds paid to residents
employed by the Program (other than from amounts under a contract under
section 1944.155) is allowable match.
(iii) In-kind items (these are limited to 10 percent of the 50
percent matching amount), such as the current market value of donated
common or office space, utility costs, furniture, material, supplies,
equipment and food used in direct provision of services. The applicant
must provide an explanation for the estimated donated value of any item
listed.
(iv) The value of services performed by volunteers to CHSP, at the
rate of $5.00 an hour.
(d) Limitation. (1) The following are not eligible for use as
matching funds:
(i) PHA operating funds;
(ii) CHSP funds;
(iii) Section 8 funds other than excess residual receipts;
(iv) Funds under section 14 of the U.S. Housing Act of 1937, unless
used for service coordination or case management; and
(v) Comprehensive grant funds unless used for service coordination
or case management;
(2) Local government contributions are limited by section
802(i)(1)(E).
(e) Annual review of match. The Secretary concerned will review the
infusion of matching funds annually, as part of the program or budget
review. If there are insufficient matching funds available to meet
program requirements at any point after grant start-up, or at any time
during the term of the grant (i.e., if matching funds from
[[Page 207]]
sources other than program participant fees drop below 50 percent of
total supportive services cost), the Secretary concerned may decrease
the federal grant share of supportive services funds accordingly.
Sec. 1944.261 Program participant fees.
(a) Eligible program participants. The grantee shall establish fees
consistent with section 1944.145(a). Each program participant shall pay
CHSP fees as stated in paragraphs (d) and (e) of this section, up to a
maximum of 20 percent of the program participant's adjusted income.
Consistent with section 802(d)(7)(A), the Secretary concerned shall
provide for the waiver of fees for individuals who are without
sufficient income to provide for any payment.
(b) Fees shall include: (1) Cash contributions of the program
participant;
(2) Food Stamps; and
(3) Contributions or donations to other eligible programs acceptable
as matching funds under section 1944.145(c).
(c) Older Americans Act programs. No fee may be charged for any
meals or supportive services under CHSP if that service is funded under
an Older Americans Act Program.
(d) Meals fees: (1) For full meal services, the fees for residents
receiving more than one meal per day, seven days per week, shall be
reasonable and shall equal between 10 and 20 percent of the adjusted
income of the project resident, or the cost of providing the services,
whichever is less.
(2) The fees for residents receiving meal services less frequently
than as described in paragraph (d)(1) of this section shall be in an
amount equal to 10 percent of the adjusted income of the project
resident, or the cost of providing the services, whichever is less.
(e) Other service fees. The grantee may also establish fees for
other supportive services so that the total fees collected from all
participants for meals and other services is at least 10 percent of the
total cost of CHSP. However, no program participants may be required to
pay more than 20 percent of their adjusted incomes for any combination
of services.
(f) Other residents and nonresidents. Fees shall be established for
residents of eligible housing projects (other than eligible project
residents) and for nonresidents who receive meals and other services
from CHSP under section 1944.125(a). These fees shall be in an amount
equal to the cost of providing the services.
Sec. 1944.262 Grant agreement and administration.
(a) General. HUD will enter into grant agreements with grantees, to
provide congregate services for program participants in eligible housing
projects, in order to meet the purposes of CHSP.
(b) Term of grant agreement and reservation of amount. A grant will
be for a term of five years and the Secretary concerned shall reserve a
sum equal to the total approved grant amount for each grantee. Grants
will be renewable at the expiration of a term, subject to the
availability of funds and conformance with the regulations in this
subpart, except as otherwise provided in section 1944.160.
(c) Monitoring of project sites by governmental units. States,
Indian tribes, and units of general local government with a grant
covering multiple projects shall monitor, review, and evaluate Program
performance at each project site for compliance with CHSP regulations
and procedures, in such manner as prescribed by HUD or RHS.
(d) Reports. Each grantee shall submit program and fiscal reports
and program budgets to the Secretary concerned in such form and at such
times, as the Secretary concerned requires.
(e) Enforcement. The Secretary concerned will enforce the
obligations of the grantee under the agreement through such action as
may be necessary, including terminating grants, recapturing grant funds,
and imposing sanctions.
(1) These actions may be taken for:
(i) A grantee's non-compliance with the grant agreement or HUD or
RHS regulations;
(ii) Failure of the grantee to provide supportive services within 12
months of execution of the grant agreement.
(2) Sanctions include but are not limited to the following:
(i) Temporary withholding of reimbursements or extensions or
renewals under the grant agreement, pending
[[Page 208]]
correction of deficiencies by the grantee;
(ii) Setting conditions in the contract;
(iii) Termination of the grant;
(iv) Substitution of grantee; and
(v) Any other action deemed necessary by the Secretary concerned.
(f) Renewal of grants. Subject to the availability of funding,
satisfactory performance, and compliance with the regulations in this
subpart:
(1) Grantees funded initially under this subpart shall be eligible
to receive continued, non-competitive renewals after the initial five-
year term of the grant.
(2) Grantees will receive priority funding and grants will be
renewed within time periods prescribed by the Secretary concerned.
(g) Use of Grant Funds. If during any year, grantees use less than
the annual amount of CHSP funds provided to them for that year, the
excess amount can be carried forward for use in later years.
Sec. 1944.263 Eligibility and priority for 1978 Act recipients.
Grantees funded initially under 42 U.S.C. 8001 shall be eligible to
receive continued, non-competitive funding subject to its availability.
These grantees will be eligible to receive priority funding under this
subpart if they comply with the regulations in this part and with the
requirements of any NOFA issued in a particular fiscal year.
Sec. 1944.264 Evaluation of Congregate Housing Services Programs.
(a) Grantees shall submit annually to the Secretary concerned, a
report evaluating the impact and effectiveness of CHSPs at the grant
sites, in such form as the Secretary concerned shall require.
(b) The Secretaries concerned shall further review and evaluate the
performance of CHSPs at these sites and shall evaluate the Program as a
whole.
(c) Each grantee shall submit a certification with its application,
agreeing to cooperate with and to provide requested data to the entity
responsible for the Program's evaluation, if requested to do so by the
Secretary concerned.
Sec. 1944.265 Reserve for supplemental adjustment.
The Secretary concerned may reserve funds subject to section 802(o).
Requests to utilize supplemental funds by the grantee shall be
transmitted to the Secretary concerned in such form as may be required.
Sec. 1944.266 Other Federal requirements.
In addition to the Federal Requirements set forth in 24 CFR part 5,
the following requirements apply to grant recipient organizations in
this program:
(a) Office of Management and Budget (OMB) Circulars and
Administrative Requirements. The policies, guidelines, and requirements
of OMB Circular No. A-87 and 24 CFR part 85 apply to the acceptance and
use of assistance under this program by public body grantees. The
policies, guidelines, and requirements of OMB Circular No. A-122 apply
to the acceptance and use of assistance under this program by non-profit
grantees. Grantees are also subject to the audit requirements described
in 24 CFR part 44 (OMB Circular A-128).
(b) Conflict of interest. In addition to the conflict of interest
requirements in OMB Circular A-87 and 24 CFR part 85, no person who is
an employee, agent, consultant, officer, or elected or appointed
official of the applicant, and who exercises or has exercised any
function or responsibilities with respect to activities assisted with
CHSP grant funds, or who is in a position to participate in a decision-
making process or gain inside information with regard to such
activities, may obtain a personal or financial interest or benefit from
the activity, or have an interest in any contract, subcontract, or
agreement with respect thereto, or any proceeds thereunder, either for
himself or herself or for those with whom he or she has family or
business ties during his or her tenure, or for one year thereafter. CHSP
employees may receive reasonable salary and benefits.
(c) Disclosures required by Reform Act. Section 102(c) of the HUD
Reform Act of 1989 (42 U.S.C. 3545(c)) requires disclosure concerning
other government
[[Page 209]]
assistance to be made available with respect to the Program and parties
with a pecuniary interest in CHSP and submission of a report on expected
sources and uses of funds to be made available for CHSP. Each applicant
shall include information required by 24 CFR part 12 on form HUD-2880
``Applicant/Recipient Disclosure/Update Report,'' as required by the
Federal Register Notice published on January 16, 1992, at 57 FR 1942.
(d) Nondiscrimination and equal opportunity. (1) The fair housing
poster regulations (24 CFR part 110) and advertising guidelines (24 CFR
part 109);
(2) The Affirmative Fair Housing Marketing Program requirements of
24 CFR part 200, subpart M, and the implementing regulations at 24 CFR
part 108; and
(3) Racial and ethnic collection requirements--Recipients must
maintain current data on the race, ethnicity and gender of program
applicants and beneficiaries in accordance with section 562 of the
Housing and Community Development Act of 1987 and section 808(e)(6) of
the Fair Housing Act.
(e) Environmental requirements. Support services, including the
operating and administrative expenses described in section 1944.115(a),
are categorically excluded from the requirements of the National
Environmental Policy Act (NEPA) of 1969. These actions, however, are not
excluded from individual compliance requirements of other environmental
statutes, Executive Orders, and agency regulations where appropriate.
When the responsible official determines that any action under this
subpart may have an environmental effect because of extraordinary
circumstances, the requirements of NEPA shall apply.
Subparts G-H [Reserved]
Subpart I_Self-Help Technical Assistance Grants
Source: 55 FR 41833, Oct. 16, 1990, unless otherwise noted.
Sec. 1944.401 Objective.
This subpart sets forth the policies and procedures and delegates
authority for providing Technical Assistance (TA) funds to eligible
applicants to finance programs of technical and supervisory assistance
for self-help housing, as authorized under section 523 of the Housing
Act of 1949. Any processing or servicing activity conducted pursuant to
this subpart involving authorized assistance to Rural Development
employees, members of their families, known close relatives, or business
or close personal associates, is subject to the provisions of subpart D
of part 1900 of this chapter. Applicants for this assistance are
required to identify any known relationship or association with a Rural
Development employee. This financial assistance may pay part or all of
the cost of developing, administering, or coordinating programs of
technical and supervisory assistance to aid needy very low- and low-
income families in carrying out self-help housing efforts in rural
areas. Very low-income families must receive a priority for recruitment
and participation and may not comprise less than the percentage stated
in subpart L of part 1940 of this chapter of those assisted in any
grant. The primary purpose is to fund organizations that are willing to
locate and work with families that otherwise do not qualify as
homeowners. Generally, these are families below 50 percent of median
incomes, living in substandard housing, and/or lacking the skills to be
good homeowners. Grantees will comply with the nondiscrimination
regulation subpart E of part 1901 of this chapter which states that no
person in the United States shall, on the grounds of race, color,
national origin, sex, religion, marital status, mental or physical
handicap, or age, be excluded from participating in, be denied the
benefits of, or be subject to discrimination in connection with the use
of grant funds and all provisions of the Fair Housing Act of 1988.
[55 FR 41833, Oct. 16, 1990, as amended at 58 FR 227, Jan. 5, 1993]
Sec. 1944.402 Grant purposes.
Rural Development may contract or make a grant to an organization
to:
(a) Give technical and supervisory assistance to eligible very low-
and low-income families as defined in Appendix 9 of HB-1-3550 (available
in any Rural
[[Page 210]]
Development office), in carrying out self-help housing efforts.
(b) Assist other organizations to provide technical and supervisory
assistance to eligible families.
(c) Develop a final application, recruit families and related
activities necessary to participate under paragraph (a) of this section.
[55 FR 41833, Oct. 16, 1990, as amended at 67 FR 78328, Dec. 24, 2002]
Sec. 1944.403 Definitions.
(a) Agreement. The Self-Help Technical Assistance Agreement, which
is a document signed by Rural Development and the grantee, sets forth
the terms and conditions under which TA funds will be made available.
(Exhibit A of this subpart).
(b) Agreement period (or grant period). The period of time for which
an agreement is in force. Generally, the period will not exceed 24
months.
(c) Date of completion. The date when all work under a grant is
completed or the date in the TA grant agreement, or any supplement or
amendment to it, when Federal assistance ends.
(d) Direct costs. Those costs that are specifically identified with
a particular project or activity. Grantees receiving funds from a single
grant source would consider all costs as direct costs.
(e) Disallowed costs. Those charges to a grant which Rural
Development determines cannot be authorized.
(f) Equivalent units. Equivalent units represent the ``theoretical
number of units'' arrived at by adding the equivalent percentage of
completion figure for each family in the self-help program (pre-
construction and actual construction) together at any given date during
program operations. The sum of the percentage of completion figures for
all participant families represent the total number of ``theoretical
units'' completed at any point in time. Equivalent units are useful in
measuring progress during the period of the grant and are not a
measurement of actual accomplishments. The number of equivalent units
for any group can never exceed the number of planned or completed houses
for that group.
(g) Equivalent value of a modest house. The equivalent value of a
modest house is the typical cost of a recent contractor-built Rural
Development financed home in the area plus the actual or projected costs
of an acceptable site and site development. If Rural Development has not
financed a contractor-built house during the last twelve months, the
value will be established by use of the Marshall and Swift cost handbook
or a similar type of handbook. Equivalent value of a modest house is
established by Rural Development.
(h) Indirect costs. Those costs that are incurred for common or
joint objectives and therefore, cannot be readily and specifically
identified with a particular project or activity, e.g., self-help.
(i) Mutual self-help. The construction method by which participating
families organized in groups generally of 4 to 10 families utilize their
own labor to reduce the total construction cost of their homes.
Participating families complete construction work on their homes by an
exchange of labor with one another. The mutual self-help method must be
used for new construction.
(j) Organization. (1) A State, political subdivision, or public
nonprofit corporation (including Indian tribes or Tribal corporations);
or
(2) A private nonprofit corporation that is owned and controlled by
private persons or interests and is organized and operated for purposes
other than making gains or profits for the corporation and is legally
precluded from distributing any gains or profits to its members.
(k) Participating family. Individuals and/or their families who
agree to build homes by the mutual self-help method and rehabilitate
homes by the self-help method. Participants are families with very low-
or low-incomes who have the ability to furnish their share of the
required labor input regardless of the handicap, age, race, color,
national origin, religion, family status, or sex of the head of
household. The participating family must be approved for a section 502
RH loan or similar loans from other Federal, state, and private lenders
that uses income guidelines substantially similar to the Department of
Housing and Urban Development before the start of construction,
[[Page 211]]
have sufficient time available to assist in building their own homes,
and show a desire to work with other families. Each family in the group
must contribute labor on each other's homes to accomplish the 65 percent
of the total 100 percent of tasks listed in exhibit B-2 of this subpart.
A participating family may use a substitute to perform the labor with
prior approval of the Grantee and the Rural Development State Director.
A substitute is only permitted when the participating family is
incapacitated.
(l) Self-help. The construction method by which an individual family
utilizes their labor to reduce the construction cost of their home
without an exchange of labor between participating families. Unless
otherwise authorized by the District Director, this method is only
funded for repair and rehabilitation type construction.
(m) Sponsor. An existing entity that is willing and able to assist
an applicant, with or without charge, in applying for a grant and in
carrying out responsibilities under the agreement. Examples of sponsors
are local rural electric cooperatives, institutions of higher education,
community action agencies and other self-help grantees. Also, when
available, regional technical and management assistance contractors may
qualify to serve as a sponsor at no charge.
(n) Technical assistance. The organizing and supervising of groups
of families in the construction of their own homes including:
(1) Recruiting families who are interested in sharing labor in the
construction of each other's homes and assisting such families in
obtaining housing loans.
(2) Conducting meetings of the families to explain the self-help
program and subjects related to home ownership, such as loan payments,
taxes, insurance, maintenance, and upkeep of the property.
(3) Helping families in planning and developing activities that lead
to the acquisition and development of suitable building sites.
(4) Assisting families in selecting or developing house plans for
homes which will meet their needs and which they can afford.
(5) Assisting families in obtaining cost estimates for construction
materials and any contracting that may be required.
(6) Providing assistance in the preparation of loan applications.
(7) Providing construction supervision and training for families
while they construct their homes.
(8) Providing financial supervision to individual families with
section 502 Rural Housing (RH) loans which will minimize the time and
effort required by Rural Development in processing borrower expenditures
for materials and contract services.
(9) Assisting families in solving other housing problems.
(o) Termination of a grant. The cancellation of Federal assistance,
in whole or in part, at any time before the date of completion.
Sec. 1944.404 Eligibility.
To receive a grant, the applicant must:
(a) Be an organization as defined in Sec. 1944.403(j) of this
subpart.
(b) Have the financial, legal, administrative, and actual capacity
to assume and carry out the responsibilities imposed by the Agreement.
To meet the requirement of actual capacity it must either:
(1) Have necessary background and experience with proven ability to
perform responsibly in the field of mutual self-help or other business
management or administrative ventures which indicate an ability to
perform responsibility in the field of mutual self-help; or
(2) Be sponsored by an organization with background experience, and
ability, which agrees in writing to help the applicant to carry out its
responsibilities.
(c) Legally obligate itself to administer TA funds, provide adequate
accounting of the expenditure of such funds, and comply with the
Agreement and Rural Development regulations.
(d) If the organization is a private nonprofit corporation, be a
corporation that:
(1) Is organized under State and local laws.
(2) Is qualified under section 501(c)(3) of the Internal Revenue
Code of 1986.
[[Page 212]]
(3) Has as one of its purposes the production of affordable housing.
(4) Has a Board of Directors which consist of not less than five.
Sec. 1944.405 Authorized use of grant funds.
(a) Payment of salaries of personnel as authorized in the Agreement.
(b) Payment of necessary and reasonable office expenses such as
office rental, office utilities, and office equipment rental. The
purchase of office equipment is permissible when the grantee determines
it to be more economical than renting. As a general rule, these types of
expenses would be classified as indirect costs in multiple funded
organizations.
(c) Purchase of office supplies such as paper, pens, pencils, and
trade magazines.
(d) Payment of necessary employee benefit costs including but not
limited to items such as Worker's Compensation, employer's share of
social security, health benefits, and a reasonable tax deferred pension
plan for permanent employees.
(e) Purchase, lease, or maintenance of power or specialty tools such
as a power saw, electric drill, sabre saw, ladders, and scaffolds, which
are needed by the participating families. The participating families,
however, are expected to provide their own hand tools such as hammers
and handsaws.
(f) Payment of liability insurance and special purpose audit costs
associated with self-help activities. These would be considered direct
costs, even though the grantee's general liability insurance cost and
the cost of audits for the organization are generally indirect costs.
(g) Payment of reasonable fees for training of grantee personnel
including board members. This may include the cost of travel and per
diem to attend in or out-of-State training as authorized by the board of
directors and, when necessary, for the employee to do the current job.
These costs are generally direct costs.
(h) Payment of services rendered by a sponsor or other organization
after the grant is closed and when it is determined the sponsor can
provide the necessary services which will result in an overall reduction
in the cost of assistance. Typically, this will be limited to new
grantees and an existing grantee for the period of time that its size or
activity does not justify a full staff. A full staff is a full or part-
time director, project worker, secretary-bookkeeper, and a construction
supervisor. This type of cost is generally direct.
(i) Payment of certain consulting and legal costs required in the
administration of the grant if such service is not available without
cost. This does not include legal expenses for claims against the
Federal Government. (Legal costs that may be incurred by the
organization for the benefit of the participating families may be paid
with prior approval of the State Director).
(j) Payments of the cost of an accountant to set up an accounting
system and perform audits that may be required. Generally, these costs
are indirect.
(k) Payments of reasonable expenses of board members for attending
regular or special board meetings. These costs are indirect.
Sec. 1944.406 Prohibited use of grant funds.
(a) Hiring personnel specifically for the purpose of performing any
of the construction work for participating families in the self-help
projects.
(b) Buying real estate or building materials or other property of
any kind for participating families.
(c) Paying any debts, expenses, or costs which should be the
responsibility of the participating families in the self-help projects.
(d) Paying for training of an employee as authorized by 2 CFR part
200 as adopted by USDA through 2 CFR part 400.
(e) Paying costs other than approved indirect (including salaries)
that are not directly related to helping very low- and low-income
families obtain housing consistent with the objectives of this program.
[55 FR 41833, Oct. 16, 1990, as amended at 79 FR 76009, Dec. 19, 2014]
Sec. 1944.407 Limitations.
The amount of the TA grant depends on the experience and capability
of the
[[Page 213]]
applicant and must be justified based on the number of families to be
assisted. As a guide, the maximum grant amounts for any grant period
will be limited to:
(a) An average TA cost per equivalent unit of no more than 15
percent of the cost of equivalent value of modest homes built in the
area. (Upon request, the County Supervisor will provide the grantee the
average cost of modest homes for the area); or
(b) An average TA cost per equivalent unit that does not exceed the
difference between the equivalent value of modest homes in the area and
the average mortgage of the participating families minus $1,000; or
(c) A TA per equivalent unit cost that does not exceed an amount
established by the State Director. The State Director may authorize a
greater TA cost than paragraph (a) or (b) of this section when needed to
accomplish a particular objective, such as requiring the grantee to
serve very low-income families, remote areas, or similar situations; or
(d) A negotiated amount for repair and rehabilitation type
proposals. At a minimum, applicants applying for repair and
rehabilitation grants must include information on the proximity of the
houses in a project, the typical needed repairs, and the cost savings
between self-help and contractor rehabilitation and repair.
[55 FR 41833, Oct. 16, 1990; 56 FR 19253, Apr. 26, 1991]
Sec. 1944.408 [Reserved]
Sec. 1944.409 Executive Order 12372.
The self-help program is subject to the provision of Executive Order
12372 which requires intergovernmental consultation with State and local
officials. These requirements are set forth in U. S. Department of
Agriculture regulations 7 CFR 3015, subpart V and RD Instruction 1970-I,
`Intergovernmental Review,' available in any Agency office or on the
Agency's Web site, new applicants for the self-help program must submit
their Statement of Activities to the State single point of contact prior
to submitting their preapplication to Agency. The name of the point of
contact is available from the State Office.
[55 FR 41833, Oct. 16, 1990, as amended at 61 FR 39851, July 31, 1996;
76 FR 80730, Dec. 27, 2011]
Sec. 1944.410 Processing preapplications, applications, and completing
grant dockets.
(a) Form SF-424, ``Application for Federal Assistance.'' Form SF-424
in an original and one copy must be submitted by the applicant to the
District Director. It will be used to establish communication between
the applicant and RHS, determine the applicant's eligibility, determine
how well the project can compete with similar applications from other
organizations and eliminate any proposals which have little or no chance
for Federal funding before applicants incur significant expenditures for
preparing an application. In addition, the following information will be
attached to and become a part of the preapplication:
(1) Complete information about the applicant's previous experience
and capacity to carry out the objective of the agreement.
(2) If the applicant organization is already formed, a copy of or an
accurate reference to the specific provisions of State law under which
the applicant is organized; a certified copy of the applicant's Articles
of Incorporation and Bylaws or other evidence of corporate existence;
certificate of incorporation for other than public bodies; evidence of
good standing from the State when the corporation has been in existence
1 year or more; the names and addresses of the applicant's members,
directors, and officers; and, if another organization is a member of the
applicant-organization, its name, address, and principal business. If
the applicant is not already formed, attach copies of the proposed
organizational documents demonstrating compliance with Sec. 1944.404(d)
of this subpart.
(3) A current (no more than 12 months old) dated and signed
financial statement showing the amounts and specific nature of assets
and liabilities together with information on the repayment schedule and
status of any debt owed by the applicant. If the applicant is being
sponsored by another
[[Page 214]]
organization, the same type of financial statement also must be provided
by the applicant's sponsor.
(4) A narrative statement which includes information about the
amount of the grant funds being requested, area(s) to be served, need
for self-help housing in the area(s), the number of self-help units
proposed to be built, rehabilitated or repaired during the agreement
period, housing conditions of low-income families in the area and
reasons why families need self-help assistance. Evidence should be
provided that the communities support the activity and that there are
low-income families willing to contribute their labor in order to obtain
adequate housing. Evidence of community support may be letters of
support from local officials, individuals and community organizations.
The pre-application may contain information such as census materials,
local planning studies, surveys, or other readily available information
which indicates a need in the area for housing of the type and cost to
be provided by the proposed self-help TA program.
(5) A plan of how the organization proposes to reach very low-income
families living in houses that are deteriorated, dilapidated,
overcrowded, and/or lacking plumbing facilities.
(6) A proposed budget which will be prepared on SF-424A, ``Budget
Information (Non-Construction Programs)'' will be completed to address
applicable assurances as outlined in 2 CFR part 200 as adopted by USDA
through 2 CFR part 400. State and local Government will include an
assurance that the grantee shall comply with all applicable Federal
statutes and regulations in effect with respect to the periods for which
it receives grant funding. The State and local governments shall also
comply with 2 CFR part 200 as adopted by USDA through 2 CFR part 400.
(7) A preliminary survey as to the availability of lots and
projected cost of the sites.
(8) A list of other activities the applicant is engaged in and
expects to continue, and a statement as to other sources of funding and
whether it will have sufficient funds to assure continued operation of
the other activities for at least the period of the agreement. If multi-
funded, its cost allocation plan or indirect cost rate must be part of
the pre-application.
(9) Whether assistance under paragraph (d) of this section is
requested and a brief narrative identifying the need, amount of funds
needed, and projected time period.
(10) If a project is planned for five or more housing lots or units,
an Affirmative Fair Marketing Plan is required. The plan will be in
effect until the completion of the project.
(b) Preapplication review. (1) The District Director, within 30 days
of receipt of the preapplication, Form SF-424, and all other required
information and material will complete a thorough review for
completeness, accuracy, and conformance to program policy and
regulations. Incomplete preapplications will be returned to the
applicant for completion. The applicant should be given the name of the
regional technical assistance contractor. The County Supervisor in the
prospective county will be contacted as to the need for the program in
the proposed area and if the necessary resources are available to the
grantee. This will include a discussion of the number of 502 and 504
units that will need to be committed to the grantee and the potential
work impact on the office during the grant period. If it is determined
that the County Office lacks the resources (either personnel or funds)
to process all loan requests in a timely manner, the District Director
must communicate this need to the State Director along with a
recommended solution. (Lack of resources at the county level are not
grounds to deny a request). After the District Director has determined
that the preapplication is complete and accurate, the District Director
will assemble the material in an applicant case file and forward it to
the State Director. The case file, as a minimum, must contain the
following:
(i) Form SF-424,
(ii) Original and one copy of Form RD 1940-20, ``Request for
Environmental Information,''
(iii) Eligibility recommendations, and
[[Page 215]]
(iv) HUD Form 935.2 ``Affirmative Fair Housing Marketing Plan'', if
applicable.
(2) The State Director may, if needed, submit the organizational
documents with any comments or questions to the Office of General
Counsel (OGC) for a preliminary opinion as to whether the applicant is
or will be a legal organization of the type required by these
regulations and for advice on any other aspects of the preapplication.
(3) The State Director, if unable to determine eligibility or
qualifications with the advice of the OGC, may submit the preapplication
to the National Office for review. The preapplication will contain all
memoranda from OGC giving the results of its review. The State Director
will identify in the transmittal memorandum to the National Office the
specific problem and will recommend possible solutions and any
information about the applicant which would be helpful to the National
Office in reaching a decision.
(4) After an eligibility determination has been made, which should
be completed within 30 days unless OGC is involved, the State Director
will:
(i) If the applicant is eligible, contact the National Office as to
the availability of funds or submit the proposal to the National Office
for authorization if the requested amount exceeds the State Director's
approval authority. If funds are available, the final review officer,
either the State Director or the Assistant Administrator, Housing will
issue a letter of conditions that the applicant must meet and direct the
District Director to issue Form AD-622, ``Notice of Preapplication
Review Action.''
(ii) If the applicant is determined not eligible, the State Director
will direct the District Director to issue Form AD-622.
(c) Form AD-622, ``Notice of Preapplication Review Action.'' (1) If
the applicant is eligible and after the State Director has returned the
preapplication information and the executed original Form RD 1940-20 to
the District Office, the District Director will, within 10 days, prepare
and issue Form AD-622. The original Form AD-622 will be signed and
delivered to the applicant along with the letter of conditions, a copy
to the applicant's case file, a copy to the County Supervisor, and a
copy to the State Director.
(2) If the applicant is not eligible and after the State Director
has returned the preapplication information, the District Director will
within 5 days notify the applicant on Form AD-622. The notification will
inform the applicant that an appeal of the decision may be made to the
National Appeals Staff under subpart B of part 1900 of this chapter.
(3) If the applicant is eligible and no grant or loan funds are
available, the State Director will return the preapplication information
to the District Director who will, within 10 days, notify the applicant
on Form AD-622. The notification will explain the facts concerning the
lack of funding and that Rural Development will notify them when funding
will be available. This is not an appealable decision.
(d) Self-help technical assistance grant predevelopment agreement.
If the grantee requested predevelopment assistance and the State
Director determines that the applicant lacks the financial resources to
meet the conditions of grant approval, a grant of up to $10,000 and for
up to six months will be made in order for the applicant to provide what
is required by paragraph (e) of this section. Exhibit D of this subpart
will be used for this purpose. Existing grantees proposing to operate in
an area different from the area that they are currently funded to
operate are eligible for this grant. However, this grant is available
only once for a defined area. This grant is available only after the
letter of conditions has been issued. Denial of this assistance is an
appealable decision under subpart B of part 1900 of this chapter.
(e) Form SF-424, ``Application for Federal Assistance.'' The
applicant will submit Form SF-424 in an original and one copy to the
District Director. The application should provide a detailed proposal of
its goals including:
(1) Names, addresses, number in household, and total annual
household income of families who have been contacted by the applicant
and are interested in participating in a self-help housing project.
Community organizations including minority organizations
[[Page 216]]
may be used as a source of names of people interested in self-help
housing.
(2) Proof that the first group of prospective participating self-
help families have qualified for financial assistance.
(3) Evidence that lots are optioned by the prospective participating
self-help families for the first group. Evidence that lots are available
for the remaining groups.
(4) Detailed cost estimates of houses to be built by the mutual
self-help method. Plans and specifications should be submitted with the
cost estimates.
(5) Proposed staffing need, including qualifications, experience,
proposed hiring schedule, and availability of any prospective employees.
(6) Name, address, and official position of the applicant's
representative or representatives authorized to act for the applicant
and work with Rural Development.
(7) Budget information including a detailed budget for the Agreement
period based upon the needs outlined in the proposal. SF 424A will be
completed to furnish the budget information.
(8) Indirect or direct cost policy and proposed indirect cost rate
developed in accordance with 2 CFR part 200 as adopted by USDA through 2
CFR part 400.
(9) Personnel procedures and practices that will be established or
are in existence. Forms to be used should be submitted with the
application.
(10) A proposed monthly activities schedule showing the proposed
dates for starting and completing the recruitment, loan processing and
construction phases for each group of participant families.
[55 FR 41833, Oct. 16, 1990, as amended at 61 FR 39851, July 31, 1996;
79 FR 76009, Dec. 19, 2014]
Sec. 1944.411 Conditions for approving a grant.
A grant may be approved for an eligible applicant when the
conditions in the letter of conditions are met and the following
conditions are present:
(a) The applicant has or can hire, or contract directly or
indirectly with, qualified people to carry out its responsibilities in
administering the grant.
(b) The applicant has met all of the conditions listed in Sec.
1944.410(e) of this subpart.
(c) The grantee furnishes a signed statement that it complies with
the requirements of the Departmental Regulations found in 2 CFR part 200
as adopted by USDA through 2 CFR part 400.
(d) A resolution has been adopted by the board of directors which
authorizes the appropriate officer to execute exhibit A of this subpart
and Form RD 400-4, ``Assurance Agreement.''
(e) The grantee has fidelity bonding as covered in 2 CFR part 200 as
adopted by USDA through 2 CFR part 400 if a nonprofit organization or,
if a State or local government, to the extent required in 2 CFR part 200
as adopted by USDA through 2 CFR part 400.
(f) The grantee has agreed by completing SF-424B, ``Assurances-Non
Construction Programs,'' that it will establish a recordkeeping system
that is certifiable by a certified public accountant that it adequately
meets the Agreement.
(g) The grantee has established an interest bearing checking account
on which at least two bonded officials will sign all checks issued and
understands that interest earned in excess of $250.00 annually must be
submitted to Rural Development quarterly. (The use of minority
depository institutions is encouraged.)
(h) The grantee has developed an agreement to be executed by the
grantee and the self-help participants which clearly sets forth what is
expected of each and has incorporated exhibit B-2 of this subpart which
clearly shows what work is expected of the participating family.
[55 FR 41833, Oct. 16, 1990; 56 FR 19253, Apr. 26, 1991; 79 FR 76010,
Dec. 19, 2014]
Sec. 1944.412 Docket preparation.
When the application and all items required for the complete docket
have been received, the District Director will thoroughly examine it to
insure the application has been properly and accurately prepared and
that it includes the required dates and signatures. The docket items
will be assembled and distributed by the District Director in the
following order:
[[Page 217]]
----------------------------------------------------------------------------------------------------------------
Total No. Signed by No. for agreement
Form No. Name of form or document of copies applicant docket Copy for applicant
----------------------------------------------------------------------------------------------------------------
SF-424................ Application for Federal 3 1 1-O and 1C 1-C
Assistance.
AD-622................ Notice of Preapplication 2 ......... 1-C 1-O
Review Action.
RD 1940-1............. Request for Obligation 4 2 3-O and 2C 1-C
of Funds.
RD 400-4.............. Assurance Agreement..... 2 1 1-O 1-C
HUD Form 935.2, 3 1 1-O and 1C 1-C
Affirmative Fair
Housing Marketing Plan.
Certified Copy 1 1 1-O -
Authorizing Resolution.
Self-Help Technical 2 1 1-O 1-C
Assistance Grant
Agreement (Exhibit A).
Any Personnel Forms to 2 ......... 1-O 1-C
be used.
----------------------------------------------------------------------------------------------------------------
O = Original.
C = Copy.
Sec. 1944.413 Grant approval.
(a) Approval of grant. Within 30 days of the grantee meeting the
conditions of Sec. 1944.411 of this subpart or, if applicable, signing
exhibit D, the approving official will:
(1) Execute and distribute Form RD 1940-1 in accordance with the
Forms Manual Insert (FMI).
(2) After the Finance Office acknowledges that funds are obligated,
request an initial advance of funds on Form RD 440-57, ``Acknowledgment
of Obligated Funds/Check Request,'' in accordance with the FMI. The
amount of this request should cover the applicant's needs for the
remainder of the month in which the grant is closed plus the next month.
Subsequent advances will cover only a one-month period.
(b) Cancellation of an approved grant. An approved grant may be
canceled before closing if the applicant is no longer eligible, the
proposal is no longer feasible, or the applicant requests cancellation.
Cancellation will be accomplished as follows:
(1) The District Director will prepare Form RD 1940-10,
``Cancellation of U.S. Treasury Check and/or Obligation,'' according to
the FMI and send it to the State Director with the reasons for
cancellation. If the State Director approves the request, Form RD 1940-
10 will be returned to the District Office for processing in accordance
with the FMI.
(2) The District Director will notify the applicant of the
cancellation and the right to appeal under subpart B of part 1900 of
this chapter. If the applicant requested the cancellation, no appeal
rights are provided, but the applicant will still be notified of the
cancellation.
(c) Disapproval of grant. If a grant is disapproved after the docket
has been developed, the approving official will state the reason on the
original Form RD 1940-1, or in a memorandum to the District Director.
The District Director will notify the applicant in writing of the
disapproval and the reason for disapproval. Also, the notification will
inform the applicant of its appeal rights under subpart B of part 1900
of this chapter.
Sec. 1944.414 [Reserved]
Sec. 1944.415 Grant approval and other approving authorities.
(a) The State Director is authorized to approve or disapprove TA
grants under this subpart. For a grant in excess of $300,000, or in the
case of a grant amendment when the amount of the grant plus any
unexpended funds from a previous grant will exceed $400,000, prior
written consent of the National Office is required. In such cases, the
docket, along with the State Director's recommendations, must be
submitted to the National Office for review.
(b) The State Director may approve a grant not to exceed $10,000 to
an eligible organization under Sec. 1944.410(d) of this subpart. The
grant must be limited to 6 months and funds must be used for the
development of the final application, family recruitment, and related
activities as explained in Sec. 1944.410(e) of this subpart. The amount
of this grant will not be included in figuring TA cost per units.
(c) The authority to contract for services is limited to the
Administrator of Rural Development.
(d) Monthly expenditures of the grantee will normally be approved by
the District Director unless:
[[Page 218]]
(1) The grantee operates in only one county, in which case the
authority may be delegated to the County Supervisor.
(2) The grantee operates in more than one Rural Development
District, in which case the State Director will designate the approving
official.
(3) The grantee operates in more than one State Director's
jurisdiction, in which case the Administrator will designate the
approving official.
(4) The expenditure is under contract authority, in which case the
Contracting Official Representative will approve the monthly
expenditure.
Sec. 1944.416 Grant closing.
The grant is closed on the date the Agreement is executed as defined
in Sec. 1944.403(a) by the applicant and the Government. Funds may not
be advanced prior to the signing of the Agreement. The District Director
or Assistant District Director are authorized to execute the Agreement
for Rural Development. Person(s) authorized by resolution may sign for
the applicant.
Sec. 1944.417 Servicing actions after grant closing.
Rural Development has a responsibility to help the grantee be
successful and help the grantee avoid cases of fraud and abuse.
Servicing actions also include correlating activities between the
grantee and Rural Development to the benefit of the participating
families. The amount of servicing actions needed will vary in accordance
with the experience of the grantee, but as minimum the following actions
are required:
(a) Monthly, the grantee will provide the District Director with a
request for additional funds on Form SF-270, ``Request for Advance or
Reimbursement.'' This request need only show the amount of funds used
during the previous month, amount of unspent funds, projected need for
the next 30 days, and written justification if the request exceeds the
projected need for the next 30 days. This request must be in the
District Director's office fifteen days prior to the beginning of the
month. Upon receipt of the grantee's request, the District Director
will:
(1) If the request appears to be in order, process Form RD 440-57 so
that delivery of the check will be possible on the first of the next
month.
(2) If the request does not appear to be in order, immediately
contact the grantee to resolve the problem. After the contact:
(i) If the explanation is acceptable, process Form RD 440-57 so
delivery may be possible by the first of the next month, or
(ii) If the explanation is not acceptable, immediately notify the
grantee and request the amount of funds that appear reasonable for the
next 30 days on Form RD 440-57, so that delivery may be possible by the
first of the next month. Unapproved funds that are later approved will
be added to the next month's request.
(b) Quarterly, the grantee will submit exhibit B of this subpart in
an original and three copies to the County Supervisor on or before
January 15, April 15, July 15, and October 15 which will verify its
progress toward meeting the objectives stated in the Agreement and the
application. The County Supervisor will immediately complete the County
Office review part and forward the report to the District Office. After
exhibit B is received in the District Office, a meeting should be
scheduled between the grantee, District Director, and the County
supervisor since this is an opportune time for both the grantee and
Rural Development to review progress to date and make necessary
adjustments for the future. This meeting is required if the grantee was
previously identified as a problem grantee or will be identified as a
problem grantee at this time. Regardless of whether a meeting will be
held, the following will be done:
(1) Exhibit B and other information will be evaluated to determine
progress made to date. The District Director will comment on exhibit B
as to whether the grantee is ahead or behind schedule in each of the
following areas:
(i) Assisting the projected number of families.
(ii) Serving very low-income applicants. Is the grantee reaching a
minimum of very low-income families as required in exhibit A, attachment
2 to subpart L of
[[Page 219]]
part 1940 of this chapter (available in any Rural Development office).
(iii) Equivalent units (EUs). Is the number of EUs completed
representative of lapse in time of the grant? For example, if 25 percent
of the grant period has elapsed, are 25 percent of the number of EUs
completed?
(iv) Labor contributions by the family. Are the families working
together and are they completing the labor tasks as established on
exhibit B-2?
(2) The District Director will submit exhibit B to the State
Director who will evaluate the quarterly report along with the District
Director's comments. If the State Director determines the grantee is
progressing satisfactorily, the State Director will sign and forward
exhibit B to the National Office. However, if the State Director
determines the grantee is not performing as expected, the State Director
will notify the grantee that it has been classified a ``High Risk''
grantee. The notice will specify the deficiencies and inform the grantee
of proposed remedies for noncompliance. The notice will advise the
grantee that Rural Development is available to assist and provide the
name and address of an organization that is under contract with Rural
Development to assist them. The State Director will forward a copy of
exhibit B, District Directors comments, and the reasons for classifying
them as ``High Risk'' to the National Office, Single Family Housing,
Special Programs Branch. When the period of time provided for corrective
action has expired, an assessment will be made of the progress by the
grantee toward correcting the situation. If the State Director
determines:
(i) The situation has been corrected or reasonable progress has been
made toward correcting the situation, the ``High Risk'' status will be
lifted and the grantee so notified.
(ii) The situation has not been corrected but it is correctable if
additional time is granted, an extension will be issued.
(iii) The situation has not been corrected and it is unlikely to be
corrected if given additional time, the grant will be terminated under
Sec. 1944.426(b)(1) of this subpart.
[55 FR 41833, Oct. 16, 1990; 56 FR 19253, Apr. 26, 1991]
Sec. 1944.418 [Reserved]
Sec. 1944.419 Final grantee evaluation.
Near the end of the grant period but prior to the last month, an
evaluation of the grantee will be conducted by Rural Development. The
State Director may use Rural Development employees or an organization
under contract to Rural Development to provide the evaluation. The
evaluation is to determine how successful the grantee was in meeting
goals and objectives as defined in the agreement, application, this
regulation, and any amendments.
(a) This is a quantitative evaluation of the grantee to determine if
it met its goals in:
(1) Assisting the project number of families in obtaining adequate
housing.
(2) Meeting the goal of assisting very low-income families.
(3) Meeting the family labor requirement in Sec. 1944.411(h) and
exhibit B-2 of this subpart.
(4) Keeping costs within the guides set in Sec. 1944.407.
(5) Meeting order objectives in the Agreement.
(b) The evaluation is a narrative addressed to the State Director
with a copy of the National Office, Single Family Housing Processing
Division. It will be in 3 parts, namely; findings, recommendations, and
an overall rating. The rating will be either unacceptable, acceptable,
or outstanding, as follows:
(1) Outstanding if the grantee met or exceeded all of the goals in
paragraph (a) of this section.
(2) Acceptable if the grantee met or exceeded all of the goals as
defined in paragraph (a) except two.
(3) Unacceptable if the grantee failed to obtain an acceptable
rating.
(c) After the State Director has reviewed the evaluation, a copy
will be mailed to the grantee. The grantee may request a review of the
evaluation with the District Director. This review is for clarification
of the material and to dispute the findings if they are known to be
wrong. The rating is not
[[Page 220]]
open for discussion except to the extent it can be proven that the
findings do not support the rating. If this is the case, the District
Director will file an amendment to the State Director.
Sec. 1944.420 Extension or revision of the grant agreement.
The State Director may authorize the District Director to execute on
behalf of the Government, exhibit C of this subpart, at any time during
the grant period provided:
(a) The extension period is for no more than one year from the final
date of the existing Agreement.
(b) The need for the extension is clearly justified.
(c) If additional funds are needed, a revised budget is submitted
with complete justification, and
(d) The grantee is within the guidelines in Sec. 1944.407 of this
subpart or the State Director determines that the best interest of the
Government will be served by the extension.
Sec. 1944.421 Refunding of an existing grantee.
Grantees wishing to continue with self-help efforts after the end of
the current grant plus any extensions should file Form SF-424, in
accordance with Sec. 1944.410(e). It is recommended that it be filed at
least 6 months before the end of the current grant period. Funds from
the existing grant may be used to meet the conditions of a new grant to
serve the same or redefined geographic area. If the grantee is targeting
a different geographic area, a new preapplication must be submitted in
accordance with Sec. 1944.410 and the grantee may apply for a
predevelopment grant in accordance with Sec. 1944.410(d). In addition
to meeting the conditions of an applicant as defined in Sec. 1944.411
of this subpart, the grantee must also have received or will receive an
acceptable rating on its current grant unless an exception is granted by
the State Director. The State Director may grant an exception to the
rating if it is determined that the reasons causing the previous
unacceptable rating have been removed or will be removed with the
approval of this grant.
Sec. 1944.422 Audit and other report requirements.
The grantee must submit an audit to the appropriate Rural
Development District Office annually (or biennially if a State or local
government with authority to do a less frequent audit requests it) and
within 90 days of the end of the grantee's fiscal year, grant period, or
termination of the grant. The audit, conducted by the grantee's
auditors, is to be performed in accordance with Generally Accepted
Government Auditing Standards (GAGAS), using the publication ``Standards
for Audit of Governmental Organizations, Programs, Activities and
Functions'' developed by the Comptroller General of the United States in
1981, and any subsequent revisions. In addition, the audits are also to
be performed in accordance with 2 CFR part 200 as adopted by USDA
through 2 CFR part 400 and Rural Development requirements as specified
in this subpart. Audits of borrower loan funds will be required. The
number of borrower accounts audited will be determined by the auditor.
In incidences where it is difficult to determine the appropriate number
of accounts to be audited, auditors should be authorized by the State
Director to audit the lesser of 10 loans or 10 percent of total loans.
(a) Nonprofit organizations and others. If determined necessary,
these organizations are to be audited in accordance with Rural
Development requirements in accordance with 2 CFR part 200 as adopted by
USDA through 2 CFR part 400. These requirements also apply to public
hospitals, public colleges, and universities if they are excluded from
the audit requirements of paragraph (b) of this section.
(1) An audit conducted by the grantee's auditor shall be supplied to
the Rural Development District Director as soon as possible but in no
case later than ninety (90) days following the period covered by the
grant agreement.
(2) Auditors shall promptly notify United States Department of
Agriculture's Office of the Inspector General Regional Inspector General
and the Rural Development District Office, in writing, of any indication
of fraud, abuse, or illegal acts in grantees use of
[[Page 221]]
grant funds or in the handling of borrowers accounts.
(3) Nonprofit organizations that receive less than $25,000 a year in
Federal financial assistance need not be audited.
(b) State and local governments and Indian tribes. These
organizations are to be audited in accordance with this subpart and 2
CFR part 200 as adopted by USDA through 2 CFR part 400. The grantee will
forward completed audits to the appropriate Federal Cognizant agency and
a copy to the Rural Development District Director. ``Cognizant agency''
for audits is defined at 2 CFR 200.18 as the Federal agency designated
to carry out the responsibilities described in Sec. 200.513
Responsibilities, paragraph (a). The cognizant agency for audit is not
necessarily the same as the cognizant agency for indirect costs. A list
of cognizant agencies for audit may be found at the FAC Web site. Within
USDA, the OIG shall fulfill cognizant agency responsibilities. Smaller
grantees not assigned a cognizant agency by OMB should contact the
Federal agency that provided the most funds. When USDA is designated as
the cognizant agency or when it has been determined by the borrower that
Rural Development provided the major portion of Federal financial
assistance, the State Director will contact the appropriate USDA OIG
Regional Inspector General. Rural Development and the borrower shall
coordinate all proposed audit plans with the appropriate USDA OIG.
(1) State and local governments and Indian tribes that receive
$25,000 or more a year in Federal financial assistance shall have an
audit made in accordance with 2 CFR part 200 as adopted by USDA through
2 CFR part 400.
(2) State and local and Indian tribes that receive less than $25,000
a year in Federal financial assistance shall be exempt from 2 CFR part
200 as adopted by USDA through 2 CFR part 400.
(3) Public hospitals and public colleges and universities may be
excluded by the State Director from OMB Circular A-128 audit
requirements. If such entities are excluded, audits shall be made in
accordance with paragraph (a) of this section.
[55 FR 41833, Oct. 16, 1990; 56 FR 19253, Apr. 26, 1991; 79 FR 76010,
Dec. 19, 2014]
Sec. 1944.423 Loan packaging and 502 RH application submittal.
A grantee is required to assist 502 RH applicants in submitting
their application for a RH loan. Loan packaging will be performed in
accordance with 7 CFR part 3550; therefore, it is important that the
grantee be trained at an early date in the packaging of RH loans.
Typically, this training should take place before the first applications
are submitted to the County Office and before the grant is closed. A
grantee should become very knowledgeable of Rural Development's
eligibility requirements but must understand that only Rural Development
can approve or deny an applicant assistance. Grantee must work
cooperatively with Rural Development in the 502 loan approval process
and must work within the regulations for the 502 program and recognize
Rural Development's ultimate decision making authority to approve or
deny loans. However, the grantee may ask for clarification that may be
helpful in working with future applicants. Grant funds may not be used
to pay any expense in connection with an appeal that the applicant may
file or pursue.
[55 FR 41833, Oct. 16, 1990, as amended at 67 FR 78328, Dec. 24, 2002]
Sec. 1944.424 Dwelling construction and standards.
All construction will be performed in accordance with subpart A of
part 1924 of this chapter. The planned work must meet the building
requirements of 7 CFR part 3550 and meet the Development Standards as
defined in subpart A of part 1924 of this chapter and in any local
codes. Sites and site developments must conform to the requirements of
subpart C of part 1924 of this chapter.
[55 FR 41833, Oct. 16, 1990, as amended at 67 FR 78328, Dec. 24, 2002]
[[Page 222]]
Sec. 1944.425 Handling and accounting for borrower loan funds.
Grantees will be required to administer borrower loan funds during
the construction phases. The extent of their involvement will depend on
the experience of the grantee and the amount of authority delegated to
them by the District Director in accordance with Sec. 1924.6(c) of
subpart A of part 1924 of this chapter. Training should include Rural
Development's non-discrimination policies in receiving applications.
Sec. 1944.426 Grant closeout.
(a) Grant purposes completed. Promptly after the date of completion,
grant closeout actions will be taken to allow the orderly discontinuance
of grantee activity.
(1) The grantee will immediately refund to Rural Development any
balance of grant funds that are not committed for the payment of
authorized expenses.
(2) The grantee will furnish Form SF-269A, ``Financial Status Report
(short form)'' to Rural Development within 90 days after the date of
completion of the grant. All other financial, performance, and other
reports required as a condition of the grant also will be completed.
(3) After the grant closeout, Rural Development retains the right to
recover any disallowed costs which are discovered as a result of the
final audit. 7 CFR part 3550 will be used by Rural Development to
recover any unauthorized expenditures.
(4) The grantee will provide Rural Development an audit conforming
to those requirements established in this part, including audits of
self-help borrower accounts.
(5) Upon request from the recipient, any allowable reimbursable cost
not covered by previous payments shall be promptly paid by Rural
Development.
(b) Grant purposes not completed--(1) Notification of termination.
The State Director will promptly notify the grantee and the National
Office in writing of the termination action including the specific
reasons for the decision and the effective date of the termination. The
notification to the grantee will specify that if the grantee believes
the reason for the proposed termination can be resolved, the grantee
should, within 15 calendar days of the date of this notification,
contact the State Director in writing requesting a meeting for further
consideration. The meeting will be an informal proceeding at which the
grantee will be given the opportunity to provide whatever additional
information it believes should be considered in reaching a decision
concerning the case. The grantee may have an attorney or any other
person present at the meeting if desired. Within 7 calendar days of the
meeting, the State Director will determine what action to take.
(i) If the State Director determines that termination is not
necessary, the grantee will be informed by letter along with the
District Director.
(ii) If the State Director determines that termination of the grant
is appropriate, he/she will promptly inform the grantee by the use of
exhibit B-3 of subpart B of part 1900 of this chapter.
(2) National Office review. (i) Upon receipt of a request from a
grantee that the decision of the State Director be reconsidered, the
National Office will make a preliminary decision concerning the
continued funding of the grantee during the appeal period. Written
notification of the decision will be given to the State Director and
grantee.
(ii) The National Office will then obtain a comprehensive report on
the matter from the State Office. This information will be considered
together with any additional information that may be provided by the
grantee.
(c) Grant suspension. When the grantee has failed to comply with the
terms of the agreement, the District Director will promptly report the
facts to the State Director. The State Director will consider
termination or suspension of the grant usually only after a Grantee has
been classified as ``high risk'' in accordance with Sec.
1944.417(b)(2). When the State Director determines that the grantee has
a reasonable potential to correct deficiencies the grant may be
suspended. The State Director will request written authorization from
the National Office to suspend a grantee. The suspension will adhere to
2 CFR part 200 as adopted by USDA through 2
[[Page 223]]
CFR part 400. The grantee will be notified of the grant suspension in
writing by the State Director. The State Director will also promptly
inform the grantee of its rights to appeal the decision by use of
Exhibit B-3 of Subpart B of part 1900 of this chapter.
(d) Grant termination. The State Director may terminate the grant
agreement whenever Rural Development determines that the grantee has
failed to comply with terms of the Agreement. The reasons for
termination may include, but are not limited to, such problems as listed
in paragraph (e)(3)(i) of exhibit A of this subpart. The State Director
may also withhold further disbursement of grant funds and prohibit the
grantee from incurring additional obligations of grant funds with
written approval of the National Office. Rural Development will allow
all necessary and proper costs which grantee could not reasonably avoid.
(1) Termination for cause. The grant agreement may be terminated in
whole, or in part, at any time before date of completion, whenever Rural
Development determines that the grantee has failed to comply with terms
of the Agreement. The State Director will notify the grantee in writing
giving the reasons for the action and inform the grantee of its rights
of appeal by use of exhibit B-3 of subpart B of part 1900 of this
chapter.
(2) Termination for convenience. FmHA or its successor agency under
Public Law 103-354 or the grantee may terminate the grant in whole, or
in part, when both parties agree that the continuation of the grant
would not produce beneficial results. The two parties will agree in
writing to the termination conditions including the effective date. No
notice of rights of appeal will be issued by Rural Development.
[55 FR 41833, Oct. 16, 1990, as amended at 67 FR 78328, Dec. 24, 2002;
68 FR 61331, Oct. 28, 2003; 79 FR 76010, Dec. 19, 2014]