24 CFR Part 5

SUBCHAPTER C—COMMUNITY FACILITIES

PART 570—COMMUNITY 570.416 Hispanic-serving institutions work DEVELOPMENT BLOCK GRANTS study program. Subpart F—Small Cities, Non-Entitlement Subpart A—General Provisions CDBG Grants in Hawaii and Insular Sec. Areas Programs 570.1 Purpose and primary objective. 570.420 General. 570.3 Definitions. 570.421 New York Small Cities Program de- 570.4 Allocation of funds. sign. 570.5 Waivers. 570.422–4.25 [Reserved] 570.426 Program income. Subpart B [Reserved] 570.427 Program amendments. 570.428 [Reserved] Subpart C—Eligible Activities 570.429 Hawaii general and grant require- 570.200 General policies. ments. 570.201 Basic eligible activities. 570.431 Citizen participation. 570.202 Eligible rehabilitation and preserva- 570.440 Application requirements for insular tion activities. area grants funded under section 106. 570.203 Special economic development ac- 570.441 Citizen participation—insular areas. tivities. 570.442 Reallocations-Insular Areas. 570.204 Special activities by Community- Based Development Organizations Subpart G—Urban Development Action (CBDOs). Grants 570.205 Eligible planning, urban environ- 570.450 Purpose. mental design and policy-planning-man- 570.456 Ineligible activities and limitations agement-capacity building activities. on eligible activities. 570.206 Program administrative costs. 570.207 Ineligible activities. 570.457 Displacement, relocation, acquisi- 570.208 Criteria for national objectives. tion, and replacement of housing. 570.209 Guidelines for evaluating and select- 570.461 Post-preliminary approval require- ing economic development projects. ments; lead-based paint. 570.210 Prohibition on use of assistance for 570.463 Project amendments and revisions. employment relocation activities. 570.464 Project closeout. 570.465 Applicability of rules and regula- Subpart D—Entitlement Grants tions. 570.466 Additional application submission 570.300 General. requirements for Pockets of Poverty— 570.301 Activity locations and float-funding. employment opportunities. 570.302 Submission requirements. 570.303 Certifications. Subpart H [Reserved] 570.304 Making of grants. 570.307 Urban counties. Subpart I—State Community Development 570.308 Joint requests. Block Grant Program 570.309 Restriction on location of activities. 570.480 General. Subpart E—Special Purpose Grants 570.481 Definitions. 570.482 Eligible activities. 570.400 General. 570.483 Criteria for national objectives. 570.401 Community adjustment and eco- 570.484 Overall benefit to low and moderate nomic diversification planning assist- income persons. ance. 570.485 Making of grants. 570.402 Technical assistance awards. 570.486 Local government requirements. 570.403 New Communities. 570.487 Other applicable laws and related 570.404 Historically Black colleges and uni- program requirements. versities program. 570.488 Displacement, relocation, acquisi- 570.405 The insular areas. tion, and replacement of housing. 570.406 Formula miscalculation grants. 570.489 Program administrative require- 570.410 Special Projects Program. ments. 570.411 Joint Community Development Pro- 570.490 Recordkeeping requirements. gram. 570.491 Performance and evaluation report. 570.415 Community Development Work 570.492 State’s reviews and audits. Study Program. 570.493 HUD’s reviews and audits.

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570.494 Timely distribution of funds by 570.707 Applicability of rules and regula- states. tions. 570.495 Reviews and audits response. 570.708 Sanctions. 570.496 Remedies for noncompliance; oppor- 570.709 Allocation of loan guarantee assist- tunity for hearing. ance. 570.497 Condition of State election to ad- 570.710 State responsibilities. minister State CDBG Program. 570.711 State borrowers; additional requirements and application procedures. Subpart J—Grant Administration 570.500 Definitions. Subpart N—Urban Renewal Provisions 570.501 Responsibility for grant administration. 570.800 Urban renewal regulations. 570.502 Applicability of uniform administrative requirements. Subpart O—Performance Reviews 570.503 Agreements with subrecipients. 570.504 Program income. 570.900 General. 570.505 Use of real property. 570.901 Review for compliance with the pri- 570.506 Records to be maintained. mary and national objectives and other 570.507 Reports. program requirements. 570.508 Public access to program records. 570.902 Review to determine if CDBG funded 570.509 Grant closeout procedures. activities are being carried out in a time- 570.510 Transferring projects from urban ly manner. counties to metropolitan cities. 570.903 Review to determine if the recipient 570.511 Use of escrow accounts for rehabili- is meeting its consolidated plan respon- tation of privately owned residential sibilities. property. 570.904 Equal opportunity and fair housing 570.512 [Reserved] review criteria. 570.513 Lump sum drawdown for financing 570.905 Review of continuing capacity to of property rehabilitation activities. carry out CDBG funded activities in a timely manner. Subpart K—Other Program Requirements 570.906 Review of urban counties. 570.600 General. 570.907–570.909 [Reserved] 570.601 Public Law 88–352 and Public Law 90– 570.910 Corrective and remedial actions. 284; affirmatively furthering fair hous- 570.911 Reduction, withdrawal, or adjusting; Executive Order 11063. ment of a grant or other appropriate ac- 570.602 Section 109 of the Act. tion. 570.603 Labor standards. 570.912 Nondiscrimination compliance. 570.604 Environmental standards. 570.913 Other remedies for noncompliance. 570.605 National Flood Insurance Program. APPENDIX A TO PART 570—GUIDELINES AND 570.606 Displacement, relocation, acquisi- OBJECTIVES FOR EVALUATING PROJECT tion, and replacement of housing. COSTS AND FINANCIAL REQUIREMENTS 570.607 Employment and contracting opportunities. AUTHORITY: 42 U.S.C. 3535(d) and 5301–5320. 570.608 Lead-based paint. 570.609 Use of debarred, suspended or ineli- SOURCE: 40 FR 24693, June 9, 1975, unless gible contractors or subrecipients. otherwise noted. 570.610 Uniform administrative requirements and cost principles. Subpart A—General Provisions 570.611 Conflict of interest. 570.612 Executive Order 12372. 570.613 Eligibility restrictions for certain SOURCE: 53 FR 34437, Sept. 6, 1988, unless resident aliens. otherwise noted. 570.614 Architectural Barriers Act and the Americans with Disabilities Act. § 570.1 Purpose and primary objective. (a) This part describes policies and Subpart L [Reserved] procedures applicable to the following Subpart M—Loan Guarantees programs authorized under title I of the Housing and Community Develop- 570.700 Purpose. ment Act of 1974, as amended: 570.701 Definitions. (1) Entitlement grants program (sub- 570.702 Eligible applicants. part D); 570.703 Eligible activities. 570.704 Application requirements. (2) Nonentitlement Funds: HUD-ad- 570.705 Loan requirements. ministered Small Cities and Insular 570.706 Federal guarantee; subrogation. Area programs (subpart F);

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(3) State program: State-adminis- Development Act of 1974, loans guaran- tered CDBG nonentitlement funds (sub- teed under subpart M of this part, part I); urban renewal surplus grant funds, and (4) Special Purpose Grants (subpart program income as defined in E); § 570.500(a). (5) Urban Development Action Grant Chief executive officer of a State or program (subpart G); and unit of general local government (6) Loan Guarantees (subpart M). means the elected official or the le- (b) Subparts A, C, J, K, and O apply gally designated official, who has the to all programs in paragraph (a) except primary responsibility for the conduct as modified or limited under the provi- of that entity’s governmental affairs. sions of these subparts or the applica- Examples of the ‘‘chief executive offi- ble program regulations. In the appli- cer’’ of a unit of general local govern- cation of the subparts to Special Pur- ment are: the elected mayor of a mu- pose Grants or the Urban Development nicipality; the elected county execu- Action Grant program, the reference to tive of a county; the chairperson of a funds in the form of grants in the term county commission or board in a coun- ‘‘CDBG funds’’, as defined in § 570.3, ty that has no elected county execu- shall mean the grant funds under those tive; and the official designated pursu- programs. The subparts do not apply to ant to law by the governing body of a the State program (subpart I) except to unit of general local government. the extent expressly referred to. City means the following: (c) The primary objective of the programs authorized under title I of the (1) For purposes of Entitlement Com- Housing and Community Development munity Development Block Grant and Act of 1974, as amended, is described in Urban Development Action Grant eligi- section 101(c) of the Act (42 U.S.C. bility: 5301(c)). (i) Any unit of general local government that is classified as a munici- [53 FR 34437, Sept. 6, 1988, as amended at 56 pality by the United States Bureau of FR 56126, Oct. 31, 1991; 61 FR 11475, Mar. 20, the Census, or 1996; 69 FR 32778, June 10, 2004] (ii) Any other unit of general local § 570.3 Definitions. government that is a town or township The terms HUD and Secretary are de- and that, in the determination of the fined in 24 CFR part 5. All of the fol- Secretary: lowing definitions in this section that (A) Possesses powers and performs rely on data from the United States functions comparable to those associ- Bureau of the Census shall rely upon ated with municipalities; the data available from the latest de- (B) Is closely settled (except that the cennial census. Secretary may reduce or waive this re- Act means title I of the Housing and quirement on a case by case basis for Community Development Act of 1974 as the purposes of the Action Grant pro- amended (42 U.S.C. 5301 et seq.). gram); and Age of housing means the number of (C) Contains within its boundaries no year-round housing units, as further incorporated places as defined by the defined in section 102(a)(11) of the Act. United States Bureau of the Census Applicant means a State or unit of that have not entered into cooperation general local government that makes agreements with the town or township application pursuant to the provisions for a period covering at least 3 years to of subpart E, F, G or M. undertake or assist in the undertaking Buildings for the general conduct of of essential community development government shall have the meaning pro- and housing assistance activities. The vided in section 102(a)(21) of the Act. determination of eligibility of a town CDBG funds means Community De- or township to qualify as a city will be velopment Block Grant funds, includ- based on information available from ing funds received in the form of grants the United States Bureau of the Census under subpart D, F, or § 570.405 of this and information provided by the town part, funds awarded under section or township and its included units of 108(q) of the Housing and Community general local government.

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(2) For purposes of Urban Develop- Family refers to the definition of ment Action Grant eligibility only, ‘‘family’’ in 24 CFR 5.403. Guam, the Virgin Islands, American Household means all persons occu- Samoa, the Commonwealth of the pying a housing unit. The occupants Northern Mariana Islands, the counties may be a family, as defined in 24 CFR of Kauai, Maui, and Hawaii in the 5.403; two or more families living to- State of Hawaii, and Indian tribes that gether; or any other group of related or are eligible recipients under the State unrelated persons who share living ar- and Local Government Fiscal Assist- rangements, regardless of actual or ance Act of 1972 and located on reserva- perceived, sexual orientation, gender tions in Oklahoma as determined by identity, or marital status. the Secretary of the Interior or in Income. For the purpose of deter- Alaskan Native Villages. mining whether a family or household Community Development Financial In- is low- and moderate-income under stitution has the same meaning as used subpart C of this part, grantees may se- in the Community Development Bank- lect any of the three definitions listed ing and Financial Institutions Act of below for each activity, except that in- 1994 (12 U.S.C. 4701 note). tegrally related activities of the same Consolidated plan. The plan prepared type and qualifying under the same in accordance with 24 CFR part 91, paragraph of § 570.208(a) shall use the which describes needs, resources, prior- same definition of income. The option ities and proposed activities to be un- to choose a definition does not apply to dertaken with respect to HUD pro- activities that qualify under grams, including the CDBG program. § 570.208(a)(1) (Area benefit activities), An approved consolidated plan means a except when the recipient carries out a consolidated plan that has been ap- survey under § 570.208(a)(1)(vi). Activi- proved by HUD in accordance with 24 ties qualifying under § 570.208(a)(1) gen- CFR part 91. erally must use the area income data Discretionary grant means a grant supplied to recipients by HUD. The made from the various Special Purpose three definitions are as follows: Grants in accordance with subpart E of (1)(i) ‘‘Annual income’’ as defined this part. under the Section 8 Housing Assistance Entitlement amount means the amount Payments program at 24 CFR 813.106 of funds which a metropolitan city is (except that if the CDBG assistance entitled to receive under the Entitle- being provided is homeowner rehabili- ment grant program, as determined by tation under § 570.202, the value of the formula set forth in section 106 of the homeowner’s primary residence may be Act. excluded from any calculation of Net Extent of growth lag shall have the Family Assets); or meaning provided in section 102(a)(12) (ii) Annual income as reported under of the Act. the Census long-form for the most re- Extent of housing overcrowding shall cent available decennial Census. This have the meaning provided in section definition includes: 102(a)(10) of the Act. (A) Wages, salaries, tips, commis- Extent of poverty means the number sions, etc.; of persons whose incomes are below the (B) Self-employment income from poverty level based on data compiled own nonfarm business, including pro- and published by the United States Bu- prietorships and partnerships; reau of the Census available from the (C) Farm self-employment income; latest census referable to the same (D) Interest, dividends, net rental in- point or period in time and the latest come, or income from estates or trusts; reports from the Office of Management (E) Social Security or railroad retire- and Budget. For purposes of this part, ment; the Secretary has determined that it is (F) Supplemental Security Income, neither feasible nor appropriate to Aid to Families with Dependent Chil- make adjustments at this time in the dren, or other public assistance or pub- computations of ‘‘extent of poverty’’ lic welfare programs; for regional or area variations in in- (G) Retirement, survivor, or dis- come and cost of living. ability pensions; and

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(H) Any other sources of income re- very low-income limit, established by ceived regularly, including Veterans’ HUD. (VA) payments, unemployment com- Moderate-income person means a mem- pensation, and alimony; or ber of a family that has an income (iii) Adjusted gross income as defined equal to or less than the Section 8 low- for purposes of reporting under Inter- income limit and greater than the Sec- nal Revenue Service (IRS) Form 1040 tion 8 very low-income limit, estab- for individual Federal annual income lished by HUD. Unrelated individuals tax purposes. shall be considered as one-person fami- (2) Estimate the annual income of a lies for this purpose. family or household by projecting the Nonentitlement amount means the prevailing rate of income of each per- amount of funds which is allocated for son at the time assistance is provided use in a State’s nonentitlement areas for the individual, family, or household as determined by formula set forth in (as applicable). Estimated annual in- section 106 of the Act. come shall include income from all Nonentitlement area shall have the family or household members, as appli- meaning provided in section 102(a)(7) of cable. Income or asset enhancement the Act. derived from the CDBG-assisted activ- Population means the total resident ity shall not be considered in calcu- population based on data compiled and lating estimated annual income. published by the United States Bureau Insular area shall have the meaning of the Census available from the latest provided in section 102(a)(24) of the census or which has been upgraded by Act. the Bureau to reflect the changes re- Low- and moderate-income household sulting from the Boundary and Annex- means a household having an income ation Survey, new incorporations and equal to or less than the Section 8 low- consolidations of governments pursu- income limit established by HUD. ant to § 570.4, and which reflects, where Low- and moderate-income person applicable, changes resulting from the means a member of a family having an Bureau’s latest population determina- income equal to or less than the Sec- tion through its estimating technique tion 8 low-income limit established by using natural changes (birth and death) HUD. Unrelated individuals will be and net migration, and is referable to considered as one-person families for the same point or period in time. this purpose. Small business means a business that Low-income household means a house- meets the criteria set forth in section hold having an income equal to or less 3(a) of the Small Business Act (15 than the Section 8 very low-income U.S.C. 631, 636, 637). limit established by HUD. State shall have the meaning provided Low-income person means a member in section 102(a)(2) of the Act. of a family that has an income equal to Unit of general local government shall or less than the Section 8 very low-in- have the meaning provided in section come limit established by HUD. Unre- 102(a)(1) of the Act. lated individuals shall be considered as Urban county shall have the meaning one-person families for this purpose. provided in section 102(a)(6) of the Act. Metropolitan area shall have the For the purposes of this definition, meaning provided in section 102(a)(3) of HUD will determine whether the coun- the Act. ty’s combined population contains the Metropolitan city shall have the mean- required percentage of low- and mod- ing provided in section 102(a)(4) of the erate-income persons by identifying Act except that the term ‘‘central the number of persons that resided in city’’ is replaced by ‘‘principal city.’’ applicable areas and units of general Microenterprise shall have the mean- local government based on data from ing provided in section 102(a)(22) of the the most recent decennial census, and Act. using income limits that would have Moderate-income household means a applied for the year in which that cen- household having an income equal to sus was taken. or less than the Section 8 low-income Urban Development Action Grant limit and greater than the Section 8 (UDAG) means a grant made by the

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Secretary pursuant to section 119 of cipal cities, as officially designated by the Act and subpart G of this part. the Office of Management and Budget [53 FR 34437, Sept. 6, 1988; 53 FR 41330, Oct. 21, as of such date. 1988, as amended at 56 FR 56126, Oct. 31, 1991; (d) In determining whether a county 60 FR 1915, 1943, Jan. 5, 1995; 60 FR 56909, Nov. qualifies as an urban county, and in 9, 1995; 61 FR 5209, Feb. 9, 1996; 61 FR 11475, computing entitlement amounts for Mar. 20, 1996; 61 FR 18674, Apr. 29, 1996; 68 FR urban counties, the demographic val- 69582, Dec. 12, 2003; 69 FR 32778, June 10, 2004; ues of population, poverty, housing 77 FR 5675, Feb. 3, 2012] overcrowding, and age of housing of § 570.4 Allocation of funds. any Indian tribes located within the county shall be excluded. In allocating (a) The determination of eligibility amounts to States for use in non- of units of general local government to entitlement areas, the demographic receive entitlement grants, the entitle- values of population, poverty, housing ment amounts, the allocation of appropriated funds to States for use in non- overcrowding and age of housing of all entitlement areas, the reallocation of Indian tribes located in all nonentitled funds, the allocation of appropriated areas shall be excluded. It is recognized funds to insular areas, and the alloca- that all such data on Indian tribes are tion of appropriated funds for discre- not generally available from the tionary grants under the Secretary’s United States Bureau of the Census Fund shall be governed by the policies and that missing portions of data will and procedures described in sections have to be estimated. In accomplishing 106 and 107 of the Act, as appropriate. any such estimates the Secretary may (b) The definitions in § 570.3 shall gov- use such other related information ern in applying the policies and proce- available from reputable sources as dures described in sections 106 and 107 may seem appropriate, regardless of of the Act. the data’s point or period of time and (c) In determining eligibility for enti- shall use the best judgement possible tlement and in allocating funds under in adjusting such data to reflect the section 106 of the Act for any federal same point or period of time as the fiscal year, HUD will recognize cor- overall data from which the Indian porate status and geographical bound- tribes are being deducted, so that such aries and the status of metropolitan deduction shall not create an imbal- areas and principal cities effective as ance with those overall data. of July 1 preceding such federal fiscal (e) Amounts remaining after closeout year, subject to the following limita- of a grant which are required to be re- tions: turned to HUD under the provisions of (1) With respect to corporate status § 570.509, Grant closeout procedures, as certified by the applicable State and shall be considered as funds available available for processing by the Census for reallocation unless the appropria- Bureau as of such date; tion under which the funds were pro- (2) With respect to boundary changes vided to the Department has lapsed. or annexations, as are used by the Cen- sus Bureau in preparing population es- [53 FR 34437, Sept. 6, 1988, as amended at 68 timates for all general purpose govern- FR 69582, Dec. 12, 2003; 69 FR 32778, June 10, mental units and are available for 2004] processing by the Census Bureau as of such date, except that any such bound- § 570.5 Waivers. ary changes or annexations which re- HUD’s authority for the waiver of sult in the population of a unit of gen- regulations and for the suspension of eral local government reaching or ex- requirements to address damage in a ceeding 50,000 shall be recognized for Presidentially declared disaster area is this purpose whether or not such described in 24 CFR part 5 and in sec- changes are used by the Census Bureau tion 122 of the Act, respectively. in preparing such population estimates; and [61 FR 11476, Mar. 20, 1996] (3) With respect to the status of Met- ropolitan Statistical Areas and prin- Subpart B [Reserved] 36

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Subpart C—Eligible Activities less than 70 percent of the aggregate of CDBG fund expenditures shall be for activities meeting the criteria under SOURCE: 53 FR 34439, Sept. 6, 1988, unless otherwise noted. § 570.208(a) or under § 570.208(d)(5) or (6) for benefiting low- and moderate-in- § 570.200 General policies. come persons. For grants under section (a) Determination of eligibility. An ac- 107 of the Act, insular area recipients tivity may be assisted in whole or in must meet this requirement for each part with CDBG funds only if all of the separate grant. See § 570.420(d)(3) for ad- following requirements are met: ditional discussion of the primary ob- (1) Compliance with section 105 of the jective requirement for insular areas Act. Each activity must meet the eligi- funded under section 106 of the Act. bility requirements of section 105 of The requirements for the HUD-admin- the Act as further defined in this sub- istered Small Cities program in New part. York are at § 570.420(d)(2). In deter- (2) Compliance with national objectives. mining the percentage of funds ex- Grant recipients under the Entitlement pended for such activities: and HUD-administered Small Cities (i) Cost of administration and plan- programs and recipients of insular area ning eligible under § 570.205 and § 570.206 funds under section 106 of the Act must will be assumed to benefit low and certify that their projected use of funds moderate income persons in the same has been developed so as to give maximum feasible priority to activities proportion as the remainder of the which will carry out one of the na- CDBG funds and, accordingly shall be tional objectives of benefit to low- and excluded from the calculation; moderate-income families or aid in the (ii) Funds deducted by HUD for re- prevention or elimination of slums or payment of urban renewal temporary blight. The projected use of funds may loans pursuant to § 570.802(b) shall be also include activities that the recipi- excluded; ent certifies are designed to meet other (iii) Funds expended for the repay- community development needs having ment of loans guaranteed under the a particular urgency because existing provisions of subpart M shall also be conditions pose a serious and imme- excluded; diate threat to the health or welfare of (iv) Funds expended for the acquisi- the community where other financial tion, new construction or rehabilita- resources are not available to meet tion of property for housing that quali- such needs. Consistent with the fore- fies under § 570.208(a)(3) shall be count- going, each recipient under the Entitle- ed for this purpose but shall be limited ment or HUD-administered Small Cit- to an amount determined by multi- ies programs, and each recipient of in- plying the total cost (including CDBG sular area funds under section 106 of and non-CDBG costs) of the acquisi- the Act must ensure and maintain evi- tion, construction or rehabilitation by dence that each of its activities as- the percent of units in such housing to sisted with CDBG funds meets one of be occupied by low and moderate in- the three national objectives as con- come persons. tained in its certification. Criteria for determining whether an activity ad- (v) Funds expended for any other ac- dresses one or more of these objectives tivities qualifying under § 570.208(a) are found in § 570.208. shall be counted for this purpose in (3) Compliance with the primary objec- their entirety. tive. The primary objective of the Act (4) Compliance with environmental re- is described in section 101(c) of the Act. view procedures. The environmental re- Consistent with this objective, entitle- view procedures set forth at 24 CFR ment recipients, non-entitlement part 58 must be completed for each ac- CDBG grantees in Hawaii, and recipi- tivity (or project as defined in 24 CFR ents of insular area funds under section part 58), as applicable. 106 of the Act must ensure that, over a (5) Cost principles. Costs incurred, period of time specified in their certifi- whether charged on a direct or an indication not to exceed three years, not rect basis, must be in conformance

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with OMB Circulars A–87, ‘‘Cost Prin- persons from using the facilities, are ciples for State, Local and Indian Trib- not permitted. al Governments’’; A–122, ‘‘Cost Prin- (c) Special assessments under the CDBG ciples for Non-profit Organizations’’; or program. The following policies relate A–21, ‘‘Cost Principles for Educational to special assessments under the CDBG Institutions,’’ as applicable. 1 All items program: of cost listed in Attachment B of these (1) Definition of special assessment. The Circulars that require prior Federal term ‘‘special assessment’’ means the agency approval are allowable without recovery of the capital costs of a public prior approval of HUD to the extent improvement, such as streets, water or they comply with the general policies sewer lines, curbs, and gutters, through and principles stated in Attachment A a fee or charge levied or filed as a lien of such circulars and are otherwise eli- against a parcel of real estate as a di- gible under this subpart C, except for rect result of benefit derived from the the following: installation of a public improvement, (i) Depreciation methods for fixed as- or a one-time charge made as a condi- sets shall not be changed without tion of access to a public improvement. HUD’s specific approval or, if charged This term does not relate to taxes, or through a cost allocation plan, the the establishment of the value of real Federal cognizant agency. estate for the purpose of levying real (ii) Fines and penalties (including pu- estate, property, or ad valorem taxes, nitive damages) are unallowable costs and does not include periodic charges to the CDBG program. based on the use of a public improve- (iii) Pre-award costs are limited to ment, such as water or sewer user those authorized under paragraph (h) of charges, even if such charges include this section. the recovery of all or some portion of (b) Special policies governing facilities. the capital costs of the public improve- The following special policies apply to: ment. (2) (1) Facilities containing both eligible Special assessments to recover cap- Where CDBG funds are used and ineligible uses. A public facility oth- ital costs. erwise eligible for assistance under the to pay all or part of the cost of a public CDBG program may be provided with improvement, special assessments may CDBG funds even if it is part of a mul- be imposed as follows: tiple use building containing ineligible (i) Special assessments to recover the uses, if: CDBG funds may be made only against properties owned and occupied by per- (i) The facility which is otherwise el- sons not of low and moderate income. igible and proposed for assistance will Such assessments constitute program occupy a designated and discrete area income. within the larger facility; and (ii) Special assessments to recover (ii) The recipient can determine the the non-CDBG portion may be made costs attributable to the facility pro- provided that CDBG funds are used to posed for assistance as separate and pay the special assessment in behalf of distinct from the overall costs of the all properties owned and occupied by multiple-use building and/or facility. low and moderate income persons; ex- Allowable costs are limited to those at- cept that CDBG funds need not be used tributable to the eligible portion of the to pay the special assessments in be- building or facility. half of properties owned and occupied (2) Fees for use of facilities. Reasonable by moderate income persons if the fees may be charged for the use of the grant recipient certifies that it does facilities assisted with CDBG funds, not have sufficient CDBG funds to pay but charges such as excessive member- the assessments in behalf of all of the ship fees, which will have the effect of low and moderate income owner-occu- precluding low and moderate income pant persons. Funds collected through such special assessments are not pro- 1 These circulars are available from the gram income. American Communities Center by calling (3) Public improvements not initially as- the following toll-free numbers: (800) 998–9999 sisted with CDBG funds. The payment of or (800) 483–2209 (TDD). special assessments with CDBG funds

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constitutes CDBG assistance to the (f) Means of carrying out eligible activi- public improvement. Therefore, CDBG ties. (1) Activities eligible under this funds may be used to pay special as- subpart, other than those authorized sessments provided: under § 570.204(a), may be undertaken, (i) The installation of the public im- subject to local law: provements was carried out in compli- (i) By the recipient through: ance with requirements applicable to (A) Its employees, or activities assisted under this part in- (B) Procurement contracts governed cluding environmental, citizen partici- by the requirements of 24 CFR 85.36; or pation and Davis-Bacon requirements; (ii) Through loans or grants under (ii) The installation of the public im- agreements with subrecipients, as de- provement meets a criterion for na- fined at § 570.500(c); or tional objectives in § 570.208(a)(1), (b), (iii) By one or more public agencies, or (c); and including existing local public agen- (iii) The requirements of cies, that are designated by the chief § 570.200(c)(2)(ii) are met. executive officer of the recipient. (d) Consultant activities. Consulting (2) Activities made eligible under services are eligible for assistance § 570.204(a) may only be undertaken by under this part for professional assist- entities specified in that section. ance in program planning, development (g) Limitation on planning and admin- of community development objectives, istrative costs. No more than 20 percent and other general professional guid- of the sum of any grant, plus program ance relating to program execution. income, shall be expended for planning The use of consultants is governed by and program administrative costs, as the following: defined in §§ 570.205 and 507.206, respec- (1) Employer-employee type of relation- tively. Recipients of entitlement ship. No person providing consultant grants under subpart D of this part services in an employer-employee type shall conform with this requirement by of relationship shall receive more than limiting the amount of CDBG funds ob- a reasonable rate of compensation for ligated for planning plus administra- personal services paid with CDBG tion during each program year to an funds. In no event, however, shall such amount no greater than 20 percent of compensation exceed the equivalent of the sum of its entitlement grant made the daily rate paid for Level IV of the for that program year (if any) plus the Executive Schedule. Such services program income received by the recipi- shall be evidenced by written agree- ent and its subrecipients (if any) dur- ments between the parties which detail ing that program year. the responsibilities, standards, and (h) Reimbursement for pre-award costs. compensation. The effective date of the grant agree- (2) Independent contractor relationship. ment is the program year start date or Consultant services provided under an the date that the consolidated plan is independent contractor relationship received by HUD, whichever is later. are governed by the procurement re- For a Section 108 loan guarantee, the quirements in 24 CFR 85.36, and are not effective date of the grant agreement is subject to the compensation limitation the date of HUD execution of the grant of Level IV of the Executive Schedule. agreement amendment for the par- (e) Recipient determinations required as ticular loan guarantee commitment. a condition of eligibility. In several in- (1) Prior to the effective date of the stances under this subpart, the eligi- grant agreement, a recipient may incur bility of an activity depends on a spe- costs or may authorize a subrecipient cial local determination. Recipients to incur costs, and then after the effec- shall maintain documentation of all tive date of the grant agreement pay such determinations. A written deter- for those costs using its CDBG funds, mination is required for any activity provided that: carried out under the authority of (i) The activity for which the costs §§ 570.201(f), 570.201(i)(2), 570.201(p), are being incurred is included, prior to 570.201(q), 570.202(b)(3), 570.206(f), 570.209, the costs being incurred, in a consoli- 570.210, and 570.309. dated plan action plan, an amended

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consolidated plan action plan, or an ap- (v) Any other relevant consider- plication under subpart M of this part, ations. except that a new entitlement grantee (i) Urban Development Action Grant. preparing to receive its first allocation Grant assistance may be provided with of CDBG funds may incur costs nec- Urban Development Action Grant essary to develop its consolidated plan funds, subject to the provisions of sub- and undertake other administrative ac- part G, for: tions necessary to receive its first (1) Activities eligible for assistance grant, prior to the costs being included under this subpart; and in its consolidated plan; (2) Notwithstanding the provisions of (ii) Citizens are advised of the extent § 570.207, such other activities as the to which these pre-award costs will af- Secretary may determine to be con- fect future grants; sistent with the purposes of the Urban (iii) The costs and activities funded Development Action Grant program. are in compliance with the require- (j) Faith-based activities. (1) Organiza- ments of this part and with the Envi- tions that are religious or faith-based ronmental Review Procedures stated in are eligible, on the same basis as any 24 CFR part 58; other organization, to participate in (iv) The activity for which payment the CDBG program. Neither the Fed- is being made complies with the statu- eral government nor a State or local tory and regulatory provisions in effect government receiving funds under at the time the costs are paid for with CDBG programs shall discriminate CDBG funds; against an organization on the basis of the organization’s religious character (v) CDBG payment will be made dur- or affiliation. ing a time no longer than the next two (2) Organizations that are directly program years following the effective funded under the CDBG program may date of the grant agreement or amend- not engage in inherently religious ac- ment in which the activity is first in- tivities, such as worship, religious included; and struction, or proselytization, as part of (vi) The total amount of pre-award the programs or services funded under costs to be paid during any program this part. If an organization conducts year pursuant to this provision is no such activities, the activities must be more than the greater of 25 percent of offered separately, in time or location, the amount of the grant made for that from the programs or services funded year or $300,000. under this part, and participation must (2) Upon the written request of the be voluntary for the beneficiaries of recipient, HUD may authorize payment the HUD-funded programs or services. of pre-award costs for activities that do (3) A religious organization that par- not meet the criteria at paragraph ticipates in the CDBG program will re- (h)(1)(v) or (h)(1)(vi) of this section, if tain its independence from Federal, HUD determines, in writing, that there State, and local governments, and may is good cause for granting an exception continue to carry out its mission, in- upon consideration of the following cluding the definition, practice, and ex- factors, as applicable: pression of its religious beliefs, pro- (i) Whether granting the authority vided that it does not use direct CDBG would result in a significant contribu- funds to support any inherently reli- tion to the goals and purposes of the gious activities, such as worship, reli- CDBG program; gious instruction, or proselytization. (ii) Whether failure to grant the au- Among other things, faith-based orga- thority would result in undue hardship nizations may use space in their facili- to the recipient or beneficiaries of the ties to provide CDBG-funded services, activity; without removing religious art, icons, (iii) Whether granting the authority scriptures, or other religious symbols. would not result in a violation of a In addition, a CDBG-funded religious statutory provision or any other regu- organization retains its authority over latory provision; its internal governance, and it may re- (iv) Whether circumstances are clear- tain religious terms in its organiza- ly beyond the recipient’s control; or tion’s name, select its board members

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on a religious basis, and include reli- § 570.201 Basic eligible activities. gious references in its organization’s CDBG funds may be used for the fol- mission statements and other gov- lowing activities: erning documents. (a) Acquisition. Acquisition in whole (4) An organization that participates or in part by the recipient, or other in the CDBG program shall not, in pro- public or private nonprofit entity, by viding program assistance, discrimi- purchase, long-term lease, donation, or nate against a program beneficiary or otherwise, of real property (including prospective program beneficiary on the air rights, water rights, rights-of-way, basis of religion or religious belief. easements, and other interests therein) (5) CDBG funds may not be used for for any public purpose, subject to the the acquisition, construction, or reha- limitations of § 570.207. bilitation of structures to the extent (b) Disposition. Disposition, through that those structures are used for in- sale, lease, donation, or otherwise, of any real property acquired with CDBG herently religious activities. CDBG funds or its retention for public pur- funds may be used for the acquisition, poses, including reasonable costs of construction, or rehabilitation of temporarily managing such property or structures only to the extent that property acquired under urban renewal, those structures are used for con- provided that the proceeds from any ducting eligible activities under this such disposition shall be program in- part. Where a structure is used for both come subject to the requirements set eligible and inherently religious activi- forth in § 570.504. ties, CDBG funds may not exceed the (c) Public facilities and improvements. cost of those portions of the acquisi- Acquisition, construction, reconstruction, construction, or rehabilitation tion, rehabilitation or installation of that are attributable to eligible activi- public facilities and improvements, ex- ties in accordance with the cost accept as provided in § 570.207(a), carried counting requirements applicable to out by the recipient or other public or CDBG funds in this part. Sanctuaries, private nonprofit entities. (However, chapels, or other rooms that a CDBG- activities under this paragraph may be funded religious congregation uses as directed to the removal of material and its principal place of worship, however, architectural barriers that restrict the mobility and accessibility of elderly or are ineligible for CDBG-funded im- severely disabled persons to public fa- provements. Disposition of real prop- cilities and improvements, including erty after the term of the grant, or any those provided for in § 570.207(a)(1).) In change in use of the property during undertaking such activities, design fea- the term of the grant, is subject to gov- tures and improvements which pro- ernment-wide regulations governing mote energy efficiency may be in- real property disposition (see 24 CFR cluded. Such activities may also in- parts 84 and 85). clude the execution of architectural de- (6) If a State or local government vol- sign features, and similar treatments untarily contributes its own funds to intended to enhance the aesthetic qual- supplement federally funded activities, ity of facilities and improvements re- the State or local government has the ceiving CDBG assistance, such as deco- option to segregate the Federal funds rative pavements, railings, sculptures, or commingle them. However, if the pools of water and fountains, and other funds are commingled, this section ap- works of art. Facilities designed for use plies to all of the commingled funds. in providing shelter for persons having special needs are considered public fa- [53 FR 34439, Sept. 6, 1988, as amended at 54 cilities and not subject to the prohibi- FR 47031, Nov. 8, 1989; 57 FR 27119, June 17, tion of new housing construction de- 1992; 60 FR 1943, Jan. 5, 1995; 60 FR 17445, Apr. scribed in § 570.207(b)(3). Such facilities 6, 1995; 60 FR 56910, Nov. 9, 1995; 61 FR 11476, include shelters for the homeless; con- Mar. 20, 1996; 61 FR 18674, Apr. 29, 1996; 65 FR valescent homes; hospitals, nursing 70215, Nov. 21, 2000; 68 FR 56404, Sept. 30, 2003; 69 FR 32778, June 10, 2004; 70 FR 76369, Dec. homes; battered spouse shelters; half- 23, 2005; 72 FR 46370, Aug. 17, 2007] way houses for run-away children, drug offenders or parolees; group homes for

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mentally retarded persons and tem- percent of each grant, except that for porary housing for disaster victims. In entitlement grants made under subpart certain cases, nonprofit entities and D of this part, the amount shall not ex- subrecipients including those specified ceed 15 percent of the grant plus 15 per- in § 570.204 may acquire title to public cent of program income, as defined in facilities. When such facilities are § 570.500(a). For entitlement grants owned by nonprofit entities or sub- under subpart D of this part, compli- recipients, they shall be operated so as ance is based on limiting the amount of to be open for use by the general public CDBG funds obligated for public serv- during all normal hours of operation. ice activities in each program year to Public facilities and improvements eli- an amount no greater than 15 percent gible for assistance under this para- of the entitlement grant made for that graph are subject to the policies in program year plus 15 percent of the § 570.200(b). program income received during the (d) Clearance and remediation activi- grantee’s immediately preceding pro- ties. Clearance, demolition, and re- gram year. moval of buildings and improvements, (2) A recipient which obligated more including movement of structures to CDBG funds for public services than 15 other sites and remediation of known percent of its grant funded from Fed- or suspected environmental contami- eral fiscal year 1982 or 1983 appropria- nation. Demolition of HUD-assisted or tions (excluding program income and HUD-owned housing units may be un- any assistance received under Public dertaken only with the prior approval Law 98–8), may obligate more CDBG of HUD. Remediation may include funds than allowable under paragraph project-specific environmental assess- (e)(1) of this section, so long as the ment costs not otherwise eligible under total amount obligated in any program § 570.205. year does not exceed: (e) Public services. Provision of public (i) For an entitlement grantee, 15% services (including labor, supplies, and of the program income it received dur- materials) including but not limited to ing the preceding program year; plus those concerned with employment, crime prevention, child care, health, (ii) A portion of the grant received drug abuse, education, fair housing for the program year which is the high- counseling, energy conservation, wel- est of the following amounts: fare (but excluding the provision of in- (A) The amount determined by apply- come payments identified under ing the percentage of the grant it obli- § 570.207(b)(4)), homebuyer downpay- gated for public services in the 1982 ment assistance, or recreational needs. program year against the grant for its To be eligible for CDBG assistance, a current program year; public service must be either a new (B) The amount determined by apply- service or a quantifiable increase in ing the percentage of the grant it obli- the level of an existing service above gated for public services in the 1983 that which has been provided by or on program year against the grant for its behalf of the unit of general local gov- current program year; ernment (through funds raised by the (C) The amount of funds it obligated unit or received by the unit from the for public services in the 1982 program State in which it is located) in the 12 year; or, calendar months before the submission (D) The amount of funds it obligated of the action plan. (An exception to for public services in the 1983 program this requirement may be made if HUD year. determines that any decrease in the (f) Interim assistance. (1) The following level of a service was the result of activities may be undertaken on an in- events not within the control of the terim basis in areas exhibiting objec- unit of general local government.) The tively determinable signs of physical amount of CDBG funds used for public deterioration where the recipient has services shall not exceed paragraphs (e) determined that immediate action is (1) or (2) of this section, as applicable: necessary to arrest the deterioration (1) The amount of CDBG funds used and that permanent improvements will for public services shall not exceed 15 be carried out as soon as practicable:

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(i) The repairing of streets, side- used for the relocation of individuals walks, parks, playgrounds, publicly and families displaced by program ac- owned utilities, and public buildings; tivities assisted under this part. and (k) Housing services. Housing services, (ii) The execution of special garbage, as provided in section 105(a)(21) of the trash, and debris removal, including Act (42 U.S.C. 5305(a)(21)). neighborhood cleanup campaigns, but (l) Privately owned utilities. CDBG not the regular curbside collection of funds may be used to acquire, con- garbage or trash in an area. struct, reconstruct, rehabilitate, or in- (2) In order to alleviate emergency stall the distribution lines and facili- conditions threatening the public ties of privately owned utilities, in- health and safety in areas where the cluding the placing underground of new chief executive officer of the recipient or existing distribution facilities and determines that such an emergency lines. condition exists and requires imme- (m) Construction of housing. CDBG diate resolution, CDBG funds may be funds may be used for the construction used for: of housing assisted under section 17 of (i) The activities specified in para- the United States Housing Act of 1937. graph (f)(1) of this section, except for (n) Homeownership assistance. CDBG the repair of parks and playgrounds; funds may be used to provide direct (ii) The clearance of streets, includ- homeownership assistance to low- or ing snow removal and similar activi- moderate-income households in accord- ties, and ance with section 105(a) of the Act. (iii) The improvement of private (o)(1) The provision of assistance ei- properties. ther through the recipient directly or (3) All activities authorized under through public and private organiza- paragraph (f)(2) of this section are lim- tions, agencies, and other subrecipients ited to the extent necessary to allevi- (including nonprofit and for-profit sub- ate emergency conditions. recipients) to facilitate economic de- (g) Payment of non-Federal share. Pay- velopment by: ment of the non-Federal share required (i) Providing credit, including, but in connection with a Federal grant-in- not limited to, grants, loans, loan aid program undertaken as part of guarantees, and other forms of finan- CDBG activities, provided, that such cial support, for the establishment, payment shall be limited to activities stabilization, and expansion of micro- otherwise eligible and in compliance enterprises; with applicable requirements under (ii) Providing technical assistance, this subpart. advice, and business support services to (h) Urban renewal completion. Pay- owners of microenterprises and persons ment of the cost of completing an developing microenterprises; and urban renewal project funded under (iii) Providing general support, in- title I of the Housing Act of 1949 as cluding, but not limited to, peer sup- amended. Further information regard- port programs, counseling, child care, ing the eligibility of such costs is set transportation, and other similar serv- forth in § 570.801. ices, to owners of microenterprises and (i) Relocation. Relocation payments persons developing microenterprises. and other assistance for permanently (2) Services provided this paragraph and temporarily relocated individuals (o) shall not be subject to the restric- families, businesses, nonprofit organi- tions on public services contained in zations, and farm operations where the paragraph (e) of this section. assistance is (1) required under the pro- (3) For purposes of this paragraph (o), visions of § 570.606 (b) or (c); or (2) de- ‘‘persons developing microenterprises’’ termined by the grantee to be appro- means such persons who have expressed priate under the provisions of interest and who are, or after an initial § 570.606(d). screening process are expected to be, (j) Loss of rental income. Payments to actively working toward developing housing owners for losses of rental in- businesses, each of which is expected to come incurred in holding, for tem- be a microenterprise at the time it is porary periods, housing units to be formed.

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(4) Assistance under this paragraph (2) Low-income public housing and (o) may also include training, technical other publicly owned residential build- assistance, or other support services to ings and improvements; increase the capacity of the recipient (3) Publicly or privately owned com- or subrecipient to carry out the activi- mercial or industrial buildings, except ties under this paragraph (o). that the rehabilitation of such build- (p) Technical assistance. Provision of ings owned by a private for-profit busi- technical assistance to public or non- ness is limited to improvement to the profit entities to increase the capacity exterior of the building, abatement of of such entities to carry out eligible asbestos hazards, lead-based paint haz- neighborhood revitalization or eco- ard evaluation and reduction, and the nomic development activities. (The re- correction of code violations; cipient must determine, prior to the (4) Nonprofit-owned nonresidential provision of the assistance, that the ac- buildings and improvements not eligi- tivity for which it is attempting to ble under § 570.201(c); and build capacity would be eligible for as- (5) Manufactured housing when such sistance under this subpart C, and that housing constitutes part of the commu- the national objective claimed by the nity’s permanent housing stock. grantee for this assistance can reason- (b) Types of assistance. CDBG funds ably be expected to be met once the en- may be used to finance the following tity has received the technical assist- types of rehabilitation activities, and ance and undertakes the activity.) Ca- related costs, either singly, or in com- pacity building for private or public bination, through the use of grants, entities (including grantees) for other loans, loan guarantees, interest supple- purposes may be eligible under § 570.205. ments, or other means for buildings (q) Assistance to institutions of higher and improvements described in para- education. Provision of assistance by graph (a) of this section, except that rehabilitation of commercial or indus- the recipient to institutions of higher trial buildings is limited as described education when the grantee determines in paragraph (a)(3) of this section. that such an institution has demonstrated a capacity to carry out eligi- (1) Assistance to private individuals and entities, including profit making ble activities under this subpart C. and nonprofit organizations, to acquire [53 FR 34439, Sept. 6, 1988, as amended at 53 for the purpose of rehabilitation, and FR 31239, Aug. 17, 1988; 55 FR 29308, July 18, to rehabilitate properties, for use or re- 1990; 57 FR 27119, June 17, 1992; 60 FR 1943, sale for residential purposes; Jan. 5, 1995; 60 FR 56911, Nov. 9, 1995; 61 FR (2) Labor, materials, and other costs 18674, Apr. 29, 1996; 65 FR 70215, Nov. 21, 2000; of rehabilitation of properties, includ- 67 FR 47213, July 17, 2002; 71 FR 30034, May 24, 2006] ing repair directed toward an accumu- lation of deferred maintenance, re- § 570.202 Eligible rehabilitation and placement of principal fixtures and preservation activities. components of existing structures, installation of security devices, includ- (a) Types of buildings and improve- ing smoke detectors and dead bolt ments eligible for rehabilitation assist- locks, and renovation through alter- ance. CDBG funds may be used to fi- ations, additions to, or enhancement of nance the rehabilitation of: existing structures and improvements, (1) Privately owned buildings and im- abatement of asbestos hazards (and provements for residential purposes; other contaminants) in buildings and improvements to a single-family resi- improvements that may be undertaken dential property which is also used as a singly, or in combination; place of business, which are required in (3) Loans for refinancing existing in- order to operate the business, need not debtedness secured by a property being be considered to be rehabilitation of a rehabilitated with CDBG funds if such commercial or industrial building, if financing is determined by the recipi- the improvements also provide general ent to be necessary or appropriate to benefit to the residential occupants of achieve the locality’s community de- the building; velopment objectives;

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(4) Improvements to increase the effi- violations) in deteriorating or deterio- cient use of energy in structures rated areas when such enforcement to- through such means as installation of gether with public or private improve- storm windows and doors, siding, wall ments, rehabilitation, or services to be and attic insulation, and conversion, provided may be expected to arrest the modification, or replacement of heat- decline of the area. ing and cooling equipment, including (d) Historic preservation. CDBG funds the use of solar energy equipment; may be used for the rehabilitation, (5) Improvements to increase the effi- preservation or restoration of historic cient use of water through such means properties, whether publicly or pri- as water savings faucets and shower vately owned. Historic properties are heads and repair of water leaks; those sites or structures that are ei- (6) Connection of residential struc- ther listed in or eligible to be listed in tures to water distribution lines or the National Register of Historic local sewer collection lines; Places, listed in a State or local inven- (7) For rehabilitation carried out tory of historic places, or designated as with CDBG funds, costs of: a State or local landmark or historic (i) Initial homeowner warranty pre- district by appropriate law or ordi- miums; nance. Historic preservation, however, (ii) Hazard insurance premiums, ex- is not authorized for buildings for the cept where assistance is provided in the general conduct of government. form of a grant; and (e) Renovation of closed buildings. (iii) Flood insurance premiums for CDBG funds may be used to renovate properties covered by the Flood Dis- closed buildings, such as closed school aster Protection Act of 1973, pursuant buildings, for use as an eligible public to § 570.605. facility or to rehabilitate such build- (8) Costs of acquiring tools to be lent ings for housing. to owners, tenants, and others who will (f) Lead-based paint activities. Lead- use such tools to carry out rehabilita- based paint activities pursuant to tion; (9) Rehabilitation services, such as § 570.608. rehabilitation counseling, energy au- [53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, diting, preparation of work specifica- 1988, as amended at 60 FR 1944, Jan. 5, 1995; tions, loan processing, inspections, and 60 FR 56911, Nov. 9, 1995; 64 FR 50225, Sept. 15, other services related to assisting own- 1999; 71 FR 30035, May 24, 2006] ers, tenants, contractors, and other entities, participating or seeking to par- § 570.203 Special economic develop- ticipate in rehabilitation activities au- ment activities. thorized under this section, under sec- A recipient may use CDBG funds for tion 312 of the Housing Act of 1964, as special economic development activi- amended, under section 810 of the Act, ties in addition to other activities au- or under section 17 of the United States thorized in this subpart that may be Housing Act of 1937; carried out as part of an economic de- (10) Assistance for the rehabilitation velopment project. Guidelines for se- of housing under section 17 of the lecting activities to assist under this United States Housing Act of 1937; and paragraph are provided at § 570.209. The (11) Improvements designed to re- recipient must ensure that the appro- move material and architectural bar- priate level of public benefit will be de- riers that restrict the mobility and ac- rived pursuant to those guidelines be- cessibility of elderly or severely dis- fore obligating funds under this au- abled persons to buildings and improve- thority. Special activities authorized ments eligible for assistance under under this section do not include as- paragraph (a) of this section. sistance for the construction of new (c) Code enforcement. Costs incurred housing. Activities eligible under this for inspection for code violations and section may include costs associated enforcement of codes (e.g., salaries and with project-specific assessment or re- related expenses of code enforcement mediation of known or suspected envi- inspectors and legal proceedings, but ronmental contamination. Special eco- not including the cost of correcting the nomic development activities include:

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(a) The acquisition, construction, re- graphs (a)(1), (a)(2), and (a)(3) of this construction, rehabilitation or instal- section, the funded activity or activi- lation of commercial or industrial ties may be considered either alone or buildings, structures, and other real in concert with other project activities property equipment and improvements, either being carried out or for which including railroad spurs or similar ex- funding has been committed. For pur- tensions. Such activities may be car- poses of this section: ried out by the recipient or public or (1) Neighborhood revitalization private nonprofit subrecipients. project includes activities of sufficient (b) The provision of assistance to a size and scope to have an impact on the private for-profit business, including, decline of a geographic location within but not limited to, grants, loans, loan the jurisdiction of a unit of general guarantees, interest supplements, tech- local government (but not the entire nical assistance, and other forms of jurisdiction) designated in comprehen- support, for any activity where the as- sive plans, ordinances, or other local sistance is appropriate to carry out an documents as a neighborhood, village, economic development project, exclud- or similar geographical designation; or ing those described as ineligible in the entire jurisdiction of a unit of gen- § 570.207(a). In selecting businesses to eral local government which is under assist under this authority, the recipi- 25,000 population; ent shall minimize, to the extent prac- (2) Community economic develop- ticable, displacement of existing busi- ment project includes activities that nesses and jobs in neighborhoods. increase economic opportunity, prin- (c) Economic development services in cipally for persons of low- and mod- connection with activities eligible erate-income, or that stimulate or re- under this section, including, but not tain businesses or permanent jobs, in- limited to, outreach efforts to market cluding projects that include one or available forms of assistance; screening more such activities that are clearly of applicants; reviewing and under- needed to address a lack of affordable writing applications for assistance; housing accessible to existing or preparation of all necessary agree- planned jobs and those activities speci- ments; management of assisted activi- fied at 24 CFR 91.1(a)(1)(iii); activities ties; and the screening, referral, and under this paragraph may include costs placement of applicants for employ- associated with project-specific assessment opportunities generated by ment or remediation of known or sus- CDBG-eligible economic development pected environmental contamination; activities, including the costs of pro- (3) Energy conservation project in- viding necessary training for persons cludes activities that address energy filling those positions. conservation, principally for the ben- [53 FR 34439, Sept. 6, 1988, as amended at 60 efit of the residents of the recipient’s FR 1944, Jan. 5, 1995; 71 FR 30035, May 24, jurisdiction; and 2006] (4) To carry out a project means that the CBDO undertakes the funded ac- § 570.204 Special activities by Commu- tivities directly or through contract nity-Based Development Organiza- with an entity other than the grantee, tions (CBDOs). or through the provision of financial (a) Eligible activities. The recipient assistance for activities in which it re- may provide CDBG funds as grants or tains a direct and controlling involve- loans to any CBDO qualified under this ment and responsibilities. section to carry out a neighborhood re- (b) Ineligible activities. Notwith- vitalization, community economic de- standing that CBDOs may carry out ac- velopment, or energy conservation tivities that are not otherwise eligible project. The funded project activities under this subpart, this section does may include those listed as eligible not authorize: under this subpart, and, except as de- (1) Carrying out an activity described scribed in paragraph (b) of this section, as ineligible in § 570.207(a); activities not otherwise listed as eligi- (2) Carrying out public services that ble under this subpart. For purposes of do not meet the requirements of qualifying as a project under para- § 570.201(e), except that:

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(i) Services carried out under this hood organizations located in its geo- section that are specifically designed graphic area of operation; and to increase economic opportunities (v) Is not an agency or instrumen- through job training and placement tality of the recipient and does not per- and other employment support serv- mit more than one-third of the mem- ices, including, but not limited to, peer bership of its governing body to be ap- support programs, counseling, child pointed by, or to consist of, elected or care, transportation, and other similar other public officials or employees or services; and officials of an ineligible entity (even (ii) Services of any type carried out though such persons may be otherwise under this section pursuant to a strat- qualified under paragraph (c)(1)(iv) of egy approved by HUD under the provi- this section); and sions of 24 CFR 91.215(e) shall not be (vi) Except as otherwise authorized subject to the limitations in in paragraph (c)(1)(v) of this section, § 570.201(e)(1) or (2), as applicable; (3) Providing assistance to activities requires the members of its governing that would otherwise be eligible under body to be nominated and approved by § 570.203 that do not meet the require- the general membership of the organi- ments of § 570.209; or zation, or by its permanent governing (4) Carrying out an activity that body; and would otherwise be eligible under (vii) Is not subject to requirements § 570.205 or § 570.206, but that would re- under which its assets revert to the result in the recipient’s exceeding the cipient upon dissolution; and spending limitation in § 570.200(g). (viii) Is free to contract for goods and (c) Eligible CBDOs. (1) A CBDO quali- services from vendors of its own choos- fying under this section is an organiza- ing. tion which has the following character- (2) A CBDO that does not meet the istics: criteria in paragraph (c)(1) of this sec- (i) Is an association or corporation tion may also qualify as an eligible en- organized under State or local law to tity under this section if it meets one engage in community development ac- of the following requirements: tivities (which may include housing (i) Is an entity organized pursuant to and economic development activities) section 301(d) of the Small Business In- primarily within an identified geo- vestment Act of 1958 (15 U.S.C. 681(d)), graphic area of operation within the ju- including those which are profit mak- risdiction of the recipient, or in the ing; or case of an urban county, the jurisdic- (ii) Is an SBA approved Section 501 tion of the county; and State Development Company or Sec- (ii) Has as its primary purpose the tion 502 Local Development Company, improvement of the physical, economic or an SBA Certified Section 503 Com- or social environment of its geographic pany under the Small Business Invest- area of operation by addressing one or ment Act of 1958, as amended; or more critical problems of the area, with particular attention to the needs (iii) Is a Community Housing Devel- of persons of low and moderate income; opment Organization (CHDO) under 24 and CFR 92.2, designated as a CHDO by the (iii) May be either non-profit or for- HOME Investment Partnerships pro- profit, provided any monetary profits gram participating jurisdiction, with a to its shareholders or members must be geographic area of operation of no only incidental to its operations; and more than one neighborhood, and has (iv) Maintains at least 51 percent of received HOME funds under 24 CFR its governing body’s membership for 92.300 or is expected to receive HOME low- and moderate-income residents of funds as described in and documented its geographic area of operation, own- in accordance with 24 CFR 92.300(e). ers or senior officers of private estab- (3) A CBDO that does not qualify lishments and other institutions lo- under paragraph (c)(1) or (2) of this sec- cated in and serving its geographic tion may also be determined to qualify area of operation, or representatives of as an eligible entity under this section low- and moderate-income neighbor- if the recipient demonstrates to the

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satisfaction of HUD, through the provi- cost of such activities under §§ 570.201– sion of information regarding the orga- 570.204. Costs for such specific assess- nization’s charter and by-laws, that ments and clearances may also be in- the organization is sufficiently similar curred under this paragraph but would in purpose, function, and scope to those then be considered planning costs for entities qualifying under paragraph the purposes of § 570.200(g); (c)(1) or (2) of this section. (v) Strategies and action programs to [60 FR 1944, Jan. 5, 1995, as amended at 71 FR implement plans, including the devel- 30035, May 24, 2006] opment of codes, ordinances and regulations; § 570.205 Eligible planning, urban en- (vi) Support of clearinghouse func- vironmental design and policy-planning-management-capacity building tions, such as those specified in Execu- activities. tive Order 12372; and (a) Planning activities which consist (vii) Analysis of impediments to fair of all costs of data gathering, studies, housing choice. analysis, and preparation of plans and (viii) Developing an inventory of the identification of actions that will properties with known or suspected en- implement such plans, including, but vironmental contamination. not limited to: (5) [Reserved] (1) Comprehensive plans; (6) Policy—planning—management— (2) Community development plans; capacity building activities which will (3) Functional plans, in areas such as: enable the recipient to: (i) Housing, including the develop- (1) Determine its needs; ment of a consolidated plan; (2) Set long-term goals and short- (ii) Land use and urban environ- term objectives, including those re- mental design; lated to urban environmental design; (iii) Economic development; (3) Devise programs and activities to (iv) Open space and recreation; (v) Energy use and conservation; meet these goals and objectives; (vi) Floodplain and wetlands manage- (4) Evaluate the progress of such pro- ment in accordance with the require- grams and activities in accomplishing ments of Executive Orders 11988 and these goals and objectives; and 11990; (5) Carry out management, coordina- (vii) Transportation; tion and monitoring of activities nec- (viii) Utilities; and essary for effective planning implemen- (ix) Historic preservation. tation, but excluding the costs nec- (4) Other plans and studies such as: essary to implement such plans. (i) Small area and neighborhood [53 FR 34439, Sept. 6, 1988, as amended at 56 plans; FR 56127, Oct. 31, 1991; 60 FR 1915, Jan. 5, 1995; (ii) Capital improvements programs; 71 FR 30035, May 24, 2006] (iii) Individual project plans (but excluding engineering and design costs § 570.206 Program administrative related to a specific activity which are costs. eligible as part of the cost of such activity under §§ 570.201–570.204); Payment of reasonable administra- (iv) The reasonable costs of general tive costs and carrying charges related environmental, urban environmental to the planning and execution of com- design and historic preservation stud- munity development activities assisted ies; and general environmental in whole or in part with funds provided assessment- and remediation-oriented under this part and, where applicable, planning related to properties with housing activities (described in para- known or suspected environmental graph (g) of this section) covered in the contamination. However, costs nec- recipient’s housing assistance plan. essary to comply with 24 CFR part 58, This does not include staff and over- including project specific environ- head costs directly related to carrying mental assessments and clearances for out activities eligible under § 570.201 activities eligible for assistance under through § 570.204, since those costs are this part, are eligible as part of the eligible as part of such activities.

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(a) General management, oversight and ments, including such services as gen- coordination. Reasonable costs of over- eral legal services, accounting services, all program management, coordina- and audit services; and tion, monitoring, and evaluation. Such (4) Other costs for goods and services costs include, but are not necessarily required for administration of the pro- limited to, necessary expenditures for gram, including such goods and serv- the following: ices as rental or purchase of equip- (1) Salaries, wages, and related costs ment, insurance, utilities, office sup- of the recipient’s staff, the staff of plies, and rental and maintenance (but local public agencies, or other staff en- not purchase) of office space. gaged in program administration. In (b) Public information. The provisions charging costs to this category the re- of information and other resources to cipient may either include the entire residents and citizen organizations par- salary, wages, and related costs allo- ticipating in the planning, implemen- cable to the program of each person tation, or assessment of activities whose primary responsibilities with re- being assisted with CDBG funds. gard to the program involve program (c) Fair housing activities. Provision of administration assignments, or the pro fair housing services designed to fur- rata share of the salary, wages, and re- ther the fair housing objectives of the lated costs of each person whose job in- Fair Housing Act (42 U.S.C. 3601–20) by cludes any program administration as- making all persons, without regard to signments. The recipient may use only race, color, religion, sex, national ori- one of these methods during the pro- gin, familial status or handicap, aware gram year (or the grant period for of the range of housing opportunities grants under subpart F). Program ad- available to them; other fair housing ministration includes the following enforcement, education, and outreach types of assignments: activities; and other activities de- (i) Providing local officials and citi- signed to further the housing objective zens with information about the proof avoiding undue concentrations of as- gram; (ii) Preparing program budgets and sisted persons in areas containing a schedules, and amendments thereto; high proportion of low and moderate (iii) Developing systems for assuring income persons. compliance with program require- (d) [Reserved] ments; (e) Indirect costs. Indirect costs may (iv) Developing interagency agree- be charged to the CDBG program under ments and agreements with subrecipi- a cost allocation plan prepared in ac- ents and contractors to carry out pro- cordance with OMB Circular A–21, A– gram activities; 87, or A–122 as applicable. (v) Monitoring program activities for (f) Submission of applications for fed- progress and compliance with program eral programs. Preparation of docu- requirements; ments required for submission to HUD (vi) Preparing reports and other doc- to receive funds under the CDBG and uments related to the program for sub- UDAG programs. In addition, CDBG mission to HUD; funds may be used to prepare applica- (vii) Coordinating the resolution of tions for other Federal programs where audit and monitoring findings; the recipient determines that such ac- (viii) Evaluating program results tivities are necessary or appropriate to against stated objectives; and achieve its community development (ix) Managing or supervising persons objectives. whose primary responsibilities with re- (g) Administrative expenses to facilitate gard to the program include such as- housing. CDBG funds may be used for signments as those described in para- necessary administrative expenses in graph (a)(1)(i) through (viii) of this sec- planning or obtaining financing for tion. housing as follows: for entitlement re- (2) Travel costs incurred for official cipients, assistance authorized by this business in carrying out the program; paragraph is limited to units which are (3) Administrative services performed identified in the recipient’s HUD ap- under third party contracts or agree- proved housing assistance plan; for

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HUD-administered small cities recipi- Rental Rehabilitation and Housing De- ents, assistance authorized by the velopment programs authorized under paragraph is limited to facilitating the section 17 of the United States Housing purchase or occupancy of existing units Act of 1937, whether or not such activi- which are to be occupied by low and ties are otherwise assisted with funds moderate income households, or the provided under this part. construction of rental or owner units (i) Whether or not such activities are where at least 20 percent of the units in otherwise assisted by funds provided each project will be occupied at afford- under this part, reasonable costs equiv- able rents/costs by low and moderate alent to those described in paragraphs income persons. Examples of eligible (a), (b), (e), and (f) of this section for actions are as follows: overall program management of: (1) The cost of conducting prelimi- (1) A Federally designated Empower- nary surveys and analysis of market ment Zone or Enterprise Community; needs; and (2) Site and utility plans, narrative (2) The HOME program under title II descriptions of the proposed construc- of the Cranston-Gonzalez National Af- tion, preliminary cost estimates, urban fordable Housing Act (42 U.S.C. 12701 design documentation, and ‘‘sketch note). drawings,’’ but excluding architectural, [53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, engineering, and other details ordi- 1988, as amended at 54 FR 37411, Sept. 8, 1989; narily required for construction pur- 60 FR 56912, Nov. 9, 1995; 69 FR 32778, June 10, poses, such as structural, electrical, 2004] plumbing, and mechanical details; (3) Reasonable costs associated with § 570.207 Ineligible activities. development of applications for mort- The general rule is that any activity gage and insured loan commitments, that is not authorized under the provi- including commitment fees, and of ap- sions of §§ 570.201–570.206 is ineligible to plications and proposals under the Sec- be assisted with CDBG funds. This section 8 Housing Assistance Payments tion identifies specific activities that Program pursuant to 24 CFR parts 880– are ineligible and provides guidance in 883; determining the eligibility of other ac- (4) Fees associated with processing of tivities frequently associated with applications for mortgage or insured housing and community development. loan commitments under programs in- (a) The following activities may not cluding those administered by HUD, be assisted with CDBG funds: Farmers Home Administration (1) Buildings or portions thereof, used (FmHA), Federal National Mortgage for the general conduct of government as Association (FNMA), and the Govern- defined at § 570.3(d) cannot be assisted ment National Mortgage Association with CDBG funds. This does not in- (GNMA); clude, however, the removal of archi- (5) The cost of issuance and adminis- tectural barriers under § 570.201(c) in- tration of mortgage revenue bonds used volving any such building. Also, where to finance the acquisition, rehabilita- acquisition of real property includes an tion or construction of housing, but ex- existing improvement which is to be cluding costs associated with the pay- used in the provision of a building for ment or guarantee of the principal or the general conduct of government, the interest on such bonds; and portion of the acquisition cost attrib- (6) Special outreach activities which utable to the land is eligible, provided result in greater landlord participation such acquisition meets a national ob- in Section 8 Housing Assistance Pay- jective described in § 570.208. ments Program-Existing Housing or (2) General government expenses. Ex- similar programs for low and moderate cept as otherwise specifically author- income persons. ized in this subpart or under OMB Cir- (h) Section 17 of the United States cular A–87, expenses required to carry Housing Act of 1937. Reasonable costs out the regular responsibilities of the equivalent to those described in para- unit of general local government are graphs (a), (b), (e) and (f) of this section not eligible for assistance under this for overall program management of the part.

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(3) Political activities. CDBG funds (2) Operating and maintenance ex- shall not be used to finance the use of penses. The general rule is that any ex- facilities or equipment for political pense associated with repairing, oper- purposes or to engage in other partisan ating or maintaining public facilities, political activities, such as candidate improvements and services is ineli- forums, voter transportation, or voter gible. Specific exceptions to this gen- registration. However, a facility origi- eral rule are operating and mainte- nally assisted with CDBG funds may be nance expenses associated with public used on an incidental basis to hold po- service activities, interim assistance, litical meetings, candidate forums, or and office space for program staff em- voter registration campaigns, provided ployed in carrying out the CDBG pro- that all parties and organizations have gram. For example, the use of CDBG access to the facility on an equal basis, funds to pay the allocable costs of op- and are assessed equal rent or use erating and maintaining a facility used charges, if any. in providing a public service would be (b) The following activities may not eligible under § 570.201(e), even if no be assisted with CDBG funds unless au- other costs of providing such a service thorized under provisions of § 570.203 or are assisted with such funds. Examples as otherwise specifically noted herein of ineligible operating and mainte- or when carried out by an entity under nance expenses are: the provisions of § 570.204. (i) Maintenance and repair of pub- (1) Purchase of equipment. The pur- licly owned streets, parks, play- chase of equipment with CDBG funds is grounds, water and sewer facilities, generally ineligible. neighborhood facilities, senior centers, (i) Construction equipment. The pur- centers for persons with a disabilities, chase of construction equipment is in- parking and other public facilities and eligible, but compensation for the use improvements. Examples of mainte- of such equipment through leasing, de- nance and repair activities for which preciation, or use allowances pursuant CDBG funds may not be used include to OMB Circulars A–21, A–87 or A–122 as the filling of pot holes in streets, re- applicable for an otherwise eligible ac- pairing of cracks in sidewalks, the tivity is an eligible use of CDBG funds. mowing of recreational areas, and the However, the purchase of construction replacement of expended street light equipment for use as part of a solid bulbs; and waste disposal facility is eligible under (ii) Payment of salaries for staff, § 570.201(c). utility costs and similar expenses nec- (ii) Fire protection equipment. Fire protection equipment is considered for essary for the operation of public this purpose to be an integral part of a works and facilities. public facility and thus, purchase of (3) New housing construction. For the such equipment would be eligible under purpose of this paragraph, activities in § 570.201(c). support of the development of low or (iii) Furnishings and personal property. moderate income housing including The purchase of equipment, fixtures, clearance, site assemblage, provision of motor vehicles, furnishings, or other site improvements and provision of personal property not an integral public improvements and certain hous- structural fixture is generally ineli- ing pre-construction costs set forth in gible. CDBG funds may be used, how- § 570.206(g), are not considered as activi- ever, to purchase or to pay deprecia- ties to subsidize or assist new residen- tion or use allowances (in accordance tial construction. CDBG funds may not with OMB Circular A–21, A–87 or A–122, be used for the construction of new per- as applicable) for such items when nec- manent residential structures or for essary for use by a recipient or its sub- any program to subsidize or assist such recipients in the administration of ac- new construction, except: tivities assisted with CDBG funds, or (i) As provided under the last resort when eligible as fire fighting equip- housing provisions set forth in 24 CFR ment, or when such items constitute part 42; all or part of a public service pursuant (ii) As authorized under § 570.201(m) to § 570.201(e). or (n);

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(iii) When carried out by an entity come residents, will also be considered pursuant to § 570.204(a); to meet the objective of benefiting low- (4) Income payments. The general rule and moderate-income persons where is that CDBG funds may not be used for the proportion of such persons in the income payments. For purposes of the area is within the highest quartile of CDBG program, ‘‘income payments’’ all areas in the recipient’s jurisdiction means a series of subsistence-type in terms of the degree of concentration grant payments made to an individual of such persons. This exception is inap- or family for items such as food, cloth- plicable to non-entitlement CDBG ing, housing (rent or mortgage), or grants in Hawaii. In applying this ex- utilities, but excludes emergency grant ception, HUD will determine the lowest payments made over a period of up to proportion a recipient may use to qual- three consecutive months to the pro- ify an area for this purpose, as follows: vider of such items or services on be- (A) All census block groups in the re- half of an individual or family. cipient’s jurisdiction shall be rank or- [53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, dered from the block group of highest 1988, as amended at 60 FR 1945, Jan. 5, 1995; proportion of low and moderate income 60 FR 56912, Nov. 9, 1995; 65 FR 70215, Nov. 21, persons to the block group with the 2000] lowest. For urban counties, the rank ordering shall cover the entire area § 570.208 Criteria for national objec- constituting the urban county and tives. shall not be done separately for each The following criteria shall be used participating unit of general local gov- to determine whether a CDBG-assisted ernment. activity complies with one or more of (B) In any case where the total num- the national objectives as required ber of a recipient’s block groups does under § 570.200(a)(2): not divide evenly by four, the block (a) Activities benefiting low- and mod- group which would be fractionally di- Activities meeting erate-income persons. vided between the highest and second the criteria in paragraph (a) (1), (2), (3), quartiles shall be considered to be part or (4) of this section as applicable, will of the highest quartile. be considered to benefit low and moderate income persons unless there is (C) The proportion of low and mod- substantial evidence to the contrary. erate income persons in the last census In assessing any such evidence, the full block group in the highest quartile range of direct effects of the assisted shall be identified. Any service area lo- activity will be considered. (The recipi- cated within the recipient’s jurisdic- ent shall appropriately ensure that action and having a proportion of low and tivities that meet these criteria do not moderate income persons at or above benefit moderate income persons to the this level shall be considered to be exclusion of low income persons.) within the highest quartile. (1) Area benefit activities. (i) An activ- (D) If block group data are not avail- ity, the benefits of which are available able for the entire jurisdiction, other to all the residents in a particular data acceptable to the Secretary may area, where at least 51 percent of the be used in the above calculations. residents are low and moderate income (iii) An activity to develop, establish, persons. Such an area need not be co- and operate for up to two years after terminous with census tracts or other the establishment of, a uniform emer- officially recognized boundaries but gency telephone number system serv- must be the entire area served by the ing an area having less than the per- activity. An activity that serves an centage of low- and moderate-income area that is not primarily residential residents required under paragraph in character shall not qualify under (a)(1)(i) of this section or (as applica- this criterion. ble) paragraph (a)(1)(ii) of this section, (ii) For metropolitan cities and urban provided the recipient obtains prior counties, an activity that would other- HUD approval. To obtain such ap- wise qualify under § 570.208(a)(1)(i), ex- proval, the recipient must: cept that the area served contains less (A) Demonstrate that the system will than 51 percent low- and moderate-in- contribute significantly to the safety

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of the residents of the area. The re- boundaries of the service area of the quest for approval must include a list emergency telephone number system, of the emergency services that will the census divisions that fall within participate in the emergency telephone the boundaries of the service area (cen- number system; sus tracts or block numbering areas), (B) Submit information that serves the total number of persons and the as a basis for HUD to determine wheth- total number of low- and moderate-in- er at least 51 percent of the use of the come persons within each census divi- system will be by low- and moderate- sion, the percentage of low- and mod- income persons. As available, the re- erate-income persons within the serv- cipient must provide information that ice area, and the total cost of the sys- identifies the total number of calls ac- tem. tually received over the preceding 12- (iv) An activity for which the assist- month period for each of the emer- ance to a public improvement that pro- gency services to be covered by the vides benefits to all the residents of an emergency telephone number system area is limited to paying special assess- and relates those calls to the geo- ments (as defined in § 570.200(c)) levied graphic segment (expressed as nearly against residential properties owned as possible in terms of census tracts, and occupied by persons of low and block numbering areas, block groups, moderate income. or combinations thereof that are con- (v) For purposes of determining qual- tained within the segment) of the serv- ification under this criterion, activi- ice area from which the calls were gen- ties of the same type that serve dif- erated. In analyzing this data to meet ferent areas will be considered sepa- the requirements of this section, HUD rately on the basis of their individual will assume that the distribution of in- service area. come among the callers generally re- (vi) In determining whether there is a flects the income characteristics of the sufficiently large percentage of low- general population residing in the same and moderate-income persons residing geographic area where the callers re- in the area served by an activity to side. If HUD can conclude that the qualify under paragraph (a)(1) (i), (ii), users have primarily consisted of low- or (vii) of this section, the most re- and moderate-income persons, no fur- cently available decennial census infor- ther submission is needed by the recipi- mation must be used to the fullest ex- ent. If a recipient plans to make other tent feasible, together with the section submissions for this purpose, it may re- 8 income limits that would have ap- quest that HUD review its planned plied at the time the income informa- methodology before expending the ef- tion was collected by the Census Bu- fort to acquire the information it ex- reau. Recipients that believe that the pects to use to make its case; census data does not reflect current (C) Demonstrate that other Federal relative income levels in an area, or funds received by the recipient are in- where census boundaries do not coin- sufficient or unavailable for a uniform cide sufficiently well with the service emergency telephone number system. area of an activity, may conduct (or For this purpose, the recipient must have conducted) a current survey of submit a statement explaining whether the residents of the area to determine the lack of funds is due to the insuffi- the percent of such persons that are ciency of the amount of the available low and moderate income. HUD will ac- funds, restrictions on the use of such cept information obtained through funds, or the prior commitment of such surveys, to be used in lieu of the funds by the recipient for other pur- decennial census data, where it deter- poses; and mines that the survey was conducted (D) Demonstrate that the percentage in such a manner that the results meet of the total costs of the system paid for standards of statistical reliability that by CDBG funds does not exceed the per- are comparable to that of the decennial centage of low- and moderate-income census data for areas of similar size. persons in the service area of the sys- Where there is substantial evidence tem. For this purpose, the recipient that provides a clear basis to believe must include a description of the that the use of the decennial census

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data would substantially overstate the (B) Require information on family proportion of persons residing there size and income so that it is evident that are low and moderate income, that at least 51 percent of the clientele HUD may require that the recipient are persons whose family income does rebut such evidence in order to dem- not exceed the low and moderate in- onstrate compliance with section come limit; or 105(c)(2) of the Act. (C) Have income eligibility require- (vii) Activities meeting the requirements which limit the activity exclu- ments of paragraph (d)(5)(i) of this sec- sively to low and moderate income per- tion may be considered to qualify sons; or under this paragraph, provided that the (D) Be of such nature and be in such area covered by the strategy is either a location that it may be concluded that Federally-designated Empowerment the activity’s clientele will primarily Zone or Enterprise Community or pri- be low and moderate income persons. marily residential and contains a per- (ii) An activity that serves to remove centage of low- and moderate-income material or architectural barriers to residents that is no less than the per- the mobility or accessibility of elderly centage computed by HUD pursuant to persons or of adults meeting the Bu- paragraph (a)(1)(ii) of this section or 70 reau of the Census’ Current Population percent, whichever is less, but in no Reports definition of ‘‘severely dis- event less than 51 percent. Activities abled’’ will be presumed to qualify meeting the requirements of paragraph under this criterion if it is restricted, to the extent practicable, to the re- (d)(6)(i) of this section may also be con- moval of such barriers by assisting: sidered to qualify under paragraph (A) The reconstruction of a public fa- (a)(1) of this section. cility or improvement, or portion (2) Limited clientele activities. (i) An thereof, that does not qualify under activity which benefits a limited clien- paragraph (a)(1) of this section; tele, at least 51 percent of whom are (B) The rehabilitation of a privately low- or moderate-income persons. (The owned nonresidential building or im- following kinds of activities may not provement that does not qualify under qualify under paragraph (a)(2) of this paragraph (a)(1) or (4) of this section; section: activities, the benefits of or which are available to all the residents (C) The rehabilitation of the common of an area; activities involving the ac- areas of a residential structure that quisition, construction or rehabilita- contains more than one dwelling unit tion of property for housing; or activi- and that does not qualify under para- ties where the benefit to low- and mod- graph (a)(3) of this section. erate-income persons to be considered (iii) A microenterprise assistance ac- is the creation or retention of jobs, ex- tivity carried out in accordance with cept as provided in paragraph (a)(2)(iv) the provisions of § 570.201(o) with re- of this section.) To qualify under para- spect to those owners of microenter- graph (a)(2) of this section, the activity prises and persons developing micro- must meet one of the following tests: enterprises assisted under the activity (A) Benefit a clientele who are gen- during each program year who are low- erally presumed to be principally low and moderate-income persons. For pur- and moderate income persons. Activi- poses of this paragraph, persons deter- ties that exclusively serve a group of mined to be low and moderate income persons in any one or a combination of may be presumed to continue to qual- the following categories may be pre- ify as such for up to a three-year pe- sumed to benefit persons, 51 percent of riod. whom are low- and moderate-income: (iv) An activity designed to provide abused children, battered spouses, el- job training and placement and/or derly persons, adults meeting the Bu- other employment support services, in- reau of the Census’ Current Population cluding, but not limited to, peer sup- Reports definition of ‘‘severely dis- port programs, counseling, child care, abled,’’ homeless persons, illiterate transportation, and other similar serv- adults, persons living with AIDS, and ices, in which the percentage of low- migrant farm workers; or and moderate-income persons assisted

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is less than 51 percent may qualify cost of the new construction of a mul- under this paragraph in the following tifamily, non-elderly rental housing limited circumstance: project; (A) In such cases where such training (B) Not less than 20 percent of the or provision of supportive services as- units will be occupied by low and mod- sists business(es), the only use of CDBG erate income households at affordable assistance for the project is to provide rents; and the job training and/or supportive serv- (C) The proportion of the total cost ices; and of developing the project to be borne by (B) The proportion of the total cost CDBG funds is no greater than the proof the project borne by CDBG funds is portion of units in the project that will no greater than the proportion of the be occupied by low and moderate in- total number of persons assisted who come households. are low or moderate income. (3) Housing activities. An eligible ac- (ii) When CDBG funds are used to as- tivity carried out for the purpose of sist rehabilitation eligible under providing or improving permanent resi- § 570.202(b)(9) or (10) in direct support of dential structures which, upon comple- the recipient’s Rental Rehabilitation tion, will be occupied by low- and mod- program authorized under 24 CFR part erate-income households. This would 511, such funds shall be considered to include, but not necessarily be limited benefit low and moderate income per- to, the acquisition or rehabilitation of sons where not less than 51 percent of property by the recipient, a sub- the units assisted, or to be assisted, by recipient, a developer, an individual the recipient’s Rental Rehabilitation homebuyer, or an individual home- program overall are for low and mod- owner; conversion of nonresidential erate income persons. structures; and new housing construc- (iii) When CDBG funds are used for tion. If the structure contains two housing services eligible under dwelling units, at least one must be so § 570.201(k), such funds shall be consid- occupied, and if the structure contains ered to benefit low- and moderate-in- more than two dwelling units, at least come persons if the housing units for 51 percent of the units must be so occu- which the services are provided are pied. Where two or more rental build- HOME-assisted and the requirements ings being assisted are or will be lo- at 24 CFR 92.252 or 92.254 are met. cated on the same or contiguous prop- (4) Job creation or retention activities. erties, and the buildings will be under An activity designed to create or re- common ownership and management, tain permanent jobs where at least 51 the grouped buildings may be consid- percent of the jobs, computed on a full ered for this purpose as a single struc- time equivalent basis, involve the em- ture. Where housing activities being ployment of low- and moderate-income assisted meet the requirements of para- persons. To qualify under this paragraph § 570.208 (d)(5)(ii) or (d)(6)(ii) of graph, the activity must meet the fol- this section, all such housing may also lowing criteria: be considered for this purpose as a single structure. For rental housing, occu- (i) For an activity that creates jobs, pancy by low and moderate income the recipient must document that at households must be at affordable rents least 51 percent of the jobs will be held to qualify under this criterion. The re- by, or will be available to, low- and cipient shall adopt and make public its moderate-income persons. standards for determining ‘‘affordable (ii) For an activity that retains jobs, rents’’ for this purpose. The following the recipient must document that the shall also qualify under this criterion: jobs would actually be lost without the (i) When less than 51 percent of the CDBG assistance and that either or units in a structure will be occupied by both of the following conditions apply low and moderate income households, with respect to at least 51 percent of CDBG assistance may be provided in the jobs at the time the CDBG assist- the following limited circumstances: ance is provided: (A) The assistance is for an eligible (A) The job is known to be held by a activity to reduce the development low- or moderate-income person; or

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(B) The job can reasonably be ex- poverty rate of at least 30 percent as pected to turn over within the fol- determined by the most recently avail- lowing two years and that steps will be able decennial census information; and taken to ensure that it will be filled (C) It evidences pervasive poverty by, or made available to, a low- or and general distress by meeting at moderate-income person upon turn- least one of the following standards: over. (1) All block groups in the census (iii) Jobs that are not held or filled tract have poverty rates of at least 20 by a low- or moderate-income person percent; may be considered to be available to (2) The specific activity being under- low- and moderate-income persons for taken is located in a block group that these purposes only if: has a poverty rate of at least 20 per- (A) Special skills that can only be acquired with substantial training or cent; or work experience or education beyond (3) Upon the written request of the high school are not a prerequisite to recipient, HUD determines that the fill such jobs, or the business agrees to census tract exhibits other objectively hire unqualified persons and provide determinable signs of general distress training; and such as high incidence of crime, nar- (B) The recipient and the assisted cotics use, homelessness, abandoned business take actions to ensure that housing, and deteriorated infrastruc- low- and moderate-income persons re- ture or substantial population decline. ceive first consideration for filling (vi) As a general rule, each assisted such jobs. business shall be considered to be a (iv) For purposes of determining separate activity for purposes of deter- whether a job is held by or made avail- mining whether the activity qualifies able to a low- or moderate-income per- under this paragraph, except: son, the person may be presumed to be (A) In certain cases such as where a low- or moderate-income person if: CDBG funds are used to acquire, de- (A) He/she resides within a census velop or improve a real property (e.g., tract (or block numbering area) that a business incubator or an industrial either: park) the requirement may be met by (1) Meets the requirements of para- measuring jobs in the aggregate for all graph (a)(4)(v) of this section; or the businesses which locate on the (2) Has at least 70 percent of its resi- property, provided such businesses are dents who are low- and moderate-in- not otherwise assisted by CDBG funds. come persons; or (B) Where CDBG funds are used to (B) The assisted business is located pay for the staff and overhead costs of within a census tract (or block num- an entity making loans to businesses bering area) that meets the require- exclusively from non-CDBG funds, this ments of paragraph (a)(4)(v) of this sec- requirement may be met by aggre- tion and the job under consideration is gating the jobs created by all of the to be located within that census tract. businesses receiving loans during each (v) A census tract (or block numbering area) qualifies for the presump- program year. tions permitted under paragraphs (C) Where CDBG funds are used by a (a)(4)(iv)(A)(1) and (B) of this section if recipient or subrecipient to provide it is either part of a Federally-des- technical assistance to businesses, this ignated Empowerment Zone or Enter- requirement may be met by aggre- prise Community or meets the fol- gating the jobs created or retained by lowing criteria: all of the businesses receiving tech- (A) It has a poverty rate of at least 20 nical assistance during each program percent as determined by the most re- year. cently available decennial census infor- (D) Where CDBG funds are used for mation; activities meeting the criteria listed at (B) It does not include any portion of § 570.209(b)(2)(v), this requirement may a central business district, as this term be met by aggregating the jobs created is used in the most recent Census of or retained by all businesses for which Retail Trade, unless the tract has a CDBG assistance is obligated for such

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activities during the program year, ex- (b) Activities which aid in the preven- cept as provided at paragraph (d)(7) of tion or elimination of slums or blight. Ac- this section. tivities meeting one or more of the fol- (E) Where CDBG funds are used by a lowing criteria, in the absence of sub- Community Development Financial In- stantial evidence to the contrary, will stitution to carry out activities for the be considered to aid in the prevention purpose of creating or retaining jobs, or elimination of slums or blight: this requirement may be met by aggre- (1) Activities to address slums or blight gating the jobs created or retained by on an area basis. An activity will be all businesses for which CDBG assist- considered to address prevention or ance is obligated for such activities elimination of slums or blight in an during the program year, except as pro- area if: vided at paragraph (d)(7) of this sec- (i) The area, delineated by the recipi- tion. ent, meets a definition of a slum, (F) Where CDBG funds are used for blighted, deteriorated or deteriorating public facilities or improvements area under State or local law; which will result in the creation or re- (ii) The area also meets the condi- tention of jobs by more than one business, this requirement may be met by tions in either paragraph (A) or (B): aggregating the jobs created or re- (A) At least 25 percent of properties tained by all such businesses as a re- throughout the area experience one or sult of the public facility or improve- more of the following conditions: ment. (1) Physical deterioration of build- (1) Where the public facility or im- ings or improvements; provement is undertaken principally (2) Abandonment of properties; for the benefit of one or more par- (3) Chronic high occupancy turnover ticular businesses, but where other rates or chronic high vacancy rates in businesses might also benefit from the commercial or industrial buildings; assisted activity, the requirement may (4) Significant declines in property be met by aggregating only the jobs values or abnormally low property val- created or retained by those businesses ues relative to other areas in the com- for which the facility/improvement is munity; or principally undertaken, provided that (5) Known or suspected environ- the cost (in CDBG funds) for the facil- mental contamination. ity/improvement is less than $10,000 per (B) The public improvements permanent full-time equivalent job to throughout the area are in a general be created or retained by those busi- state of deterioration. nesses. (iii) Documentation is to be main- (2) In any case where the cost per job tained by the recipient on the bound- to be created or retained (as determined under paragraph (a)(4)(vi)(F)(1) aries of the area and the conditions and of this section) is $10,000 or more, the standards used that qualified the area requirement must be met by aggre- at the time of its designation. The re- gating the jobs created or retained as a cipient shall establish definitions of result of the public facility or improve- the conditions listed at ment by all businesses in the service § 570.208(b)(1)(ii)(A), and maintain area of the facility/improvement. This records to substantiate how the area aggregation must include businesses met the slums or blighted criteria. The which, as a result of the public facility/ designation of an area as slum or improvement, locate or expand in the blighted under this section is required service area of the facility/improve- to be redetermined every 10 years for ment between the date the recipient continued qualification. Documenta- identifies the activity in its action tion must be retained pursuant to the plan under part 91 of this title and the recordkeeping requirements contained date one year after the physical com- at § 570.506 (b)(8)(ii). pletion of the facility/improvement. In (iv) The assisted activity addresses addition, the assisted activity must one or more of the conditions which comply with the public benefit stand- contributed to the deterioration of the ards at § 570.209(b). area. Rehabilitation of residential

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buildings carried out in an area meet- ity which benefits low and moderate income ing the above requirements will be con- persons pursuant to paragraph (a)(3) of this sidered to address the area’s deteriora- section can be undertaken without regard to tion only where each such building re- the area in which it is located or the extent or nature of rehabilitation assisted. habilitated is considered substandard under local definition before rehabili- (c) Activities designed to meet commu- tation, and all deficiencies making a nity development needs having a par- building substandard have been elimi- ticular urgency. In the absence of sub- nated if less critical work on the build- stantial evidence to the contrary, an ing is undertaken. At a minimum, the activity will be considered to address local definition for this purpose must this objective if the recipient certifies be such that buildings that it would that the activity is designed to allevi- render substandard would also fail to ate existing conditions which pose a se- meet the housing quality standards for rious and immediate threat to the the Section 8 Housing Assistance Pay- health or welfare of the community ments Program-Existing Housing (24 which are of recent origin or which re- CFR 882.109). cently became urgent, that the recipi- (2) Activities to address slums or blight ent is unable to finance the activity on on a spot basis. The following activities its own, and that other sources of fund- may be undertaken on a spot basis to ing are not available. A condition will eliminate specific conditions of blight, generally be considered to be of recent physical decay, or environmental con- origin if it developed or became critical tamination that are not located in a within 18 months preceding the certifi- slum or blighted area: acquisition; cation by the recipient. clearance; relocation; historic preser- (d) Additional criteria. (1) Where the vation; remediation of environ- assisted activity is acquisition of real mentally contaminated properties; or property, a preliminary determination rehabilitation of buildings or improve- of whether the activity addresses a na- ments. However, rehabilitation must tional objective may be based on the be limited to eliminating those condi- planned use of the property after acqui- tions that are detrimental to public sition. A final determination shall be health and safety. If acquisition or re- based on the actual use of the property, location is undertaken, it must be a excluding any short-term, temporary precursor to another eligible activity use. Where the acquisition is for the (funded with CDBG or other resources) purpose of clearance which will elimi- that directly eliminates the specific nate specific conditions of blight or conditions of blight or physical decay, physical decay, the clearance activity or environmental contamination. shall be considered the actual use of (3) Activities to address slums or blight the property. However, any subsequent in an urban renewal area. An activity use or disposition of the cleared prop- will be considered to address preven- erty shall be treated as a ‘‘change of tion or elimination of slums or blight use’’ under § 570.505. in an urban renewal area if the activity (2) Where the assisted activity is re- is: location assistance that the recipient (i) Located within an urban renewal is required to provide, such relocation project area or Neighborhood Develop- assistance shall be considered to ad- ment Program (NDP) action area; i.e., dress the same national objective as is an area in which funded activities were addressed by the displacing activity. authorized under an urban renewal Where the relocation assistance is vol- Loan and Grant Agreement or an an- untary on the part of the grantee the nual NDP Funding Agreement, pursu- recipient may qualify the assistance ei- ant to title I of the Housing Act of 1949; ther on the basis of the national objec- and tive addressed by the displacing activ- (ii) Necessary to complete the urban ity or on the basis that the recipients renewal plan, as then in effect, includ- of the relocation assistance are low and ing initial land redevelopment per- moderate income persons. mitted by the plan. (3) In any case where the activity un- NOTE: Despite the restrictions in (b) (1) and dertaken for the purpose of creating or (2) of this section, any rehabilitation activ- retaining jobs is a public improvement

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and the area served is primarily resi- (d)(5)(i) or (d)(6)(i) of this section, the dential, the activity must meet the re- grantee may elect to qualify the activ- quirements of paragraph (a)(1) of this ity under either the area benefit cri- section as well as those of paragraph teria at paragraph (a)(1)(vii) of this (a)(4) of this section in order to qualify section or the job aggregation criteria as benefiting low and moderate income at paragraph (a)(4)(vi)(D) of this sec- persons. tion, but not both. Where an activity (4) CDBG funds expended for planning may meet the job aggregation criteria and administrative costs under § 570.205 at both paragraphs (a)(4)(vi)(D) and (E) and § 570.206 will be considered to ad- of this section, the grantee may elect dress the national objectives. to qualify the activity under either cri- (5) Where the grantee has elected to terion, but not both. prepare an area revitalization strategy [53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, pursuant to the authority of § 91.215(e) 1988, as amended at 60 FR 1945, Jan. 5, 1995; of this title and HUD has approved the 60 FR 17445, Apr. 6, 1995; 60 FR 56912, Nov. 9, strategy, the grantee may also elect 1995; 61 FR 18674, Apr. 29, 1996; 71 FR 30035, the following options: May 24, 2006; 72 FR 46370, Aug. 17, 2007] (i) Activities undertaken pursuant to the strategy for the purpose of creating § 570.209 Guidelines for evaluating or retaining jobs may, at the option of and selecting economic develop- the grantee, be considered to meet the ment projects. requirements of this paragraph under The following guidelines are provided the criteria at paragraph (a)(1)(vii) of to assist the recipient to evaluate and this section in lieu of the criteria at select activities to be carried out for paragraph (a)(4) of this section; and economic development purposes. Spe- (ii) All housing activities in the area cifically, these guidelines are applica- for which, pursuant to the strategy, ble to activities that are eligible for CDBG assistance is obligated during CDBG assistance under § 570.203. These the program year may be considered to guidelines also apply to activities car- be a single structure for purposes of ap- ried out under the authority of § 570.204 plying the criteria at paragraph (a)(3) that would otherwise be eligible under of this section. § 570.203, were it not for the involve- (6) Where CDBG-assisted activities ment of a Community-Based Develop- are carried out by a Community Devel- ment Organization (CBDO). (This opment Financial Institution whose would include activities where a CBDO charter limits its investment area to a makes loans to for-profit businesses.) primarily residential area consisting of These guidelines are composed of two at least 51 percent low- and moderate- components: guidelines for evaluating income persons, the grantee may also project costs and financial require- elect the following options: ments; and standards for evaluating (i) Activities carried out by the Com- public benefit. The standards for evalu- munity Development Financial Insti- ating public benefit are mandatory, but tution for the purpose of creating or re- the guidelines for evaluating projects taining jobs may, at the option of the costs and financial requirements are grantee, be considered to meet the re- not. quirements of this paragraph under the (a) Guidelines and objectives for evalu- criteria at paragraph (a)(1)(vii) of this ating project costs and financial require- section in lieu of the criteria at para- ments. HUD has developed guidelines graph (a)(4) of this section; and that are designed to provide the recipi- (ii) All housing activities for which ent with a framework for financially the Community Development Finan- underwriting and selecting CDBG-as- cial Institution obligates CDBG assist- sisted economic development projects ance during the program year may be which are financially viable and will considered to be a single structure for make the most effective use of the purposes of applying the criteria at CDBG funds. These guidelines, also re- paragraph (a)(3) of this section. ferred to as the underwriting guide- (7) Where an activity meeting the cri- lines, are published as appendix A to teria at § 570.209(b)(2)(v) may also meet this part. The use of the underwriting the requirements of either paragraph guidelines published by HUD is not

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mandatory. However, grantees electing (1) Standards for activities in the aggre- not to use these guidelines would be ex- gate. Activities covered by these guide- pected to conduct basic financial un- lines must, in the aggregate, either: derwriting prior to the provision of (i) Create or retain at least one full- CDBG financial assistance to a for- time equivalent, permanent job per profit business. Where appropriate, $35,000 of CDBG funds used; or HUD’s underwriting guidelines recog- (ii) Provide goods or services to resi- nize that different levels of review are dents of an area, such that the number appropriate to take into account dif- of low- and moderate-income persons ferences in the size and scope of a pro- residing in the areas served by the as- posed project, and in the case of a mi- sisted businesses amounts to at least croenterprise or other small business one low- and moderate-income person to take into account the differences in per $350 of CDBG funds used. the capacity and level of sophistication (2) Applying the aggregate standards. among businesses of differing sizes. Re- (i) A metropolitan city, an urban coun- cipients are encouraged, when they de- ty, a non-entitlement CDBG grantee in velop their own programs and under- Hawaii, or an Insular Area shall apply writing criteria, to also take these fac- the aggregate standards under para- tors into account. The objectives of the graph (b)(1) of this section to all appli- underwriting guidelines are to ensure: cable activities for which CDBG funds (1) That project costs are reasonable; are first obligated within each single (2) That all sources of project financ- CDBG program year, without regard to ing are committed; the source year of the funds used for the activities. For Insular Areas, the (3) That to the extent practicable, preceding sentence applies to grants re- CDBG funds are not substituted for ceived in program years after Fiscal non-Federal financial support; Year 2004. A grantee under the HUD-ad- (4) That the project is financially fea- ministered Small Cities Program, or sible; Insular Areas CDBG grants prior to (5) That to the extent practicable, Fiscal Year 2005, shall apply the aggre- the return on the owner’s equity in- gate standards under paragraph (b)(1) vestment will not be unreasonably of this section to all funds obligated for high; and applicable activities from a given (6) That to the extent practicable, grant; program income obligated for CDBG funds are disbursed on a pro rata applicable activities will, for these pur- basis with other finances provided to poses, be aggregated with the most re- the project. cent open grant. For any time period in (b) Standards for evaluating public ben- which a community has no open HUD- efit. The grantee is responsible for administered or Insular Areas grants, making sure that at least a minimum the aggregate standards shall be ap- level of public benefit is obtained from plied to all applicable activities for the expenditure of CDBG funds under which program income is obligated the categories of eligibility governed during that period. by these guidelines. The standards set (ii) The grantee shall apply the ag- forth below identify the types of public gregate standards to the number of benefit that will be recognized for this jobs to be created/retained, or to the purpose and the minimum level of each number of persons residing in the area that must be obtained for the amount served (as applicable), as determined at of CDBG funds used. Unlike the guide- the time funds are obligated to activi- lines for project costs and financial re- ties. quirements covered under paragraph (iii) Where an activity is expected (a) of this section, the use of the stand- both to create or retain jobs and to ards for public benefit is mandatory. provide goods or services to residents Certain public facilities and improve- of an area, the grantee may elect to ments eligible under § 570.201(c) of the count the activity under either the regulations, which are undertaken for jobs standard or the area residents economic development purposes, are standard, but not both. also subject to these standards, as (iv) Where CDBG assistance for an specified in § 570.208(a)(4)(vi)(F)(2). activity is limited to job training and

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placement and/or other employment a project designed to promote spatial support services, the jobs assisted with deconcentration of low- and moderate- CDBG funds shall be considered to be income and minority persons; created or retained jobs for the pur- (K) With prior HUD approval, proposes of applying the aggregate stand- vides substantial benefit to low-income ards. persons through other innovative ap- (v) Any activity subject to these proaches; guidelines which meets one or more of (L) Provides services to the residents the following criteria may, at the of an area pursuant to a strategy ap- grantee’s option, be excluded from the proved by HUD under the provisions of aggregate standards described in para- § 91.215(e) of this title; graph (b)(1) of this section: (M) Creates or retains jobs through (A) Provides jobs exclusively for un- businesses assisted in an area pursuant employed persons or participants in to a strategy approved by HUD under one or more of the following programs: the provisions of § 91.215(e) of this title. (1) Jobs Training Partnership Act (N) Directly involves the economic (JTPA); development or redevelopment of envi- (2) Jobs Opportunities for Basic ronmentally contaminated properties. Skills (JOBS); or (3) Standards for individual activities. (3) Aid to Families with Dependent Any activity subject to these guide- Children (AFDC); lines which falls into one or more of (B) Provides jobs predominantly for the following categories will be consid- residents of Public and Indian Housing ered by HUD to provide insufficient units; public benefit, and therefore may under (C) Provides jobs predominantly for no circumstances be assisted with homeless persons; CDBG funds: (D) Provides jobs predominantly for (i) The amount of CDBG assistance low-skilled, low- and moderate-income exceeds either of the following, as ap- persons, where the business agrees to plicable: provide clear opportunities for pro- (A) $50,000 per full-time equivalent, motion and economic advancement, permanent job created or retained; or such as through the provision of training; (B) $1,000 per low- and moderate-in- (E) Provides jobs predominantly for come person to which goods or services persons residing within a census tract are provided by the activity. (or block numbering area) that has at (ii) The activity consists of or in- least 20 percent of its residents who are cludes any of the following: in poverty; (A) General promotion of the commu- (F) Provides assistance to busi- nity as a whole (as opposed to the pro- ness(es) that operate(s) within a census motion of specific areas and programs); tract (or block numbering area) that (B) Assistance to professional sports has at least 20 percent of its residents teams; who are in poverty; (C) Assistance to privately-owned (G) Stabilizes or revitalizes a neigh- recreational facilities that serve a pre- borhood that has at least 70 percent of dominantly higher-income clientele, its residents who are low- and mod- where the recreational benefit to users erate-income; or members clearly outweighs employ- (H) Provides assistance to a Commu- ment or other benefits to low- and nity Development Financial Institu- moderate-income persons; tion that serve an area that is predomi- (D) Acquisition of land for which the nantly low- and moderate-income per- specific proposed use has not yet been sons; identified; and (I) Provides assistance to a Commu- (E) Assistance to a for-profit business nity-Based Development Organization while that business or any other busi- serving a neighborhood that has at ness owned by the same person(s) or least 70 percent of its residents who are entity(ies) is the subject of unresolved low- and moderate-income; findings of noncompliance relating to (J) Provides employment opportuni- previous CDBG assistance provided by ties that are an integral component of the recipient.

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(4) Applying the individual activity (d) Documentation. The grantee must standards. (i) Where an activity is ex- maintain sufficient records to dem- pected both to create or retain jobs and onstrate the level of public benefit, to provide goods or services to resi- based on the above standards, that is dents of an area, it will be disqualified actually achieved upon completion of only if the amount of CDBG assistance the CDBG-assisted economic develop- exceeds both of the amounts in para- ment activity(ies) and how that com- graph (b)(3)(i) of this section. pares to the level of such benefit an- (ii) The individual activity standards ticipated when the CDBG assistance in paragraph (b)(3)(i) of this section was obligated. If the grantee’s actual shall be applied to the number of jobs results show a pattern of substantial to be created or retained, or to the variation from anticipated results, the number of persons residing in the area grantee is expected to take all actions served (as applicable), as determined at reasonably within its control to im- the time funds are obligated to activi- prove the accuracy of its projections. If ties. the actual results demonstrate that (iii) Where CDBG assistance for an the recipient has failed the public ben- activity is limited to job training and efit standards, HUD may require the placement and/or other employment recipient to meet more stringent support services, the jobs assisted with standards in future years as appro- CDBG funds shall be considered to be priate. created or retained jobs for the pur- [60 FR 1947, Jan. 5, 1995, as amended at 60 FR poses of applying the individual activ- 17445, Apr. 6, 1995; 71 FR 30035, May 24, 2006; ity standards in paragraph (b)(3)(i) of 72 FR 12535, Mar. 15, 2007; 72 FR 46370, Aug. this section. 17, 2007] (c) Amendments to economic development projects after review determinations. § 570.210 Prohibition on use of assist- If, after the grantee enters into a con- ance for employment relocation ac- tract to provide assistance to a project, tivities. the scope or financial elements of the (a) Prohibition. CDBG funds may not project change to the extent that a sig- be used to directly assist a business, in- nificant contract amendment is appro- cluding a business expansion, in the re- priate, the project should be reevalu- location of a plant, facility, or operated under these and the recipient’s ation from one LMA to another LMA if guidelines. (This would include, for ex- the relocation is likely to result in a ample, situations where the business significant loss of jobs in the LMA requests a change in the amount or from which the relocation occurs. terms of assistance being provided, or (b) Definitions. The following defini- an extension to the loan payment pe- tions apply to this section: riod required in the contract.) If a re- (1) Directly assist. Directly assist evaluation of the project indicates that means the provision of CDBG funds for the financial elements and public ben- activities pursuant to: efit to be derived have also substan- (i) § 570.203(b); or tially changed, then the recipient (ii) §§ 570.201(a)–(d), 570.201(l), should make appropriate adjustments 570.203(a), or § 570.204 when the grantee, in the amount, type, terms or condi- subrecipient, or, in the case of an actions of CDBG assistance which has tivity carried out pursuant to § 570.204, been offered, to reflect the impact of a Community Based Development Or- the substantial change. (For example, ganization (CDBO) enters into an if a change in the project elements re- agreement with a business to under- sults in a substantial reduction of the take one or more of these activities as total project costs, it may be appro- a condition of the business relocating a priate for the recipient to reduce the facility, plant, or operation to the amount of total CDBG assistance.) If grantee’s LMA. Provision of public fa- the amount of CDBG assistance pro- cilities and indirect assistance that vided to the project is increased, the will provide benefit to multiple busi- amended project must still comply nesses does not fall under the defini- with the public benefit standards under tion of ‘‘directly assist,’’ unless it in- paragraph (b) of this section. cludes the provision of infrastructure

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to aid a specific business that is the business; or the time period within subject of an agreement with the spe- which jobs are to be created as speci- cific assisted business. fied by the agreement between the (2) Labor market area (LMA). For met- business and the recipient if it is ropolitan areas, an LMA is an area de- longer than three years. fined as such by the BLS. An LMA is (c) Written agreement. Before directly an economically integrated geographic assisting a business with CDBG funds, area within which individuals can live the recipient, subrecipient, or a CDBO and find employment within a reason- (in the case of an activity carried out able distance or can readily change em- pursuant to § 570.204) shall sign a writ- ployment without changing their place ten agreement with the assisted busi- of residence. In addition, LMAs are ness. The written agreement shall in- nonoverlapping and geographically exclude: haustive. For metropolitan areas, (1) Statement. A statement from the grantees must use employment data, as assisted business as to whether the as- defined by the BLS, for the LMA in sisted activity will result in the reloca- which the affected business is cur- tion of any industrial or commercial rently located and from which current plant, facility, or operation from one jobs may be lost. For non-metropolitan LMA to another, and, if so, the number areas, an LMA is either an area defined of jobs that will be relocated from each by the BLS as an LMA, or a state may LMA; choose to combine non-metropolitan (2) Required information. If the assist- LMAs. States are required to define or ance will not result in a relocation cov- reaffirm prior definitions of their ered by this section, a certification LMAs on an annual basis and retain from the assisted business that neither records to substantiate such areas it, nor any of its subsidiaries, has plans prior to any business relocation that to relocate jobs at the time the agree- would be impacted by this rule. Metro- ment is signed that would result in a politan LMAs cannot be combined, nor significant job loss as defined in this can a non-metropolitan LMA be com- rule; and bined with a metropolitan LMA. For (3) Reimbursement of assistance. The the HUD-administered Small Cities agreement shall provide for reimburse- Program, each of the three partici- ment of any assistance provided to, or pating counties in Hawaii will be con- expended on behalf of, the business in sidered to be its own LMA. Recipients the event that assistance results in a of Fiscal Year 1999 Small Cities Pro- relocation prohibited under this sec- gram funding in New York will follow tion. the requirements for State CDBG re- (d) Assistance not covered by this sec- cipients. tion. This section does not apply to: (3) Operation. A business operation (1) Relocation assistance. Relocation includes, but is not limited to, any assistance required by the Uniform As- equipment, employment opportunity, sistance and Real Property Acquisition production capacity or product line of Policies Act of 1970, (URA) (42 U.S.C. the business. 4601–4655); (4) Significant loss of jobs. (i) A loss of (2) Microenterprises. Assistance to jobs is significant if: The number of microenterprises as defined by Section jobs to be lost in the LMA in which the 102(a)(22) of the Housing and Commu- affected business is currently located is nity Development Act of 1974; and equal to or greater than one-tenth of (3) Arms-length transactions. Assist- one percent of the total number of per- ance to a business that purchases busi- sons in the labor force of that LMA; or ness equipment, inventory, or other in all cases, a loss of 500 or more jobs. physical assets in an arms-length Notwithstanding the aforementioned, a transaction, including the assets of an loss of 25 jobs or fewer does not con- existing business, provided that the stitute a significant loss of jobs. purchase does not result in the reloca- (ii) A job is considered to be lost due tion of the sellers’ business operation to the provision of CDBG assistance if (including customer base or list, good- the job is relocated within three years will, product lines, or trade names) of the provision of assistance to the from one LMA to another LMA and

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does not produce a significant loss of for purposes of this section and the ac- jobs in the LMA from which the relocation plan. Each activity carried out tion occurs. using the float must meet all of the [70 FR 76369, Dec. 23, 2005] same requirements that apply to CDBG-assisted activities generally, and must be expected to produce program Subpart D—Entitlement Grants income in an amount at least equal to the amount of the float so used. When- SOURCE: 53 FR 34449, Sept. 6, 1988, unless ever the recipient proposes to fund an otherwise noted. activity with the float, it must include § 570.300 General. the activity in its action plan or amend the action plan for the current pro- This subpart describes the policies gram year. For purposes of this sec- and procedures governing the making tion, an activity that uses such funds of community development block will be called a ‘‘float-funded activity.’’ grants to entitlement communities and (1) Each float-funded activity must to non-entitlement counties in the State of Hawaii. The policies and pro- be individually listed and described as cedures set forth in subparts A, C, J, K, such in the action plan. and O of this part also apply to entitle- (2)(i) The expected time period be- ment grantees and to non-entitlement tween obligation of assistance for a grantees in the State of Hawaii. Sec- float-funded activity and receipt of tions 570.307 and 570.308 of this subpart program income in an amount at least do not apply to the Hawaii non-entitle- equal to the full amount drawn from ment grantees. the float to fund the activity may not exceed 2.5 years. An activity from [72 FR 46370, Aug. 17, 2007] which program income sufficient to recover the full amount of the float as- § 570.301 Activity locations and float- funding. sistance is expected to be generated more than 2.5 years after obligation The consolidated plan, action plan, may not be funded from the float, but and amendment submission require- may be included in an action plan if it ments referred to in this section are is funded from CDBG funds other than those in 24 CFR part 91. the float (e.g., grant funds or proceeds (a) For activities for which the grant- from an approved Section 108 loan ee has not yet decided on a specific lo- guarantee). cation, such as when the grantee is allocating an amount of funds to be used (ii) Any extension of the repayment for making loans or grants to busi- period for a float-funded activity shall nesses or for residential rehabilitation, be considered to be a new float-funded the description in the action plan or activity for these purposes and may be any amendment shall identify who may implemented by the grantee only if the apply for the assistance, the process by extension is made subject to the same which the grantee expects to select limitations and requirements as apply who will receive the assistance (includ- to a new float-funded activity. ing selection criteria), and how much (3) Unlike other projected program and under what terms the assistance income, the full amount of income ex- will be provided, or in the case of a pected to be generated by a float-fund- planned public facility or improve- ed activity must be shown as a source ment, how it expects to determine its of program income in the action plan location. containing the activity, whether or not (b) Float-funded activities and guaran- some or all of the income is expected tees. A recipient may use undisbursed to be received in a future program year funds in the line of credit and its CDBG (in accordance with 24 CFR program account that are budgeted in 91.220(g)(1)(ii)(D)). statements or action plans for one or (4) The recipient must also clearly more other activities that do not need declare in the action plan that identi- the funds immediately, subject to the fies the float-funded activity the re- limitations described below. Such cipient’s commitment to undertake funds shall be referred to as the ‘‘float’’ one of the following options:

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(i) Amend or delete activities in an § 570.302 Submission requirements. amount equal to any default or failure to produce sufficient income in a time- In order to receive its annual CDBG ly manner. If the recipient makes this entitlement grant, a grantee must sub- choice, it must include a description of mit a consolidated plan in accordance the process it will use to select the ac- with 24 CFR part 91. That part includes tivities to be amended or deleted and requirements for the content of the how it will involve citizens in that consolidated plan, for the process of de- process; and it must amend the appli- veloping the consolidated plan, includ- cable statement(s) or action plan(s) ing citizen participation provisions, for showing those amendments or dele- the submission date, for HUD approval, tions promptly upon determining that and for the amendment process. the float-funded activity will not gen- (Approved by the Office of Management and erate sufficient or timely program in- Budget under control number 2506–0117) come; (ii) Obtain an irrevocable line of [60 FR 1915, Jan. 5, 1995] credit from a commercial lender for § 570.303 Certifications. the full amount of the float-funded activity and describe the lender and The jurisdiction must make the cer- terms of such line of credit in the ac- tifications that are set forth in 24 CFR tion plan that identifies the float-fund- part 91 as part of the consolidated plan. ed activity. To qualify for this purpose, (Approved by the Office of Management and such line of credit must be uncondi- Budget under control number 2506–0117) tionally available to the recipient in the amount of any shortfall within 30 [60 FR 1915, Jan. 5, 1995] days of the date that the float-funded activity fails to generate the projected § 570.304 Making of grants. amount of program income on sched- (a) Approval of grant. HUD will ap- ule; prove a grant if the jurisdiction’s sub- (iii) Transfer general local govern- missions have been made and approved ment funds in the full amount of any in accordance with 24 CFR part 91, and default or shortfall to the CDBG line of the certifications required therein are credit within 30 days of the float-fund- satisfactory to the Secretary. The cer- ed activity’s failure to generate the tifications will be satisfactory to the projected amount of the program in- Secretary for this purpose unless the come on schedule; or Secretary has determined pursuant to (iv) A method approved in writing by subpart O of this part that the grantee HUD for securing timely return of the has not complied with the require- amount of the float funding. Such ments of this part, has failed to carry method must ensure that funds are out its consolidated plan as provided available to meet any default or short- under § 570.903, or has determined that fall within 30 days of the float-funded there is evidence, not directly involv- activity’s failure to generate the pro- ing the grantee’s past performance jected amount of the program income under this program, that tends to chal- on schedule. lenge in a substantial manner the (5) When preparing an action plan for grantee’s certification of future per- a year in which program income is ex- formance. If the Secretary makes any pected to be received from a float-fund- such determination, however, further ed activity, and such program income assurances may be required to be sub- has been shown in a prior statement or mitted by the grantee as the Secretary action plan, the current action plan may deem warranted or necessary to shall identify the expected income and find the grantee’s certification satis- explain that the planned use of the in- factory. come has already been described in (b) Grant agreement. The grant will be prior statements or action plans, and made by means of a grant agreement shall identify the statements or action executed by both HUD and the grantee. plans in which such descriptions may (c) Grant amount. The Secretary will be found. make a grant in the full entitlement [60 FR 56913, Nov. 9, 1995] amount, generally within the last 30

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days of the grantee’s current program unit does not cooperate in the imple- year, unless: mentation of the essential community (1) Either the consolidated plan is development or housing assistance ac- not received by August 16 of the federal tivities or where legal impediments to fiscal year for which funds are appro- such implementation exist, or where priated or the consolidated plan is not participation by a unit of general local approved under 24 CFR part 91, subpart government in noncompliance with the F—in which case, the grantee will for- applicable law in subpart K would con- feit the entire entitlement amount; or stitute noncompliance by the urban (2) The grantee’s performance does county. In such a case, the unit of gen- not meet the performance require- eral local government will not be per- ments or criteria prescribed in subpart mitted to participate in the urban O and the grant amount is reduced. county, and its population or other [53 FR 34449, Sept. 6, 1988, as amended at 60 needs characteristics will not be con- FR 1915, Jan. 5, 1995; 60 FR 16379, Mar. 30, sidered in the determination of wheth- 1995; 60 FR 56913, Nov. 9, 1995] er the county qualifies as an urban county or in determining the amount § 570.307 Urban counties. of funds to which the urban county (a) Determination of qualification. The may be entitled. HUD will not take Secretary will determine the qualifica- this action unless the unit of general tions of counties to receive entitle- local government and the county have ments as urban counties upon receipt been given an opportunity to challenge of qualification documentation from HUD’s determination and to informally counties at such time, and in such consult with HUD concerning the pro- manner and form as prescribed by posed action. HUD. The Secretary shall determine (c) Essential activities. For purposes of eligibility and applicable portions of this section, the term ‘‘essential com- each eligible county for purposes of munity development and housing as- fund allocation under section 106 of the sistance activities’’ means community Act on the basis of information avail- renewal and lower income housing ac- able from the U.S. Bureau of the Cen- tivities, specifically urban renewal and sus with respect to population and publicly assisted housing. In deter- other pertinent demographic charac- mining whether a county has the re- teristics, and based on information pro- quired powers, the Secretary will con- vided by the county and its included sider both its authority and, where ap- units of general local government. plicable, the authority of its des- (b) Qualification as an urban county. ignated agency or agencies. (1) A county will qualify as an urban (d) Period of qualification. (1) The county if such county meets the defini- qualification by HUD of an urban coun- tion at § 570.3(3). As necessitated by ty shall remain effective for three suc- this definition, the Secretary shall de- cessive Federal fiscal years regardless termine which counties have authority of changes in its population during to carry out essential community de- that period, except as provided under velopment and housing assistance ac- paragraph (f) of this section and except tivities in their included units of gen- as provided under § 570.3(3) where the eral local government without the con- period of qualification shall be two suc- sent of the local governing body and cessive Federal fiscal years. which counties must execute coopera- (2) During the period of qualification, tion agreements with such units to in- no included unit of general local gov- clude them in the urban county for ernment may withdraw from nor be requalification and grant calculation moved from the urban county for purposes. HUD’s grant computation purposes. (2) At the time of urban county quali- (3) If some portion of an urban coun- fication, HUD may refuse to recognize ty’s unincorporated area becomes in- the cooperation agreement of a unit of corporated during the urban county general local government in an urban qualification period, the newly incor- county where, based on past perform- porated unit of general local governance and other available information, ment shall not be excluded from the there is substantial evidence that such urban county nor shall it be eligible for

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a separate grant under subpart D, F, or the urban county, but which is eligible I until the end of the urban county’s to elect to have its population excluded current qualification period, unless the from that of the urban county, that it urban county fails to receive a grant has the opportunity to make such an for any year during that qualification election, and that such an election, or period. the failure to make such an election, (e) Grant ineligibility of included units shall be effective for the period for of general local government. (1) An in- which the county qualifies as an urban cluded unit of general local govern- county. These notifications shall be ment cannot become eligible for an en- made by a date specified by HUD. A titlement grant as a metropolitan city unit of general local government which during the period of qualification of elects to be excluded from participa- the urban county (even if it becomes a tion as a part of the urban county shall principal city of a metropolitan area or notify the county and HUD in writing its population surpasses 50,000 during by a date specified by HUD. Such a that period). Rather, such a unit of unit of government may subsequently general local government shall con- elect to participate in the urban coun- tinue to be included as part of the ty for the remaining one or two year urban county for the remainder of the period by notifying HUD and the coun- urban county’s qualification period, ty, in writing, of such election by a and no separate grant amount shall be date specified by HUD. calculated for the included unit. [53 FR 34449, Sept. 6, 1988, as amended at 56 (2) An included unit of general local FR 56127, Oct. 31, 1991; 68 FR 69582, Dec. 12, government which is part of an urban 2003] county shall be ineligible to apply for grants under subpart F, or to be a re- § 570.308 Joint requests. cipient of assistance under subpart I, (a) Joint requests and cooperation during the entire period of urban coun- agreements. (1) Any urban county and ty qualification. any metropolitan city located, in (f) Failure of an urban county to re- whole or in part, within that county ceive a grant. Failure of an urban coun- may submit a joint request to HUD to ty to receive a grant during any year approve the inclusion of the metropoli- shall terminate the existing qualifica- tan city as a part of the urban county tion of that urban county, and that for purposes of planning and imple- county shall requalify as an urban menting a joint community develop- county before receiving an entitlement ment and housing program. Such a grant in any successive Federal fiscal joint request shall only be considered if year. Such termination shall release submitted at the time the county is units of general local government in- seeking a three year qualification or cluded in the urban county, in subse- requalification as an urban county. quent years, from the prohibition to re- Such a joint request shall, upon ap- ceive grants under paragraphs (d)(3), proval by HUD, remain effective for the (e)(1) and (e)(2) of this section. For this period for which the county is qualified purpose an urban county shall be as an urban county. An urban county deemed to have received a grant upon may be joined by more than one metro- having satisfied the requirements of politan city, but a metropolitan city sections 104 (a), (b), (c), and (d) of the located in more than one urban county Act, without regard to adjustments may only be included in one urban which may be made to this grant county for any program year. A joint amount under section 104(e) or 111 of request shall be deemed approved by the Act. HUD unless HUD notifies the city and (g) Notifications of the opportunity to the county of its disapproval and the be excluded. Any county seeking to reasons therefore within 30 days of requalify for an entitlement grant as an ceipt of the request by HUD. urban county for any Federal fiscal (2) Each metropolitan city and urban year shall notify each unit of general county submitting a joint request shall local government which is located, in submit an executed cooperation agree- whole or in part, within the county and ment to undertake or to assist in the which would otherwise be included in undertaking of essential community

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development and housing assistance herein. The HUD Environmental Re- activities, as defined in § 570.307(c). view Procedures contained in 24 CFR (b) Joint grant amount. The grant part 58 also apply to this subpart, un- amount for a joint recipient shall be less otherwise specifically provided the sum of the amounts authorized for herein. the individual entitlement grantees, as (b) Data. Wherever data are used in described in section 106 of the Act. The this subpart for selecting applicants for urban county shall be the grant recipi- assistance or for determining grant ent. amounts, the source of such data shall (c) Effect of inclusion. Upon urban be the most recent information avail- county qualification and HUD approval able from the U.S. Bureau of the Cen- of the joint request and cooperation sus which is referable to the same agreement, the metropolitan city shall point or period of time. be considered a part of the urban coun- (c) Review of applications for discre- ty for purposes of program planning tionary assistance—(1) Review compo- and implementation for the period of nents. An application for assistance the urban county qualification, and under this subpart shall be reviewed by shall be treated the same as any other HUD to ensure that: unit of general local government which (i) The application is postmarked or is part of the urban county. received on or before any final date es- (d) Submission requirements. In re- tablished by HUD; questing a grant under this part, the (ii) The application is complete; urban county shall make a single sub- (iii) Required certifications have mission which meets the submission been included in the application; and requirements of 24 CFR part 91 and (iv) The application meets the spe- covers all members of the joint recipi- cific program requirements listed in ent. the FEDERAL REGISTER Notice pub- [53 FR 34449, Sept. 6, 1988, as amended at 60 lished in connection with a competi- FR 1915, Jan. 5, 1995] tion for funding, and any other specific requirements listed under this subpart § 570.309 Restriction on location of ac- for each of the programs. tivities. (2) Timing and review. HUD is not re- CDBG funds may assist an activity quired by the Act to review and ap- outside the jurisdiction of the grantee prove an application for assistance or a only if the grantee determines that contract proposal within any specified such an activity is necessary to further time period. However, HUD will at- the purposes of the Act and the recipi- tempt to complete its review of any ap- ent’s community development objec- plication/proposal within 75 days. tives, and that reasonable benefits (3) Notification to applicant/proposer. from the activity will accrue to resi- HUD will notify the applicant/proposer dents within the jurisdiction of the in writing that the applicant/proposal grantee. The grantee shall document has been approved, partially approved, the basis for such determination prior or disapproved. If an application/pro- to providing CDBG funds for the activ- posal is partially approved or dis- ity. approved, the applicant/proposer will be informed of the basis for HUD’s deci- [60 FR 56914, Nov. 9, 1995] sion. HUD may make conditional approvals under § 570.304(d). Subpart E—Special Purpose (d) Program amendments. (1) Recipi- Grants ents shall request prior written HUD approval for all program amendments § 570.400 General. involving changes in the scope or the (a) Applicability. The policies and pro- location of approved activities. cedures set forth in subparts A, C, J, K, (2) Any program amendments, wheth- and O of this part shall apply to this er or not they require HUD approval, subpart, except to the extent that they must be fully documented in the recipi- are specifically modified or augmented ent’s records. by the contents of this subpart, includ- (e) Performance reports. Any perform- ing specified exemptions described ance report required of a discretionary

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assistance recipient shall be submitted (ii) The cancellation or termination in the form specified in this subpart, in of a DoD contract or the failure to pro- the award document, or (if the report ceed with an approved major weapon relates to a specific competition for an system program; assistance award) in a form specified in (iii) A publicly announced planned a Notice published in the FEDERAL major reduction in DoD spending that REGISTER. would directly and adversely affect a (f) Performance reviews and findings. unit of general local government and HUD may review the recipient’s per- result in the loss of 1,000 or more full- formance in carrying out the activities time DoD and contractor employee po- for which assistance is provided in a sitions over a five-year period in the timely manner and in accordance with unit of general local government and its approved application, all applicable the surrounding area; or requirements of this part and the (iv) The Secretary of HUD (in con- terms of the assistance agreement. sultation with the Secretary of DoD) Findings of performance deficiencies determines that an action described in may be cause for appropriate correc- paragraphs (a)(2)(i)–(iii) of this section tive and remedial actions under is likely to have a direct and signifi- § 570.910. cant adverse consequence on the unit (g) Funding sanctions. Following no- of general local government. tice and opportunity for informal con- (3) Form of awards. Planning assist- sultation, HUD may withhold, reduce ance will be awarded in the form of or terminate the assistance where any grants. corrective or remedial actions taken (4) Program administration. HUD will under § 570.910 fail to remedy a recipi- publish in the FEDERAL REGISTER early ent’s performance deficiencies, and the in each fiscal year the amount of funds deficiencies are sufficiently substan- to be available for that fiscal year for tial, in the judgment of HUD, to war- awards under this section. HUD will ac- rant sanctions. cept applications throughout the fiscal (h) Publication of availability of funds. year, and will review and consider for HUD will publish by Notice in the FED- funding each application according to ERAL REGISTER each year the amount the threshold and qualifying factors in of funds available for the special pur- paragraphs (f) and (g) of this section. pose grants authorized by each section (b) Definitions. In addition to the defi- under this subpart. nitions in § 570.3 of this part, the fol- [50 FR 37525, Sept. 16, 1985, as amended at 56 lowing definitions apply to this sec- FR 18968, Apr. 24, 1991] tion: (1) Adjustment planning. Generally, § 570.401 Community adjustment and developing plans and proposals in di- economic diversification planning rect response to contraction or expan- assistance. sion of the local economy, or changes (a) General—(1) Purpose. The purpose in the physical development or the so- of this program is to assist units of cial conditions of the community, re- general local government in non- sulting from a DoD-generated impact. entitlement areas to undertake the Typically, this planning includes one planning of community adjustments or more of the following tasks: Col- and economic diversification activities, lecting, updating, and analyzing data; in response to physical, social, eco- identifying problems; formulating solu- nomic or governmental impacts on the tions; proposing long- and short-term communities generated by the actions policies; recommending public- and pri- of the Department of Defense (DoD) de- vate-sector actions to implement com- fined in paragraph (a)(2) of this section. munity adjustments and economic di- (2) Impacts. Funding under this sec- versification activities; securing cit- tion is available only to communities izen involvement; and coordinating affected by one or more of the fol- with Federal, State, and local entities lowing DoD-related impacts: with respect to the DoD-related im- (i) The proposed or actual establish- pacts. ment, realignment, or closure of a (2) Community adjustment. Any pro- military installation; posed action to change the physical,

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economic, or social infrastructure gram are set out in subpart F of this within the jurisdiction or surrounding part. area, directly and appropriately in re- (12) Surrounding area. The labor mar- sponse to the DoD-generated impact. ket area as defined by the Bureau of (3) Contract. (i) Any defense contract Labor Statistics that: in an amount not less than $5 million (i) Includes all or part of the appli- (without regard to the date on which cant’s jurisdictions; and the contract was awarded); and (ii) Includes additional areas outside (ii) Any subcontract that is entered the jurisdiction. into in connection with a contract (c) Eligible applicants. Any unit of (without regard to the effective date of general local government, excluding the subcontract) and involves not less units of general government that are than $500,000. entitlement cities or are included in an (4) Defense facility. Any private facil- urban county, and which does not in- ity producing goods or services pursu- clude Indian Tribes. ant to a defense contract. (d) Eligible activities. Activities eligi- (5) DoD. The Department of Defense. ble for adjustment planning assistance (6) Economic diversification activities. include, generally: Any public or private sector actions to (1) Initial assessments and quick change the local mix of industrial, studies of physical, social, economic, commercial, and service sectors, or the and fiscal impacts on the community; mix of business ventures within a sec- (2) Preliminary identification of po- tor, that are intended to mitigate de- tential public and private sector ac- cline in the local economy resulting tions needed for the community to ini- from DoD-generated impacts or, in the tiate its response; case of expansion of a military instal- (3) If timely, modification of the ap- lation or a defense facility, that are in- plicant’s current comprehensive plan tended to respond to new economic or any functional plan, such as for growth spawned by that expansion. housing, including shelter for the (7) Military installation. Any camp, homeless, or for transportation or post, station, base, yard, or other juris- other physical infrastructure; diction of a military department that (4) If timely, modification of the ap- is located within any of the several plicant’s current economic plans and States, the District of Columbia, the programs, such as for business develop- Commonwealth of Puerto Rico, or ment, job training, or industrial or Guam. commercial development; (8) Realignment. Any action that both (5) Preparation for and conduct of reduces and relocates functions and ci- initial community outreach activities vilian personnel positions, but does not to begin involving local citizens and include a reduction in force resulting the private sector in planning for ad- from workload adjustments, reduced justment and diversification; personnel or funding levels, or skill im- (6) Environmental reviews related to balances. DoD-related impacts; (9) Section 107 means section 107 of (7) Initial identification of and co- the Housing and Community Develop- ordination with Federal, State and ment Act of 1974, 42 U.S.C. 5307. Section local entities that may be expected to 107(b)(6) was added by section 801 of the assist in the community’s adjustment Housing and Community Development and economic development; and with Act of 1992 (Pub. L. 102–550, approved State-designated enterprise zones, and October 28, 1992). Federal empowerment zones and enter- (10) Section 2391(b). The Department prise communities when selected and of Defense adjustment planning pro- announced. gram as set out in 10 U.S.C. 2391(b). (8) Any other planning activity that (11) Small Cities CDBG Program. The may enable the community to organize Community Development Block Grant itself, establish a start-up capacity to program for nonentitlement areas in plan, propose specific plans and pro- which the States have elected not to grams, coordinate with appropriate administer available program funds. public or private entities, or qualify The regulations governing this pro- more quickly for the more substantial

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planning assistance available from below, in the order of such applications DoD. received, while program funds remain (e) Ineligible activities. Activities in- available. HUD will also request and eligible for adjustment planning assist- consider advise from DoD’s Office of ance are: Economic Assistance concerning the (1) Base re-use planning. relative merits of each application. (2) Site planning, architectural and (1) The adequacy of the applicant’s engineering studies, feasibility and initial assessment of actual or probable cost analyses and similar planning for impacts on the community and the sur- specific projects to implement commu- rounding area; nity adjustment or economic diver- (2) The adequacy and appropriateness sification, unless as last resort funding of the start-up planning envisioned by for those applicants which are unable the applicant in response to the im- to obtain planning assistance from pacts; other sources. (3) The type, extent, and adequacy of (3) Planning by communities which coordination that the applicant has are encroaching on military installa- achieved, or plans to achieve, in order tions. to undertake planning for community (4) Demonstration planning activities adjustment and economic diversifica- intended to evolve new planning tech- tion. niques for impacted communities. (4) The cost-effectiveness of the pro- (5) Any planning activity proposed to posed budget to carry out the planning supplement or replace planning that work envisioned by the applicant; has been or is being assisted by the (5) The capability of the organization DoD Sec. 2391(b) adjustment planning the applicant proposes to do the plan- program. ning; (6) Any other planning activity the (6) The credentials and experience of purpose of which is not demonstrably the key staff the applicant proposes to in direct response to a DOD-related im- do the planning; pact triggered by one or more of the (7) The presence of significant pri- four criteria specified in paragraph vate sector impact, as measured by the (a)(2) of this section. extent to which the DoD-generated im- (f) Threshold requirements. No applica- pact is projected to decrease or in- tion will qualify for funding unless it crease the employment base by 10% or meets the following requirements: more; (1) Verification by HUD that the ap- (8) The presence of significant public plicant is a unit of general government sector impact, as measured by the ex- in a nonentitlement area. tent to which the DoD-generated im- (2) Verification by HUD and DoD that pact is projected to decrease or in- a triggering event described in para- crease the applicant’s capital and oper- graph (a)(2) of this section has occurred ating budgets for the next fiscal year or will occur. by 10% or more; (3) With respect to communities af- (9) The degree of urgency, to the ex- fected by the 49 base closings and 28 re- tent that a suddenly announced action, alignments listed by the 1991 Base Clo- e.g. a plant closing, is officially sched- sure and Realignment Commission, uled to occur within a year of the date verification by DoD that it has proof application. vided no prior funding and that the ap- (h) Submission requirements. Appli- plicant may benefit from start-up plan- cants may submit applications at any ning assistance from HUD. time to: Director, Office of Technical (4) Determination by HUD that the Assistance, room 7214, 451 Seventh proposed planning activities are eligi- Street, SW., Washington, DC 20410. ble. Each application (an original and three (5) Determination by HUD that the copies) shall include the following: submission requirements in paragraph (1) The Standard Form SF–424 as a (h) of this section have been satisfied. face sheet, signed and dated by a per- (g) Qualifying factors. HUD will make son authorized to represent and con- funding decisions on qualified applica- tractually or otherwise commit the ap- tions on the basis of the factors listed plicant;

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(2) A concise title and brief abstract (7) A work plan that describes the of the proposed planning work, includ- schedule for accomplishing the tasks ing the total cost; described in the Statement of Work, (3) A narrative that: the time needed to do each task, and (i) Documents one or more of the the elapsed time needed for all the triggering events described in para- tasks; and graph (a)(2) of this section that quali- (8) Other materials, as prescribed in fies the applicant to apply for planning the application kit; these materials assistance for community adjustments will include required certifications and economic diversification; dealing with: Drug-Free Workplace Re- (ii) Provides an initial assessment of quirements; Disclosure Regarding Pay- actual or probable impacts on the ap- ments to Influence Certain Federal plicant community and the sur- Transactions; and Prohibition Regard- rounding area; ing Excessive Force. (iii) Provides an initial assessment of (i) Approval procedures—(1) Accept- the type and extent of start-up plan- ance. HUD’s acceptance of an applica- ning envisioned by the applicant in re- tion meeting the threshold require- sponse to the DoD-generated impact; ments of paragraph (f) does not assure and a commitment to provide funding or to (iv) Describes the measures by which provide the full amount requested. the applicant has already coordinated, HUD may elect to negotiate both pro- or plans to coordinate, with the DoD posed tasks and budgets in order to Office of Economic Assistance, the promote more cost-effective planning. Economic Development Administra- (2) Notification. HUD will provide no- tion of the Department of Commerce, tification about whether a project will the Department of Labor, any military be funded, rejected, or held for further department, or any other appropriate consideration by HUD and DoD. Federal agency; appropriate State (3) Form of award. HUD will award agencies, specifically including the funds in the form of grants. agency administering the Small Cities (4) Administration. Project adminis- CDBG Program; appropriate State-des- tration will be governed by the terms ignated enterprise zones; appropriate of individual awards and by the fol- Federal empowerment zones and enter- lowing provisions of this part: prise communities, when selected and (i) Subpart A, § 570.5; announced; appropriate other units of (ii) Subpart E, §§ 570.400(d), (e), (f), general local government in the non- and (g); entitlement area; appropriate busi- (iii) Subpart J, §§ 570.500(c), 570.501, nesses, corporations, and defense facili- 570.502, 570.503, and 570.509; ties concerned with impacts on the ap- (iv) Subpart K, §§ 570.601, 570.602, plicant community; and homeless non- 570.609, 570.610, and 570.611. profit organizations, with respect to The environmental review require- title V of the Stewart B. McKinney Act ments of 24 CFR part 58 do not apply. (42 U.S.C. 11411–11412), requiring the Federal property be considered for use (Approved by the Office of Management and in assisting the homeless. Budget under control number 2535–0084) (4) A Statement of Work describing [59 FR 15016, Mar. 30, 1994] the specific project tasks proposed to be undertaken in order to plan for com- § 570.402 Technical assistance awards. munity adjustment and economic di- (a) General. (1) The purpose of the versification activities; Community Development Technical (5) A proposed budget showing the es- Assistance Program is to increase the timated costs and person-days of effort effectiveness with which States, units for each task, by cost categories, with of general local government, and In- supporting documentation of costs and dian tribes plan, develop, and admin- a justification of the person-days of ef- ister assistance under title I and sec- fort; tion 810 of the Act. Title I programs (6) A description of the qualifications are the Entitlement Program (24 CFR of the proposed technical staff, includ- part 570, subpart D); the section 108 ing their names and resumes; Loan Guarantee Program (24 CFR part

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570, subpart M); the Urban Develop- of the agreement is specifically author- ment Action Grant Program (24 CFR ized by law. The Department will not part 570, subpart G); the HUD-adminis- accept or fund unsolicited proposals. tered Small Cities Program (24 CFR (b) Definitions. (1) Areawide planning part 570, subpart F); the State-adminis- organization (APO) means an organiza- tered Program for Non-Entitlement tion authorized by law or local agree- Communities (24 CFR part 570, subpart ment to undertake planning and other I); the grants for Indian Tribes pro- activities for a metropolitan or non- gram (24 CFR part 571); and the Special metropolitan area. Purpose Grants for Insular Areas, Com- (2) Technical assistance means the fa- munity Development Work Study and cilitating of skills and knowledge in Historically Black Colleges and Uni- planning, developing and administering versities (24 CFR part 570, subpart E). activities under title I and section 810 The section 810 program is the Urban of the Act in entities that may need Homesteading Program (24 CFR part but do not possess such skills and 590). (2) Funding under this section is knowledge, and includes assessing pro- awarded for the provision of technical grams and activities under title I. expertise in planning, managing or car- (c) Eligible applicants. Eligible appli- rying out such programs including the cants for award of technical assistance activities being or to be assisted there- funding are: under and other actions being or to be (1) States, units of general local gov- undertaken for the purpose of the pro- ernment, APOs, and Indian Tribes; and gram, such as increasing the effective- (2) Public and private non-profit or ness of public service and other activi- for-profit groups, including educational ties in addressing identified needs, institutions, qualified to provide tech- meeting applicable program require- nical assistance to assist such governments (e.g., citizen participation, non- mental units to carry out the title I or discrimination, OMB Circulars), in- Urban Homesteading programs. An ap- creasing program management or ca- plicant group must be designated as a pacity building skills, attracting busi- technical assistance provider to a unit ness or industry to CDBG assisted eco- of government’s title I program or nomic development sites or projects, Urban Homesteading program by the assisting eligible CDBG subrecipients chief executive officer of each unit to such as neighborhood nonprofits or be assisted, unless the assistance is small cities in how to obtain CDBG limited to conferences/workshops at- funding from cities and States. The tended by more than one unit of gov- provision of technical expertise in ernment. other areas which may have some tan- (d) Eligible activities. Activities eligi- gential benefit or effect on a program ble for technical assistance funding in- is insufficient to qualify for funding. clude: (3) Awards may be made pursuant to (1) The provision of technical or advi- HUD solicitations for assistance appli- sory services; cations or procurement contract pro- (2) The design and operation of train- posals issued in the form of a publicly available document which invites the ing projects, such as workshops, semi- submission of applications or proposals nars, or conferences; within a prescribed period of time. (3) The development and distribution HUD may also enter into agreements of technical materials and information; with other Federal agencies for award- and ing the technical assistance funds: (4) Other methods of demonstrating (i) Where the Secretary determines and making available skills, informa- that such funding procedures will tion and knowledge to assist States, achieve a particular technical assist- units of general local government, or ance objective more effectively and the Indian Tribes in planning, developing, criteria for making the awards will be administering or assessing assistance consistent with this section, or under title I and Urban Homesteading (ii) The transfer of funds to the other programs in which they are partici- Federal agency for use under the terms pating or seeking to participate.

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(e) Ineligible activities. Activities for (ii) Program policy criteria: These which costs are ineligible under this factors may be used by the selecting of- section include: ficial to select a range of projects that (1) In the case of technical assistance would best serve program objectives for for States, the cost of carrying out the a particular competition: administration of the State CDBG pro- (A) Geographic distribution; gram for non-entitlement commu- (B) Diversity of types and sizes of ap- nities; plicant entities; and (2) The cost of carrying out the ac- (C) Diversity of methods, approaches, tivities authorized under the title I and or kinds of projects. Urban Homesteading programs, such as the provision of public services, con- The Department will publish a Notice struction, rehabilitation, planning and of Fund Availability (NOFA) in the administration, for which the technical FEDERAL REGISTER for each competi- assistance is to be provided; tion indicating the objective of the (3) The cost of acquiring or devel- technical assistance, the amount of oping the specialized skills or knowl- funding available, the application pro- edge to be provided by a group funded cedures, including the eligible appli- under this section; cants and activities to be funded, any (4) Research activities; special conditions applicable to the so- (5) The cost of identifying units of licitation, including any requirements governments needing assistance (ex- for a matching share or for commit- cept that the cost of selecting recipi- ments for CDBG or other title I fund- ents of technical assistance under the ing to carry out eligible activities for provisions of paragraph (k) is eligible); which the technical assistance is to be or provided, the maximum points to be (6) Activities designed primarily to awarded each evaluation criterion for benefit HUD, or to assist HUD in car- the purpose of ranking applications, rying out the Department’s respon- and any special factors to be consid- sibilities; such as research, policy anal- ered in assigning the points to each ysis of proposed legislation, training or evaluation criterion. The Notice will travel of HUD staff, or development also indicate which program policy fac- and review of reports to the Congress. tors will be used, the impact of those (f) Criteria for competitive selection. In factors on the selection process, the determining whether to fund competi- justification for their use and, if appro- tive applications or proposals under priate, the relative priority of each this section, the Department will use program policy factor. the following criteria: (2) For competitive procurement con- (1) For solicited assistance applications. tract bids/proposals. The Department’s The Department will use two types of criteria for review and selection of so- criteria for reviewing and selecting licited bids/proposals for procurement competitive assistance applications solicited by HUD: contracts will be described in its public (i) Evaluation criteria: These criteria announcement of the availability of an will be used to rank applications ac- Invitation for Bids (IFB) or a Request cording to weights which may vary for Proposals (RFP). The public notice, with each competition: solicitation and award of procurement (A) Probable effectiveness of the ap- contracts, when used to acquire tech- plication in meeting needs of localities nical assistance, shall be procured in and accomplishing project objectives; accordance with the Federal Acquisi- (B) Soundness and cost-effectiveness tion Regulation (48 CFR chapter 1) and of the proposed approach; the HUD Acquisition Regulation (48 (C) Capacity of the applicant to carry CFR chapter 24). out the proposed activities in a timely (g) Submission procedures. Solicited and effective fashion; assistance applications shall be sub- (D) The extent to which the results mitted in accordance with the time and may be transferable or applicable to place and content requirements de- other title I or Urban Homesteading scribed in the Department’s NOFA. So- program participants. licited bids/proposals for procurement

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contracts shall be submitted in accord- the funding award the recipient of the ance with the requirements in the IFB funding is to select the recipients of or RFP. the technical assistance to be provided, (h) Approval procedures—(1) Accept- the funding recipient shall publish, and ance. HUD’s acceptance of an applica- publicly make available to potential tion or proposal for review does not technical assistance recipients, the imply a commitment to provide fund- availability of such assistance and the ing. specific criteria to be used for the se- (2) Notification. HUD will provide no- lection of the recipients to be assisted. tification of whether a project will be Selected recipients must be entities funded or rejected. participating or planning to partici- (3) Form of award. (i) HUD will award pate in the title I or Urban Home- technical assistance funds as a grant, steading programs or activities for cooperative agreement or procurement which the technical assistance is to be contract, consistent with this section, provided. the Federal Grant and Cooperative (Approved by the Office of Management and Agreement Act of 1977, 31 U.S.C. 6301– Budget under control numbers 2535–0085 and 6308, the HUD Acquisition Regulation, 2535–0084) and the Federal Acquisition Regula- tion. [56 FR 41938, Aug. 26, 1991] (ii) When HUD’s primary purpose is § 570.403 New Communities. the transfer of technical assistance to assist the recipients in support of the The regulations for New Commu- title I or Section 810 programs, an as- nities grants in this section, that were sistance instrument (grant or coopera- effective immediately before April 19, tive agreement) will be used. A grant 1996, will continue to govern the rights instrument will be used when substan- and obligations of recipients and HUD tial Federal involvement is not antici- with respect to grants under the New pated. A cooperative agreement will be Communities program. used when substantial Federal involve- [61 FR 11476, Mar. 20, 1996] ment is anticipated. When a cooperative agreement is selected, the agree- § 570.404 Historically Black colleges ment will specify the nature of HUD’s and universities program. anticipated involvement in the project. (a) General. Grants under this section (iii) A contract will be used when will be awarded to historically Black HUD’s primary purpose is to obtain a colleges and universities to expand provider of technical assistance to act their role and effectiveness in address- on the Department’s behalf. In such ing community development needs, in- cases the Department will define the cluding neighborhood revitalization, specific tasks to be performed. How- housing and economic development in ever, nothing in this section shall pre- their localities, consistent with the clude the Department from awarding a purposes of title I of the Housing and procurement contract in any other Community Development Act of 1974. case when it is determined to be in the (b) Eligible applicants. Only histori- Department’s best interests. cally Black colleges and universities (4) Administration. Project adminis- (as determined by the Department of tration will be governed by the terms Education in accordance with that De- of individual awards and relevant regu- partment’s responsibilities under Exec- lations. As a general rule, proposals utive Order 12677, dated April 28, 1989) will be funded to operate for one to two are eligible to submit applications. years, and periodic and final reports (c) Eligible activities. Activities that will be required. may be funded under this section are (i) Environmental and intergovern- those eligible under §§ 570.201 through mental review. The requirements for En- 570.207, provided that any activity vironmental Reviews and Intergovern- which is required by State or local law mental Reviews do not apply to tech- to be carried out by a governmental en- nical assistance awards. tity may not be funded under this sec- (j) Selection of recipients of technical tion. Notwithstanding the provisions of assistance. Where under the terms of §§ 570.200(g), grants under this section

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are not subject to the 20 percent limi- rying out any previous HUD-assisted tation on planning and program admin- projects or activities. istration costs, as defined in §§ 570.205 (6) In the case of proposals/projects of and 570.206, respectively. approximately equal merit, HUD re- (d) Applications. Applications will tains the right to exercise discretion in only be accepted from eligible appli- selecting projects in a manner that cants in response to a Request for Ap- would best serve the program objec- plications (RFA) which will be issued tives, with consideration given to the either concurrently with or after the needs of localities, types of activities publication of a Notice of Funding proposed, an equitable geographical Availability (NOFA) published in the distribution, and program balance. FEDERAL REGISTER. The NOFA will de- (f) Certifications. (1) Certifications re- scribe any special objectives sought to quired to be submitted by applicants be achieved by the funding to be pro- shall be as prescribed in the RFA pack- vided, including any limitations on the ages. type of activities to be funded to (2) In the absence of independent evi- achieve the objectives, points to be dence which tends to challenge in a awarded to each of the selection cri- substantial manner the certifications teria listed in paragraph (e) of this sec- made by the applicant, the required tion, and any special factors to be eval- certifications will be accepted by HUD. uated in assigning points under the se- If independent evidence is available to lection factors to achieve the stated HUD, however, HUD may require fur- objectives. The NOFA will also state ther information or assurances to be the deadline for the submission of ap- submitted in order to determine wheth- plications, the total funding available er the applicant’s certifications are for the competition, and the maximum satisfactory. amount of individual grants. The (g) Multiyear funding commitments. (1) NOFA will include further information HUD may make funding commitments and instructions for the submission of of up to five years, subject to the avail- acceptable applications to HUD. ability of appropriations. In deter- (e) Selection criteria. Each application mining the number of years for which a submitted under this section will be commitment will be made, HUD will evaluated by HUD using the following consider the nature of the activities criteria: proposed, the capability of the recipi- (1) The extent to which the applicant ent to carry out the proposed activi- addresses the objectives published in ties, and year-by-year funding require- the NOFA and the RFA. ments. (2) The extent to which the applicant (2) Awards will be made on the basis demonstrates to HUD that the proof a 12-month period of performance. posed activities will have a substantial Once a recipient has been selected for a impact in achieving the stated objec- multi-year award, that recipient would tives. not be required to compete in a com- (3) The special needs of the applicant petition for the subsequent funding or locality to be met in carrying out years covered by the multi-year fund- the proposed activities, particularly ing commitment. Recipients per- with respect to benefiting low- and forming satisfactorily will be invited moderate-income persons. to submit applications for subsequent (4) The feasibility of the proposed ac- funding years in accordance with re- tivities, i.e., their technical and finan- quirements outlined in the Notice of cial feasibility, for achieving the stat- Funding Availability and Request for ed objectives, including local support Grant Application. Subject to the for activities proposed to be carried out availability of appropriations, subse- in the locality and any matching funds quent-year funding will be determined proposed to be provided from other by the following: sources. (i) The recipient has submitted all re- (5) The capability of the applicant to ports required for the previous year or carry out satisfactorily the proposed years in a timely, complete and satis- activities in a timely fashion, includ- factory manner in accordance with the ing satisfactory performance in car- terms and conditions of the grant.

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(ii) The recipient has submitted suffi- submit an application for the current cient evidence to demonstrate success- year’s funding. ful completion of the tasks and (c) Previous audit findings and out- deliverables of the grant. A determina- standing monetary obligations. HUD tion of satisfactory performance will shall not accept for review an applica- be made by HUD based upon evidence tion from an applicant that has either of task completions provided by the re- an outstanding audit finding for any cipient, along with data from client HUD program, or an outstanding mone- feedback and site evaluations. tary obligation to HUD that is in ar- (iii) The recipient has submitted the rears, or for which a repayment sched- next annual application. ule has not been established and agreed (iv) The subsequent year’s application is consistent with that described to. The Field Office manager may in the original application. waive this restriction if he or she finds (3) Recipients participating in multi- that the applicant has made a good year funding projects are not eligible faith effort to clear the audit. In no in- to apply for additional grants for the stance, however, shall a waiver be pro- same project or activity subject area vided when funds are due HUD, unless a for which they are receiving funds. Re- satisfactory arrangement for repay- cipients are, however, eligible to comment of the debt has been made and pete for grants for other project or ac- payments are current. tivity areas. (d) Criteria for funding. The Secretary (h) Selection and notification. The shall establish, for each fiscal year, an HUD decision to approve, disapprove or amount for which eligible applicants conditionally approve an application may apply. Grant amounts will be shall be communicated in writing to based on population of the applicant the applicant. and its performance in previous years. (i) Environmental and intergovern- In determining performance, HUD will mental review. The requirements for consider program achievements and Intergovernmental Reviews do not the applicant’s effectiveness in using apply to HBCU awards. HUD will con- program funds. Effectiveness in using duct an environmental review in ac- program funds shall be measured by re- cordance with 24 CFR part 50 before viewing audit, monitoring and perform- giving its approval to a proposal. ance reports. [56 FR 18968, Apr. 24, 1991] (e) Application and performance reporting. Application and performance re- § 570.405 The insular areas. porting requirements are as follows: (a) Eligible applicants. Eligible appli- (1) Applicants must submit applica- cants are Guam, the Virgin Islands, tions within 90 days of the notification American Samoa, the Trust Territory of the grant amount from HUD. of the Pacific Islands, and the Com- (2) Applicants shall prepare and pub- monwealth of the Northern Mariana Is- lish or post a proposed application in lands. accordance with the citizen participa- (b) Threshold requirements. HUD shall review each grantee’s progress on out- tion requirements of paragraph (h) of standing grants made under this sec- this section. tion based on the grantee’s perform- (3) Applicants shall submit to HUD a ance report, the timeliness of close- final application containing its com- outs and compliance with fund man- munity development objectives and ac- agement requirements and pertinent tivities. This application shall be sub- regulations, taking into consideration mitted to the appropriate HUD office, the size of the grant and the degree and together with the required certifi- complexity of the program. If HUD de- cations, in a form prescribed by HUD. termines upon such review that the ap- (4) Grant recipients must submit to plicant does not have the capacity ef- HUD an annual performance report on fectively to administer a new grant, or progress achieved on previously funded a portion of a new grant, in addition to grants. Grant recipients must submit grants currently under administration, the report at a time and in a format de- the applicant shall not be invited to termined by HUD. The report should be

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made available to citizens in accord- sources needed to carry out, operate or ance with the requirements of para- maintain the project; or graph (h)(1)(iv) of this section. (6) Pending approval of site and (f) Costs incurred by the applicant. (1) neighborhood standards for proposed Notwithstanding any other provision of housing projects. this part, HUD will not reimburse or (h) Citizen participation. (1) The appli- recognize any costs incurred by an ap- cant shall provide for appropriate cit- plicant before submission of the appli- izen participation in the application cation to HUD. and amendment process. The applicant (2) Normally, HUD will not reimburse must, at least, do each of the following: or recognize costs incurred before HUD (i) Furnish citizens with information approval of the application for funding. concerning the amount of funds avail- However, under unusual circumstances, able for community development and the Field office manager may consider housing activities and the range of ac- and conditionally approve written re- tivities that may be undertaken, in- quests to recognize and reimburse costs cluding the estimated amount proposed that will be incurred after submission to be used for activities that will ben- of the application but before it is ap- efit persons of low and moderate in- proved where failure to do so would im- come, and the plans of the grantee for pose undue or unreasonable hardship minimizing displacement of persons as on the applicant. Conditional approvals a result of activities assisted with such will be made only before the costs are funds and to assist persons actually incurred and where the conditions for displaced; release of funds have been met in ac- (ii) Hold one or more public hearings cordance with 24 CFR 58.22, and with (scheduled at convenient times and the understanding that HUD has no ob- places) to obtain the views of citizens ligation whatsoever to approve the ap- on community development and hous- plication or to reimburse the applicant ing needs; should the application be disapproved. (iii) Develop and publish or post the (g) Criteria for conditional approval. community development statement in HUD may approve a grant subject to such a manner as to afford affected specified conditions. In any such case, citizens an opportunity to examine its the obligation and utilization of funds contents and to submit comments; may be restricted. The reasons for the conditional approval and the actions (iv) Afford citizens an opportunity to necessary to remove the conditions review and comment on the applicant’s shall be specified. Failure of the appli- performance under any community de- cant to satisfy the conditions may re- velopment block grant. sult in a termination of the grant. A (2) Before submitting the application conditional approval may be granted to HUD, the applicant shall certify under any of the following cir- that it has: cumstances: (i) Met the requirements of para- (1) When local environmental reviews graph (h)(1) of this section; under 24 CFR part 58 have not yet been (ii) Considered any comments and completed; views expressed by citizens; and (2) To ensure that actual provision of (iii) If appropriate, modified the ap- other resources required to complete plication accordingly and made the the proposed activities will be avail- modified application available to citi- able within a reasonable period of time; zens. (3) To ensure that a project can be [50 FR 37526, Sept. 16, 1985, as amended at 60 completed within its estimated costs; FR 56914, Nov. 9, 1995; 61 FR 32269, June 21, (4) Where the grantee is required to 1996] satisfy an outstanding debt due to HUD under a payment plan executed be- EFFECTIVE DATE NOTE: At 61 FR 32269, June 21, 1996, § 570.405(e)(4) was revised. This sec- tween the grantee and the Department; tion contains information collection and rec- (5) Pending resolution of problems re- ordkeeping requirements and will not be- lated to specific projects or the capa- come effective until approval has been given bility of the grantee to obtain re- by the Office of Management and Budget.

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§ 570.406 Formula miscalculation tivities. No more than twenty (20) per- grants. cent of the funds awarded under this (a) General. Grants under this section section may be used for overall pro- will be made to States and units of gram administration or planning ac- general local government determined tivities eligible under §§ 570.205 and by the Secretary to have received in- 570.206. sufficient amounts under section 106 of (2) The amount of funds awarded to a the Act as a result of a miscalculation unit of general local government under of its share of funds under such section. this section that may be used for pub- (b) Application. Since the grant is to lic service activities is limited. The ap- correct a technical error in the formula plicant may use whichever of the fol- amount which should have been award- lowing methods of calculation yields ed under section 106, no application is the highest amount: required. (i) Fifteen percent of the special (c) Use of funds. The use of funds projects grant; shall be subject to the requirements, (ii) An amount equal to 15 percent of certifications and Final Statement the sum of special project grant funds otherwise applicable to the grantee’s plus grant funds received for the same section 106 grant funds provided for the federal fiscal year under the Entitle- fiscal year in which the grant under ment or State program, less the this section is made. amount of the Entitlement or State (d) Unavailability of funds. If suffi- program grant funds which will be used cient funds are not available to make for other public service activities; or the grant in the fiscal year in which (iii) In the case of an applicant that the Secretary makes the determination required in paragraph (a) of this sec- is an Entitlement grantee subject to tion, the grant will be made, subject to the exception in § 570.201(e)(3), an the availability of appropriations for amount equal to the amount of the En- this subpart, in the next fiscal year. titlement grant funds received for the same federal fiscal year that may be [56 FR 41940, Aug. 26, 1991] used for public service activities, less the amount of the Entitlement grant § 570.410 Special Projects Program. funds which will be used for other pub- (a) Program objectives. The Commu- lic service activities. nity Development Special Projects (d) Proposals. Eligible applicants may Program enables HUD to award grants submit unsolicited proposals. HUD may to States and units of general local ask proposers to submit additional in- government, subject to availability of formation if necessary for evaluation. funds, for special projects that address There is no HUD commitment to fund community development activities or any unsolicited proposal regardless of techniques consistent with the pur- its merit. If HUD elects to fund a proposes of title I of the Housing and Com- posal, it will request that the proposer munity Development Act of 1974, as submit a formal application. amended. (1) Three (3) copies of a proposal must (b) Eligible applicants. Only States be sent to the address stated in (3), and units of general local government below. Each proposal submitted pursu- (as defined in § 570.3) are eligible to submit proposals or applications for Spe- ant to this section shall be evaluated cial Projects grants. Proposals or ap- by HUD using the following criteria: plications may be submitted by eligible (i) The extent to which the proposal applicants on behalf of themselves, on satisfies purposes of this title and ad- behalf of other eligible applicants, or dresses a special community develop- jointly by more than one eligible appli- ment need. cant. (ii) The eligibility of proposed activi- (c) Eligible activities. (1) Project ac- ties. tivities that may be funded under this (iii) The feasibility of the project; section are those eligible under 24 CFR i.e., its technical and financial feasi- part 570—Community Development bility for achieving the goals stated in Block Grants, subpart C—Eligible Ac- the proposal.

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(iv) The capacity of the proposer to cation shall be communicated in writ- carry out satisfactorily the proposed ing to the applicant. project activities. [47 FR 30054, July 12, 1982, as amended at 54 (2) If the proposal is submitted joint- FR 31672, Aug. 1, 1989; 55 FR 29309, July 18, ly by, or on behalf of, more than one el- 1990; 56 FR 56127, Oct. 31, 1991] igible applicant, the proposal must: (i) Contain a cooperation agreement § 570.411 Joint Community Develop- signed by the Chief Executive Officer of ment Program. each participating jurisdiction which (a) General. Grants under this section specifies concurrence with the purpose will be awarded to institutions of high- and intent of the proposal and intent er education or to States and local gov- to comply with grant requirements; ernments applying jointly with institu- (ii) Address problems faced by all ju- tions of higher education. Institutions risdictions listed in the proposal; and, of higher education must demonstrate (iii) Be submitted by the lead juris- the capacity to carry out activities diction. The lead jurisdiction shall be under title I of the Housing and Com- responsible for overall coordination munity Development Act of 1974. For and administration of the project. ease of reference, this program may be (3) Unsolicited proposals may be sub- called the Joint CD Program. mitted any time during the year. How- (b) Definitions. ever, if there are no funds available for Demonstrated capacity to carry out el- such proposals, they will be returned igible activities under title I means re- without review. Proposals shall con- cent satisfactory activity by the insti- tain a Standard Form 424 signed by the tution of higher education’s staff des- Chief Executive Officer of the State or ignated to work on the program, in- unit of general local government. They cluding subcontractors and consultants shall be sent to: Department of Hous- firmly committed to work on the pro- ing and Urban Development, Office of posed activities, in title I programs or Community Planning and Develop- similar programs without the need for ment, 451 Seventh Street, SW., Wash- oversight by a State or unit of general ington, DC 20410, Attention: Director, local government. Office of Program Policy Development, Institution of higher education means a CPP. college or university granting 4-year (e) Applications. Applications are ac- degrees and accredited by a national or cepted only from eligible applicants in regional accrediting agency recognized response to letters of solicitations, or by the U.S. Department of Education. to competition announcements pub- (c) Eligible applicants. Institutions of lished in Notices in the FEDERAL REG- higher education or States and units of ISTER. Submission requirements and general local government jointly with criteria to be used by HUD to evaluate institutions of higher education may solicited applications and instructions apply. Institutions of higher education regarding their submission shall be with demonstrated capacity to carry stated in each Notice or letter. out eligible activities under title I may (f) Certifications. Applications shall apply on their own, without the joint contain the certifications required by participation of a State or unit of gen- 24 CFR 570.303, except that regarding eral local government. States or unit citizen participation: The applicant of general local governments must file must certify that citizens likely to be jointly with an institution of higher affected by the project, particularly education. For these approved joint ap- low- and moderate-income persons, plications, the grant will be made to have been provided an opportunity to the State or unit of general local gov- comment on the proposal or applica- ernment and the institution of higher tion. If the application is submitted education jointly. If an eligible appli- jointly, or on behalf of more than one cant is an institution of higher edu- jurisdiction, each jurisdiction shall cation, it will not be funded more than submit the required certifications. once for the same kinds of activities. (g) Selection and notification. The HUD These grantees may not receive fund- decision to approve, disapprove or con- ing under a subsequent NOFA if it has ditionally approve a proposal or appli- the same program objectives as the one

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under which the grantee previously re- (2) Where a State is the joint appli- ceived funding. However, a State or cant and it proposes to carry out an ac- unit of general local government is eli- tivity within the jurisdiction of one or gible to apply if it files jointly with a more units of general local govern- different institution of higher edu- ment, then each such unit must ap- cation in each NOFA cycle. HUD may prove the activity and state that the further limit the type of eligible appli- activity is consistent with its Consoli- cant to be funded. Any such limita- dated Plan. tions will be contained in the Notice of (3) These approvals and findings must Funding Availability described below accompany each application and may in paragraph (h) of this section. take the form of a letter by the chief (d) Role of participants in joint applica- executive officer of each unit of gen- tions. An institution of higher edu- eral local government affected or a res- cation and a State or unit of general olution of the legislative body of each local government may carry out eligi- such unit of general local government. ble activities approved in joint applica- (h) NOFA contents. The NOFA will de- tions. Where there are joint applicants, scribe any special objectives sought to the grant will be made to both and be achieved by the funding to be pro- both will be responsible for oversight, vided, including any limitations on the compliance, and performance. The ap- type of activities to be funded to plication will have to clearly delineate achieve the objectives, any limitations the role of each applicant in the joint on the type of eligible applicants, and application. Any funding sanctions or points to be awarded to each of the se- other remedial actions by HUD for non- lection criteria and any special factors compliance or nonperformance, wheth- to be evaluated in assigning points er by the State or unit of general local under the selection criteria to achieve government or by the institution of the stated objectives. The NOFA will higher education, shall be taken also state the deadline for the submis- against both grantees. sion of applications, the total funding (e) Eligible activities. Activities that available for the competition, the pe- may be funded under this section are riod of performance and the maximum those eligible under 24 CFR part 570— and minimum amount of individual Community Development Block grants. The NOFA will also state which Grants, subpart C—Eligible Activities. of the various possible levels of com- These activities may be designed to as- petition HUD will use: national and/or sist residents of colonias, as defined in regional or entitlement areas vs. non- section 916(d) of the Cranston-Gonzalez National Affordable Housing Act (42 entitlement areas; and States or units U.S.C. 5306 note), to improve living of general local government vs. institu- conditions and standards within tions of higher education vs. institu- colonias. HUD may limit the activities tions of higher education with a dem- to be funded. Any such limitations will onstrated capacity. The NOFA will in- be contained in the Notice of Funding clude further information and instruc- Availability described in paragraph (h) tions for the submission of acceptable of this section. applications to HUD. (f) Applications. Applications will (i) Selection criteria. Each application only be accepted from eligible appli- submitted under this section will be cants in response to a publication of a evaluated by HUD using the following Notice of Funding Availability (NOFA) criteria: published by HUD in the FEDERAL REG- (1) The extent to which the applicant ISTER. addresses the objectives published in (g) Local approval. (1) Where an insti- the NOFA and demonstrates how the tution of higher education is the appli- proposed activities will have a substan- cant, each unit of general local govern- tial impact in achieving the objectives. ment that is an entitlement jurisdic- (2) The extent of the needs to be ad- tion where an activity is to take place dressed by the proposed activities, par- must approve the activity and certify ticularly with respect to benefiting that the activity is consistent with its low- and moderate-income persons and Consolidated Plan. residents of colonias, where applicable.

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(3) The feasibility of the proposed ac- (m) Citizen participation. The citizen tivities, i.e., their technical and finan- participation requirements of §§ 570.301, cial feasibility, for achieving the stat- 570.431, 570.485(c) and 570.486(a) are ed objectives. modified to require the following: The (4) The capability of the applicant to applicant must certify that citizens carry out satisfactorily the proposed likely to be affected by the project re- activities in a timely fashion, includ- gardless of race, color, creed, sex, na- ing satisfactory performance in car- tional origin, familial status, or handi- rying out any previous HUD-assisted cap, particularly low- and moderate-in- projects or activities. come persons, have been provided an (5) The extent of commitment to fair opportunity to comment on the pro- housing and equal opportunity, as indi- posal or application. cated by such factors as previous HUD (n) Environmental and Intergovern- monitoring/compliance activity, ac- mental Review. The requirements for tions to promote minority- and women- Intergovernmental Reviews do not owned business enterprise, affirma- apply to these awards. When required, tively furthering fair housing issues, an environmental review in accordance and nondiscriminatory delivery of with 24 CFR part 58 must be carried out services. by the State or unit of general local (j) Selection discretion. HUD retains government when it is the applicant. the right to exercise discretion in se- HUD will conduct any required envi- lecting projects in a manner that ronmental review when an institution would best serve the program objec- of higher education is the applicant. tives, with consideration given to the (Approved by the Office of Management and needs of States and units of general Budget under control number 2535–0084) local government and institutions of [60 FR 15837, Mar. 27, 1995] higher education, types of activities proposed, an equitable geographical § 570.415 Community Development distribution, and program balance. The Work Study Program. NOFA will state whether HUD will use (a) Applicability and objectives. HUD this discretion in any specific competi- makes grants under CDWSP to institution. tions of higher education, either di- (k) Certifications. (1) Certifications, rectly or through areawide planning including those indicating that appli- organizations or States, for the pur- cants have adhered to all civil rights pose of providing assistance to eco- requirements under subpart K of this nomically disadvantaged and minority part and the Americans with Disabil- students who participate in a work ities Act of 1990, required to be sub- study program while enrolled in full- mitted by applicants shall be as pre- time graduate programs in community scribed in the NOFA. and economic development, commu- (2) In the absence of independent evi- nity planning, and community manage- dence which tends to challenge in a ment. The primary objectives of the substantial manner the certifications program are to attract economically made by the applicant, the required disadvantaged and minority students certifications will be accepted by HUD. to careers in community and economic However, if independent evidence is development, community planning, available, HUD may require further in- and community management, and to formation or assurances to be sub- provide a cadre of well-qualified profes- mitted in order to determine whether sionals to plan, implement and admin- the applicant’s certifications are satis- ister local community development factory. programs. (l) Consolidated plan. An applicant (b) Definitions. The following defini- that proposes any housing activities as tions apply to CDWSP: part of its application will be required Applicant means an institution of to submit a certification that these ac- higher education, a State, or an tivities are consistent with the Con- areawide planning organization that solidated Plan of the jurisdiction to be submits an application for assistance served. under CDWSP.

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Areawide planning organization (APO) Recipient means an approved appli- means an organization authorized by cant that executes a grant agreement law or by interlocal agreement to un- with HUD. dertake planning and other activities Student means a student enrolled in for a metropolitan or nonmetropolitan an eligible full-time academic program. area. For an organization operating in He/she must be a first-year student in a a nonmetropolitan area to be consid- two-year graduate program. Students ered an APO, its jurisdiction must enrolled in Ph.D. programs are ineli- cover at least one county. gible. CDWSP means the Community Devel- Student with disabilities means a stu- opment Work Study Program. dent who meets the definition of ‘‘per- Community building means commu- son with disabilities’’ in the Americans nity and economic development, com- with Disabilities Act of 1990. munity planning, community manage- (c) Assistance provided—(1) Types of ment, land use and housing activities. assistance available. HUD provides fund- Community building academic program ing in the form of grants to recipients or academic program means a graduate who make assistance available to eligi- degree program whose purpose and ble students. Grants are provided to focus is to educate students in commu- cover the costs of student assistance nity building. ‘‘Community building and for an administrative allowance. academic program’’ or ‘‘academic pro- (i) Student assistance. Grants are gram’’ includes but is not limited to made to recipients to cover the costs of graduate degree programs in commu- assistance provided to eligible students nity and economic development, com- in the form of student stipends, tuition munity planning, community manage- support, and additional support. ment, public administration, public (A) Student stipend. The amount of policy, urban economics, urban man- the student stipend is based upon the agement, and urban planning. ‘‘Com- prevailing hourly rate for initial entry munity building academic program’’ or positions in community building and ‘‘academic program’’ excludes social the number of hours worked by the stu- and humanistic fields such as law, eco- dent at the work placement assignment, except that the hourly rate used nomics (except for urban economics), should be sufficiently high to allow a education and history. ‘‘Community student to earn the full stipend with- building academic program’’ or ‘‘aca- out working over 20 hours per week demic program’’ excludes joint degree during the school year and 40 hours per programs except where both joint de- week during the summer. The amount gree fields have the purpose and focus of the stipend the student receives may of educating students in community not exceed the actual amount earned, building. up to $9,000 per year. Economically disadvantaged and minor- (B) Tuition support and additional sup- ity students means students who satisfy port. The amount of support for tui- all applicable guidelines established at tion, fees, books, and travel related to the participating institution of higher the academic program, workplace as- education to measure financial need signment or conferences may not ex- for academic scholarship or loan assist- ceed actual costs incurred or $5,000 per ance, including, but not limited to, stu- year, whichever is higher. The con- dents who are Black, American Indian/ ferences are limited to those dealing Alaskan Native, Hispanic, or Asian/Pa- with community building, sponsored by cific Island, and including students professional organizations. with disabilities. (ii) Administrative allowance. HUD Institution of higher education means a provides an allowance to recipients to public or private educational institu- cover the administrative costs of the tion that offers a community building program. The administrative allowance academic program and that is accred- is $1,000 per year for each student par- ited by an accrediting agency or asso- ticipating in the program. ciation recognized by the Secretary of (2) Number of students assisted. The Education under 34 CFR part 602. minimum number of students that may

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be assisted is three students per par- with all program requirements, and for ticipating institution of higher edu- the coordination of program activities cation. If an APO or State receives as- carried out by the work placement sistance for a program that is con- agencies and (if the recipient is an APO ducted by two or more institutions of or State), by the participating institu- higher education, each participating tions of higher education. The recipi- institution must have a minimum of ent must: three students in the program. The (A) Recruit and select students for maximum number of students that participation in CDWSP. The recipient may be assisted under CDWSP is five shall establish recruitment procedures students per participating institution that identify economically disadvan- of higher education. taged and minority students pursuing (d) Recipient eligibility and responsibil- careers in community building, and ities—(1) Recipient eligibility. (i) The fol- make such students aware of the avail- lowing organizations are eligible to ability of assistance opportunities. apply for assistance under the pro- Students must be selected before the gram: beginning of the semester for which (A) Institutions of higher education. In- funding has been provided. stitutions of higher education offering (B) Recruit and select work place- a community building academic pro- ment agencies, and negotiate and exe- gram are eligible for assistance under cute agreements covering each work CDWSP. placement assignment. (B) Areawide planning organizations (C) Refer participating students to and States. An APO or a State may work placement agencies and assist apply for assistance for a program to students in the selection of work place- be conducted by two or more institu- ment assignments. tions of higher education. Institutions (D) Assign sufficient staff to admin- participating in an APO program must ister and supervise the program on a be located within the particular area day-to-day basis, and, where the recipi- that is served by the APO and is identi- ent is an APO or State, to monitor the fied by the State law or interlocal activities of the work study coordi- agreement creating the APO. Institu- nating committee. tions of higher education participating in a State program must be located (E) Encourage participating students within the State. to obtain employment for a minimum (ii) To be eligible in future funding of two years after graduation with a competitions for CDWSP, recipients unit of State or local government, In- are required to maintain a 50-percent dian tribe or nonprofit organization en- rate of graduation from a CDWSP-fund- gaged in community building. ed academic program. (F) Maintain records by racial and (iii) If an institution of higher edu- ethnic categories for each economi- cation that submits an individual ap- cally disadvantaged student enrolled in plication is also included in the appli- the CDWSP. cation of an APO or State, then the (G) Keep records and make such re- separate individual application of the ports as HUD may require. institution of higher education will be (H) Comply with all other applicable disregarded. Additionally, if an institu- Federal requirements. tion of higher education is included in (ii) If the recipient is an APO or the application of both an APO and a State, the recipient must also: State, then the references to the insti- (A) Establish a committee to coordi- tution in the application of the State nate activities between program par- will be stricken. The State’s applica- ticipants, to advise the recipient on tion will then be ineligible if fewer policy matters, to assist the recipient than two institutions of higher edu- in ranking and selection of partici- cation remain as participants in the pating students, and to review disputes State’s application. concerning compliance with program (2) Recipient responsibilities. (i) The re- agreements and performance. The com- cipient is responsible for the adminis- mittee shall be chaired by a represent- tration of the program, for compliance ative of the recipient, and shall include

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representatives of the participating in- assignment. Work placement agencies stitutions of higher education, work may provide flexibility in the work pe- placement agencies, students, and riod, if such a schedule is consistent HUD. with the requirements of the student’s (B) Allocate the assistance awarded academic program. However, a partici- under the program to the participating pating student may receive stipend institutions of higher education. APOs payment only during the period that and States may not make fractional the student is placed with the work awards to institutions. (E.g., awards to placement agency. institutions must assist a fixed number (v) Comply with all other applicable of students and not, for example, 6.5 Federal requirements. students.) (vi) Maintain such records as HUD (e) Institutions of higher education. In- may require. stitutions of higher education partici- (g) Student eligibility and responsibil- pating in a program are responsible for ities. Students apply directly to recipi- providing its educational component. ents receiving grants under CDWSP. Where the recipient is an APO or Students shall be selected in accord- State, the institution of higher edu- ance with the following eligibility re- cation shall assist the APO or State in quirements and selection procedures. the administration and operation of (1) Eligibility. To be eligible for the program. Responsibilities include CDWSP, the student: assisting the recipient in the selection (i) Must satisfy all applicable guide- of students by determining the eligi- lines established at the participating bility of students for the academic pro- institution of higher education to gram, and by making the analysis of measure financial need for academic students under the financial need scholarship or loan assistance. guidelines established by the institu- (ii) Must be a full-time student en- tion. All institutions of higher edu- rolled in the first year of graduate cation must comply with other applica- study in a community building aca- ble Federal requirements. demic program at the participating in- (f) Work placement agencies eligibility stitution of higher education. Individ- and responsibilities—(1) Eligibility. To be uals enrolled in doctoral programs are eligible to participate in the CDWSP, ineligible. the work placement agencies must be (iii) Must demonstrate an ability to involved in community building and maintain a satisfactory level of per- must be an agency of a State or unit of formance in the community building local government, an APO, an Indian academic program and in work place- tribe, or a nonprofit organization. ment assignments, and to comply with (2) Responsibilities. Work placement the professional standards set by the agencies must: recipient and the work placement (i) Provide practical experience and agencies. training in community building. (iv) May not have previously partici- (ii) Consult with the institution of pated in CDWSP. higher education (and the APO or (v) Must provide appropriate written State, where an APO or State is the re- evidence that he or she is lawfully ad- cipient) to ensure that the student’s mitted for permanent residence in the work placement assignment provides United States, if the individual is not a the requisite experience and training citizen. to meet the required number of work (2) Selection. In selecting among eligi- hours specified in the student work ble students, the recipient must con- placement agreement. sider the extent to which each student (iii) Provide a sufficient number of has demonstrated: work placement assignments to pro- (i) Financial need under the applica- vide participating students with a wide ble financial need guidelines estab- choice of work experience. lished at the institution of higher edu- (iv) Require each student to devote cation; 12–20 hours per week during the regular (ii) An interest in, and commitment school year, or 35–40 hours a week dur- to, a professional career in community ing the summer, to the work placement building;

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(iii) The ability satisfactorily to (1) Threshold. To be eligible for rank- complete academic and work place- ing, applicants must meet each of the ment responsibilities under CDWSP. following threshold requirements: (3) Student responsibilities. Partici- (i) The application must be filed in pating students must: the application form prescribed by (i) Enroll in a two-year program. A HUD, and within the required time pe- student’s academic and work place- riods; ment responsibilities include: Full- (ii) The applicant must demonstrate time enrollment in an approved aca- that it is eligible to participate; demic program; maintenance of a satis- (iii) The applicant must demonstrate factory level of performance in the that each institution of higher edu- community building academic program cation participating in the program as and in work placement assignments; a recipient has the required academic and compliance with the professional programs and faculty to carry out its conduct standards set by the recipient activities under CDWSP. Each work and the work placement agency. A sat- placement agency must have the re- isfactory level of academic perform- quired staff and community building ance consists of maintaining a B aver- work study program to carry out its age. A student’s participation in CDWSP shall be terminated for failure activities under CDWSP. to meet these responsibilities and (2) Rating. All applications that meet standards. If a student’s participation the threshold requirements for appli- is terminated, the student is ineligible cant eligibility will be rated based on for further CDWSP assistance. the following selection criteria: (ii) Agree to make a good-faith effort (i) Quality of academic program. The to obtain employment in community quality of the academic program of- building with a unit of State or local fered by the institution of higher edu- government, an Indian tribe, or a non- cation, including without limitation profit organization. The term of em- the: ployment should be for at least two (A) Quality of course offerings; consecutive years following graduation (B) Appropriateness of course offer- from the academic program. If the stu- ings for preparing students for careers dent does not obtain such employment, in community building; and the student is not required to repay the (C) Qualifications of faculty and per- assistance received. centage of their time devoted to teach- (h) Notice of fund availability. HUD ing and research in community build- will solicit grant applications from in- ing. stitutions of higher education, APO’s (ii) Rates of graduation. The rates of and States by publishing a notice of graduation of students previously en- fund availability in the FEDERAL REG- rolled in a community building aca- ISTER. The notice will: demic program at the institution of (1) Explain how application packages higher education, specifically including (requests for grant applications) providing specific application require- (where applicable) graduation rates ments and guidance may be obtained; from any previously funded CDWSP (2) Specify the place for filing com- academic programs or similar pro- pleted applications, and the date by grams. which the applications must be phys- (iii) Extent of financial commitment. ically received at that location; The commitment and ability of the in- (3) State the amount of funding stitution of higher education to assure available under the notice; that CDWSP students will receive suf- (4) Provide other appropriate pro- ficient financial assistance (including gram information and guidance. loans, where necessary) above and be- (i) Recipient selection process. The se- yond the CDWSP funding to complete lection process for applications under their academic program in a timely CDWSP consists of a threshold review, manner and without working in excess ranking of eligible applications and of 20 hours per week during the school final selection. year.

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(iv) Quality of work placement assign- bility, ample available time, and suffi- ments. The extent to which the partici- cient authority to do so; and pating students will receive a suffi- (C) The effectiveness of the appli- cient number and variety of work cant’s prior coordination and adminis- placement assignments, the assign- tration of a CDWSP-funded program, ments will provide practical and useful where applicable (including the timeli- experience to students participating in ness and completeness of the appli- the program, and the assignments will cant’s compliance with CDWSP report- further the participating students’ ing requirements). preparation for professional careers in (vii) Commitment to meeting economi- community building. cally disadvantaged and minority stu- (v) Likelihood of fostering students’ dents’ needs. The applicant’s commit- permanent employment in community ment to meeting the needs of economi- building. The extent to which the pro- cally disadvantaged and minority stu- posed program will lead participating dents as demonstrated by policies and students directly and immediately to plans regarding, and past effort and permanent employment in community success in, recruiting, enrolling and fi- building, as indicated by, without limi- nancially assisting economically dis- tation: advantaged and minority students. If (A) The past success of the institu- the applicant is an APO or State, then tion of higher education in placing its HUD will consider the demonstrated graduates (particularly CDWSP-funded commitment of each institution of and similar program graduates where higher education on whose behalf the applicable) in permanent employment APO or State is applying; HUD will in community building; and then also consider the demonstrated (B) The amount of faculty and staff commitment of the APO or State to re- time and institutional resources de- cruit and hire economically disadvan- voted to assisting students (particu- taged and minority students. larly students in CDWSP-funded and (3) Final selection. Eligible applica- similar programs where applicable) in finding permanent employment in tions will be considered for selection in community building. their rank order. HUD may make awards out of rank order to achieve ge- (vi) Effectiveness of program adminis- ographic diversity, and may provide as- tration. The degree to which an applicant will be able effectively to coordi- sistance to support a number of stu- nate and administer the program. HUD dents that is less than the number re- will allocate the maximum points quested under applications in order to available under this criterion equally provide assistance to as many highly among the following considerations set ranked applications as possible. forth in paragraphs (i)(2)(vi) (A), (B), (j) Agreements—(1) Grant agreement. and (C) of this section, except that the The responsibilities of the recipient maximum points available under this under CDWSP will be incorporated in a criterion will be allocated equally be- grant agreement executed by HUD and tween the considerations set forth in the recipient. paragraphs (i)(2)(vi) (A) and (B) of this (2) Student agreement. The recipient section only where the applicant has and each participating student must not previously administered a CDWSP- execute a written agreement incor- funded program. porating their mutual responsibilities (A) The strength and clarity of the under CDWSP. The agreement must be applicant’s plan for placing CDWSP executed before the student can be en- students on rotating work placement rolled in the program. A student’s par- assignments and monitoring CDWSP ticipation in CDWSP shall be termi- students’ progress both academically nated for failure to meet the respon- and in their work placement assign- sibilities and standards in the agreements; ment. (B) The degree to which the indi- (3) Work placement assignment agree- vidual who will coordinate and admin- ment. The institution of higher edu- ister the program has clear responsi- cation, the APO or state (if an APO or

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State is the grant recipient), the par- (iii) Consistent with OMB Circulars ticipating student, and the work place- No. A–101 and A–110, HUD, in the grant ment agency must execute a written agreement, will set forth in detail agreement covering each work place- other circumstances under which funds ment assignment. The agreement must may be deobligated, recipients may be address the responsibilities of each of liable for repayment, or other sanc- the parties, the educational objectives, tions may be imposed. the nature of supervision, the stand- (l) Other Federal requirements—(1) ards of evaluation, and the student’s Handicap provision. Recipients must time commitments under the work provide a statement certifying that no placement assignment. otherwise qualified handicapped person (4) APO (or state) and institution of shall, solely by reason of handicap, be higher education. Where the recipient is excluded from participation in, be de- an APO (or a State), the recipient and nied the benefits of, or otherwise be each participating institution of higher subjected to discrimination under the education must execute a written CDWSP. agreement incorporating their mutual (2) Nondiscrimination. The recipient responsibilities under CDWSP. must adhere to the following non- (k) Grant administration—(1) Initial ob- discrimination provisions: The require- ligation of funds. When HUD selects an ments of title VIII of the Civil Rights application for funding, and notifies Act of 1968, 42 U.S.C. 3600–20 (Fair the recipient, HUD will obligate funds Housing Act) and implementing regula- to cover the amount of the approved tions issued at subchapter A of title 24 grant. The initial obligation of funds of the Code of Federal Regulations; will provide for student grants for two title VI of the Civil Rights Act of 1964 years. (42 U.S.C. 2000d–4) (Nondiscrimination (2) Disbursement. Recipients will re- in Federally Assisted Programs) and ceive grant payments by direct deposit implementing regulations issued at 24 on a reimbursement basis. If that is CFR part 1; section 504 of the Rehabili- not possible, grant payments will be tation Act of 1973 (29 U.S.C. 794) and made by U.S. Treasury checks. implementing regulations at 24 CFR (3) Deobligation and recipient repay- part 8; Executive Order 11063 and im- ment. (i) HUD may deobligate amounts plementing regulations at 24 CFR part for grants if proposed activities are not 107; and the Age Discrimination Act of begun or completed within a reason- 1975 and implementing regulations at able time after selection. 24 CFR part 146. (ii) If a student’s participation in CDWSP is terminated before the com- [54 FR 27131, June 27, 1989, as amended at 61 pletion of the two-year term of the stu- FR 36458, July 10, 1996; 63 FR 31869, June 10, dent’s program, the recipient may sub- 1998] stitute another student to complete the two-year term of a student whose § 570.416 Hispanic-serving institutions work study program. participation has terminated. The substituted student must have a sufficient (a) Applicability and objectives. HUD number of academic credits to com- makes grants under the Hispanic-serv- plete the degree program within the re- ing Institutions Work Study Program maining portion of the terminated stu- (HSI-WSP) to public and private non- dent’s two-year term. With respect to profit Hispanic-serving Institutions any CDWSP grant, there is no require- (HSI’s) of higher education for the pur- ment, regardless of the date of grant pose of providing assistance to eco- award, for students who are terminated nomically disadvantaged and minority from the CDWSP to repay tuition and students who participate in a work additional assistance or for the grant study program while enrolled in full- recipient to repay such funds to HUD. time community college programs in Funds must still be otherwise expended community building, and to provide consistent with CDWSP regulations entry to pre-professional careers in and the grant agreement, or repayment these fields. may be required under paragraph (b) Definitions. The following defini- (k)(3)(iii) of this section. tions apply to HSI-WSP:

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Applicant means a public or private Economically disadvantaged and minor- non-profit Hispanic-serving institution ity students means students who satisfy of higher education that offers only all the applicable guidelines estab- two-year degree programs, including at lished at the participating institution least one community building aca- of higher education to measure finan- demic degree program, and that applies cial need for academic scholarship or for funding under HSI-WSP. loan assistance, including, but not lim- Community building means commu- ited to, students with disabilities and nity and economic development, com- students who are Black, American In- munity planning, community manage- dian/Alaska Native, Hispanic, Asian/ ment, public policy, urban economics, Pacific Islanders, where such students urban management, urban planning, satisfy the financial needs guidelines land use planning, housing, and related defined above. fields. Related fields include, but are Hispanic-serving institution is an insti- not limited to, administration of jus- tution of higher education that cer- tice, child development, and human tifies to the satisfaction of the Sec- services. retary that it meets the criteria set Community building academic program out at 20 U.S.C. 1059c(b)(1), including or academic program means an under- the following: An institution that has graduate associate degree program an enrollment of undergraduate full- whose purpose and focus is to educate time students that is at least 25 per- students in community building. The cent Hispanic; in which not less than 50 terms ‘‘community building academic percent of the Hispanic students are program’’ or ‘‘academic program’’ refer low-income individuals (i.e., their fam- to the types of academic programs en- ilies’ taxable income for the preceding compassed in the statutory phrase year did not exceed 150 percent of the ‘‘community or economic development, poverty level) who are first generation community planning or community college students; and in which another management.’’ For purposes of HSI- 25 percent are either low-income indi- WSP, such programs include, but are viduals or first generation college stu- not limited to, associate degree pro- dents. grams in community and economic de- HSI-WSP or HSI-WSP program means velopment, community planning, com- the Hispanic-serving Institutions Work munity management, public adminis- Study program. tration, public policy, urban econom- Institution of higher education means a ics, urban management, urban plan- public or private educational institu- ning, land use planning, housing, and tion that offers two-year associate de- related fields of study. Related fields of grees in a community building aca- study that promote community build- demic program and that is accredited ing, such as administration of justice, by an accrediting agency or association child development, and human services recognized by the Secretary of Edu- are eligible, while fields such as nat- cation. Institutions offering BOTH ural sciences, computer sciences, four-year and two-year degrees are not mathematics, accounting, electronics, eligible for HSI-WSP. engineering, and the humanities (such Recipient means an approved appli- as English or history) would not be eli- cant that executes a grant agreement gible. A transfer program (i.e., one that with HUD. leads to transfer to a four-year institu- Student means a person attending the tion of higher education for the stu- institution of higher education on a dent’s junior year) in a community full-time basis, as defined by that insti- building academic discipline is eligible tution and pursuing an eligible commu- only if the student is required to de- nity building degree. Students must clare his/her major in this discipline have attained no more than half of the while at the community college. credits required for their degree at the Community building field means any of time they first receive assistance under the fields of study eligible under a HSI-WSP. community building academic pro- Student with disabilities means a stu- gram. dent who meets the definition of a

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‘‘person with disabilities’’ in the Amer- ment, and braille materials are eligible icans with Disabilities Act of 1990. under this category. (c) Assistance provided—(1) Types of (4) Administrative allowance. HUD pro- assistance available. HUD provides fund- vides an allowance to recipients to ing in the form of grants to recipients cover the administrative costs of the who make assistance available to eligi- program. The administrative allowance ble students. Grants are provided to is $1,000 per year for each student par- cover the costs of student assistance ticipating in the program; however, no and for an administrative allowance. more than 20 percent of the grant may (2) Maximum amount of assistance. The be used for planning and program ad- maximum amount that can be provided ministrative costs. to a student is $13,200 a year, including (5) Number of students assisted. The $1,000 for an administrative allowance, minimum number of students that may subject to the 20% limitation described be assisted is three students per par- at 570.416(c)(4) below. HUD will not set maximums on how much should be ticipating institution of higher edu- spent to each eligible expenditure, cation. The maximum number of stu- other than for administrative costs. dents that may be assisted is ten stu- The institution must be able to docu- dents per participating institution of ment that the amounts paid are cus- higher education; however, a lower tomary for that institution and that it maximum or higher minimum may be has actually paid that amount to the established for a particular funding students. If a student is receiving a round by the NOFA announcing the Pell grant, he/she may not receive availability of the funds. funding for the same educational sup- (d) Recipient eligibility and responsibil- port through HSI-WSP. However, HSI- ities—(1) Recipient eligibility. Public or WSP can substitute for all or part of private Hispanic-serving institutions of the Pell grant. higher education offering only under- (3) Student assistance. Grants are pro- graduate two-year degrees, including vided in the form of student stipends, degrees in at least one community tuition support, and additional sup- building academic program, are eligi- port. ble for assistance under HSI-WSP. HSIs (i) Student stipend. The amount of the that offer BOTH two-year and four- student stipend should be based on the year degrees are not eligible for HSI- hourly rate for initial entry positions WSP assistance. in the community building field and (2) Recipient responsibilities. The re- the number of hours worked by the stu- cipient is responsible for administering dent at the work placement assign- the program, for compliance with all ment. The stipend should be suffi- program requirements, and for coordi- ciently high to allow the student to nation of program activities carried earn the full stipend, as determined by out by the work placement agencies. the recipient, without working over 20 hours per week during the school year The recipient must: and 40 hours per week during the sum- (i) Recruit students for participation mer. in HSI-WSP. The recipient shall estab- (ii) Tuition support. The amount of lish recruitment procedures that iden- tuition support may not exceed the tui- tify eligible economically disadvan- tion and required fees charged at the taged and minority students pursuing participating institution of higher edu- careers in community building, and cation. make them aware of the availability of (iii) Additional support. The recipient assistance opportunities. While the may provide additional support for program is restricted to HSIs, the re- books, tutoring, and travel related to cipient may neither restrict the pro- the academic program or work place- gram to any particular minority group ment assignment. Costs associated or groups, nor provide any preferential with reasonable accommodations for treatment in the selection process students with disabilities including, based on race or ethnicity. Only eco- but not limited to, interpreters for the nomically disadvantaged students, as deaf/hard of hearing, special equip- defined herein, may be assisted.

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(ii) Select students for participation placement site that is part of the insti- in HSI-WSP. In selecting among the el- tution of higher education (e.g., a child igible students, the recipient must con- care center) can only be an eligible site sider the extent to which each student if the services provided by that site are has demonstrated financial need under offered to people in the broader com- the applicable guidelines established at munity outside the institution. the institution of higher education; an (2) Responsibilities. Work placement interest in, and commitment to, a ca- agencies must: reer in community building; and the (i) Provide practical experience and ability to satisfactorily complete the training in the community building academic and work placement respon- field to participating students through sibilities under HSI-WSP. Students work placement assignments. must be selected before the beginning (ii) Consult with the institution of of the semester for which funding is higher education to ensure that the being provided. If a student’s participa- student’s work placement assignment tion terminates, the student may not provides the requisite experience and be replaced; the grant will be reduced training to meet the required number by the amount of unused funds allotted of work hours specified in the student for that student. work placement agreement. (iii) Provide the educational compo- (iii) Provide a sufficient number and nent for participating students. variety of work assignments to provide (iv) Recruit and select work place- participating students with a wide ment agencies, and negotiate and exe- choice of work experience. cute an agreement covering each work (iv) Require each student to devote placement assignment. 12–20 hours per week during the regular (v) Refer participating students to school year, and 35–40 hours a week work placement agencies and assist during the summer, to the work place- students in the selection of work placement assignment. Work placement ment assignments. agencies may provide flexibility in the (vi) Assign sufficient staff to admin- work period, if such a schedule is con- ister and supervise the program on a sistent with the requirements of the day-to-day basis. student’s academic program. However, (vii) Encourage participating stu- a participating student may receive a dents to either: obtain post-graduation stipend payment only during the period employment with a unit of State or when the student is placed with the local government, an areawide plan- work placement agency. ning organization (APO), Indian tribe (v) Comply with all other applicable or nonprofit organization engaged in Federal requirements. community building; or transfer to a (vi) Maintain such records as HUD four-year institution of higher edu- may require. cation to obtain a bachelor’s degree in (f) Student eligibility and responsibil- a community building academic dis- ities. Students apply directly to recipi- cipline. ents receiving grants under HSI-WSP. (viii) Maintain records by racial and (1) Eligibility. To be eligible for HSI- ethnic categories for each economi- WSP, the student: cally disadvantaged and minority stu- (i) Must satisfy all applicable guide- dent participating in HSI-WSP. lines established at the participating (ix) Keep records and make such re- institution of higher education to ports as HUD may require. measure financial need for academic (x) Comply with all other applicable scholarship or loan assistance. Federal requirements. (ii) Must be a full-time student en- (e) Work placement agencies eligibility rolled in a community building asso- and responsibilities—(1) Eligibility. To be ciate degree program at the partici- eligible to participate in HSI-WSP, the pating institution of higher education. work placement agency must be an The student must have attained no agency of a State or local government, more than 50 percent of the credits re- an APO, an Indian tribe, or a private quired for his/her degree at the time nonprofit organization involved in the student first receives assistance community building activities. A work under this program.

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(iii) Must demonstrate an ability to stitution, the student is not required to maintain a satisfactory level of per- repay the assistance received. formance in community building aca- (g) Notice of funding availability. HUD demic program (i.e., maintain a B aver- will solicit grant applications from eli- age, as defined by the institution) and gible institutions of higher education in work placement assignments, and by publishing a notice of funding avail- comply with the professional standards ability in the FEDERAL REGISTER. The set by the recipient and the work notice will: placement agencies. (1) Explain how application kits pro- (iv) May not have previously partici- viding specific application require- pated in HSI-WSP. ments and guidance may be obtained; (2) Student responsibilities. Partici- (2) Specify the place for filing com- pating students must: pleted applications, and the date by (i) Enroll or be enrolled in a two-year which applications must be physically community building associate degree received at that location; program. A student’s academic and (3) State the amount of funding work placement responsibilities in- available under the notice, which may clude: Full-time enrollment in an ap- include funds recaptured from pre- proved academic program; mainte- viously awarded grants; nance of a satisfactory level of per- (4) Provide other appropriate pro- formance in the community building gram information and guidance. academic program and in work place- (h) Agreements—(1) Grant agreement. ment assignments; and compliance The responsibilities of the recipient with the professional conduct stand- under HSI-WSP will be incorporated in ards set by the recipient and by the a grant agreement executed by HUD work placement agency. A satisfactory and the recipient. level of academic performance consists (2) Student agreement. The recipient of maintaining a B average, as defined and each participating student must by the institution. A student’s partici- execute a written agreement incor- pation in HSI-WSP shall be terminated porating their mutual responsibilities for failure to meet these responsibil- under HSI-WSP. The agreement must ities and standards. If the student’s be executed before the student can be participation is terminated, the stu- enrolled in the program. The Recipient dent is ineligible for further HSI-WSP shall terminate a student’s participa- assistance. tion in HSI-WSP for failure to meet the (ii) Devote 12–20 hours per week dur- responsibilities and standards in the ing the regular school year, and 35–40 agreement. hours a week during the summer, to (3) Work placement assignment agree- the work placement assignment. Work ment. The recipient, the student, and placement agencies may provide flexi- the work placement agency must exe- bility in the work period, if such a cute a written agreement covering schedule is consistent with the require- each work placement assignment. The ments of the student’s academic pro- agreement must address the respon- gram. However, a participating student sibilities of each of the parties, the may receive a stipend payment only educational objectives, the nature of during the period when the student is the supervision, the standards of eval- placed with the work placement agen- uation, and the student’s time commit- cy. ments under the work placement as- (iii) Agree to make a good-faith ef- signment. fort to either: obtain employment in (i) Grant administration—(1) Initial ob- community building with a unit of ligation of funds. When HUD selects an State or local government, an APO, an application for funding, HUD will obli- Indian tribe, or a non-profit organiza- gate funds to cover the amount of the tion; or to transfer to a four-year insti- approved grant. The term of the award tution of higher education to obtain a will be for two calendar years, unless bachelor’s degree in a community subsequently altered by HUD at its dis- building academic discipline. However, cretion for good cause. if the student does not obtain such em- (2) Disbursement. Recipients will re- ployment or transfer to a four-year in- ceive grant payments by direct deposit

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on a reimbursement basis. If that is § 570.420 General. not possible, grant payments will be (a) Administration of Non-entitlement made by U.S. Treasury checks. CDBG funds in New York by HUD or In- (3) Deobligation. HUD may deobligate sular Areas—(1) Small cities. The Act amounts for grants if proposed activi- permits each state to elect to admin- ties are not begun or completed within ister all aspects of the CDBG program a reasonable period of time after selec- annual fund allocation for the non-en- tion. titlement areas within its jurisdiction. (j) Other Federal requirements—(1) Ap- All states except Hawaii have elected plicability of part 570. HSI-WSP shall be to administer the CDBG program for subject to the policies and procedures non-entitlement areas within their ju- set forth in subparts A, K, and O of 24 risdiction. This section is applicable CFR part 570, as applicable, except as only to active HUD-administered small modified or limited under the provi- cities grants in New York. The require- sions of this Notice. The provisions of ments for the non-entitlement CDBG subparts C and J of part 570 shall not grants in Hawaii are set forth in apply to HSI-WSP. § 570.429 of this subpart. States that (2) Uniform Administrative require- elected to administer the program ments. Recipients under HSI-WSP shall after the close of Fiscal Year 1984 can- comply with the requirements and not return administration of the pro- standards of OMB Circular No. A–22, gram to HUD. A decision by a state to ‘‘Cost Principles for Educational Insti- discontinue administration of the pro- tutions.’’ Recipients that are private gram would result in the loss of CDBG institutions of higher education shall funds for non-entitlement areas in that comply with OMB Circular A–133, state and the reallocation of those ‘‘Non-Federal Audit Requirements for funds to all states in the succeeding fiscal year. Institutions of Higher Education and Other Nonprofit Institutions,’’ which is (2) Insular areas. Title V of Public Law 108–186 amended the Act to move implemented at 24 CFR part 45. Recipi- the insular areas funding authorization ents that are public institutions of from sections 107(a) and (b) to section higher education shall comply with 106(a). This revision identified a spe- OMB Circular A–128, ‘‘Non-Federal cific portion of the CDBG allocation Audit Requirements for State and for insular areas that is separate from Local Governments,’’ which is imple- the distribution for special purpose mented at 24 CFR part 44. Audits shall grants, as well as from the Entitlement be conducted annually. In addition, all and State formula distribution. The in- recipients under HSI-WSP shall comply sular areas of Guam, the Northern with the provisions of OMB Circular A– Mariana Islands, the Virgin Islands, 110, ‘‘Uniform Administrative Require- and American Samoa are permitted to ments for Grants and Agreements With administer all aspects of their Commu- Institutions of Higher Education, Hos- nity Development Block Grant (CDBG) pitals and Other Non-Profit Organiza- program under section 106 of the Act in tions,’’ which is implemented at 24 accordance with their final statement CFR part 84. OMB Circular A–110 shall as further described at § 570.440. apply to recipients in its entirety. (b) Scope and applicability. (1) This subpart describes the policies and pro- [62 FR 17493, Apr. 9, 1997, as amended at 63 cedures of the Small Cities program FR 9683, Feb. 25, 1998] that apply to non-entitlement areas in states where HUD administers the Subpart F—Small Cities, Non-Enti- CDBG program. HUD currently admin- tlement CDBG Grants in Ha- isters the Small Cities program in only waii and Insular Areas Pro- two states—New York (for grants prior grams to FY 2000) and Hawaii (for non-entitlement CDBG grants in Hawaii). The Small Cities portion of this subpart ad- SOURCE: 62 FR 62914, Nov. 25, 1997, unless dresses the requirements for New York otherwise noted. Small Cities grants in §§ 570.421, 570.426,

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570.427, and 570.431. Section 570.429 iden- the community and other financial re- tifies special procedures applicable to sources are not available to meet such Hawaii. needs. (2) This subpart also describes the (2) In addition to the objectives de- policies and procedures governing com- scribed in paragraph (e)(1) of this sec- munity development block grants to tion, with respect to grants made insular areas under section 106 of the through the Small Cities program, not Act. Sections 570.440 and 570.441 iden- less than 70 percent of the total of tify procedures applicable to the Insu- grant funds from each grant and Sec- lar Areas program under section 106 of tion 108 loan guarantee funds received the Act. Fund reservations for insular under subpart M of this part within a areas under section 107 of the Act shall fiscal year must be expended for activi- remain governed by the policies and ties which benefit low- and moderate- procedures described in section income persons under the criteria of 107(a)(1)(A) of the Act and §§ 570.400 and § 570.208(a) or of § 570.208(d)(5) or (6). In 570.405 of this part. the case of multiyear plans in New (3) The policies and procedures set York State approved in response to forth in the following identified sub- NOFAs published prior to calendar parts of this part apply to the HUD-ad- year 1997, not less than 70 percent of ministered Small Cities and Insular the total funding for grants approved Areas programs, except as modified or pursuant to a multiyear plan for a time limited under the provisions thereof or period of up to three years must be ex- this subpart: pended for activities which benefit low- (i) Subpart A—General Provisions; and moderate-income persons. Thus, 70 (ii) Subpart C—Eligible Activities; percent of the grant for year 1 of a (iii) Subpart J—Grant Administra- tion; multiyear plan approved in response to (iv) Subpart K—Other Program Re- NOFAs published prior to calendar quirements; year 1997 must meet the 70 percent re- (v) Subpart M—Loan Guarantees; and quirement, 70 percent of the combined (vi) Subpart O—Performance Re- grants from years 1 and 2 must meet views. the requirement, and 70 percent of the (c) Abbreviated consolidated plan. Ap- combined grants from years 1, 2, and 3 plications for the HUD-administered must meet the requirement. In deter- Small Cities Program and the Insular mining the percentage of funds ex- Areas program under section 106 of the pended for such activity, the provisions Act that contain housing activities of § 570.200(a)(3)(i), (iii), (iv), and (v) must include a certification that the shall apply. proposed housing activities are con- (3) In addition to the objectives de- sistent with the applicant’s consoli- scribed in paragraph (e)(1) of this sec- dated plan as described at 24 CFR part tion, grants made through the Insular 91. Areas program shall also comply with (d) National and primary objectives. (1) the primary objective of 70 percent Each activity funded through the benefit to low- and moderate-income Small Cities program and the Insular persons. Insular area recipients must Areas program under section 106 of the meet this requirement for each sepa- Act must meet one of the following na- rate grant under section 107 of the Act. tional objectives as defined under the For grants made under section 106 of criteria in § 570.208: the Act, insular area recipients must (i) Benefit low- and moderate-income ensure that over a period of time speci- families; fied in their certifications not to ex- (ii) Aid in the prevention or elimi- ceed three years, not less than 70 per- nation of slums or blight; or cent of the aggregate of CDBG fund ex- (iii) Be an activity that the grantee penditures shall be for low- and mod- certifies is designed to meet other com- erate-income activities meeting the munity development needs having a criteria under § 570.208(a) or under particular urgency because existing § 570.208(d)(5) or (6). See also conditions pose a serious and imme- § 570.200(a)(3) for further discussion of diate threat to the health or welfare of the primary objective.

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(e) Allocation of funds—The allocation the project does not meet the require- of appropriated funds for insular areas ments of the Section 108 program but is under section 106 of the Act shall be eligible for a grant under this subpart, governed by the policies and proce- HUD may fund Economic Development dures described in section 106(a)(2) of applications as they are determined to the Act and §§ 570.440, 570.441, and be fundable in a specific amount by 570.442 of this subpart. The annual ap- HUD up to the sum set aside for eco- propriations described in this section nomic development projects in a notice shall be distributed to insular areas on of funding availability, notwith- the basis of the ratio of the population standing paragraph (g) of this section. of each insular area to the population HUD also has the option in a NOFA of of all insular areas. funding economic development activi- [69 FR 32779, June 10, 2004, as amended at 72 ties on a competitive basis, as a com- FR 46370, Aug. 17, 2007] petitive application as described in paragraph (a)(1) of this section. In § 570.421 New York Small Cities Pro- order for an applicant to receive Small gram design. Cities grant funds on a noncompetitive (a) Selection system—(1) Competitive basis, the field office must determine applications. Each competitive applica- that the economic development project tion will be rated and scored against at will have a substantial impact on the least the following factors: needs identified by the applicant. (i) Need-absolute number of persons (b) Notice of funding availability. HUD in poverty as further explained in the will issue one or more Notice(s) of NOFA; Funding Availability (NOFA) each fis- (ii) Need-percent of persons in pov- cal year which will indicate the erty as further explained in the NOFA; amount of funds available, the annual (iii) Program Impact; and grant limits per grantee, type of grants (iv) Fair Housing and Equal Oppor- available, the application require- tunity, which may include the appli- ments, and the rating factors that will cant’s Section 3 plan and implementa- be used for those grants which are com- tion efforts with respect to actions to petitive. A NOFA may set forth, sub- affirmatively further fair housing. The ject to the requirements of this sub- NOFA described in paragraph (b) of part, additional selection criteria for this section will contain a more de- all grants. tailed description of these factors, and (c) Eligible applicants. (1) Eligible ap- the relative weight that each factor plicants in New York are units of gen- will be given. eral local government, excluding: Met- (2) In addition HUD reserves the ropolitan cities, urban counties, units right to establish minimal thresholds of general local government which are for selection factors and otherwise se- participating in urban counties or met- lect grants in accordance with § 570.425 ropolitan cities, even if only part of the and the applicable NOFA. participating unit of government is lo- (3) Imminent threats to public health cated in the urban county or metro- and safety. The criteria for these grants politan city. Indian tribes are also in- are described in § 570.424. eligible for assistance under this sub- (4) Repayment of Section 108 loans. The part. An application may be submitted criteria for these grants are described individually or jointly by eligible ap- in § 570.432. plicants. (5) Economic development grants. HUD (2) Counties, cities, towns, and vil- intends to use the Section 108 loan lages may apply and receive funding guarantee program to the maximum for separate projects to be done in the extent feasible to fund economic devel- same jurisdiction. Only one grant will opment projects in the nonentitlement be made under each funding round for areas of New York. In the event that the same type of project to be located there are not enough Section 108 loan within the jurisdiction of a unit of gen- guarantee funds available to fund via- eral local government (e.g., both the ble economic development projects, if a county and village cannot receive fund- project needs a grant in addition to a ing for a sewer system to be located in loan guarantee to make it viable, or if the same village, but the county can

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receive funding for a sewer system that (f) Multiyear plans. HUD will not is located in the same village as a reha- make any new multiyear commitments bilitation project for which the village for NOFAs published in calendar year receives funding). The NOFA will con- 1997 or later. HUD will continue to tain additional information on appli- honor the terms of the multiyear plans cant eligibility. that were approved under the provi- (3) Counties may apply on behalf of sions of NOFAs published prior to cal- units of general local government lo- endar year 1997. cated within their jurisdiction when (g) Maximum grant amount. The max- the unit of general local government imum grant amount that will be has authorized the county to apply. At awarded to a single unit of general the time that the county submits its local government in response to the an- application for funding, it must submit nual Small Cities NOFA published in a resolution by the governing body of calendar year 1997 or later is $400,000, the unit of local government that au- except that counties may apply for up thorizes the county to submit an appli- to $600,000 in HUD-administered Small cation on behalf of the unit of general Cities funds. HUD may specify lower local government. The county will be grant limits in the NOFA, which may considered the grantee and will be re- include different limits for different sponsible for executing all grant docu- types of grants available or different ments. The county is responsible for types of applicants. This paragraph (g) ensuring compliance with all laws, reg- does not apply to multiyear plans that ulations, and Executive Orders applica- were approved under the provisions of ble to the CDBG Program. HUD will NOFAs published prior to calendar deal exclusively with the county with year 1997, nor does it apply to grants respect to issues of program adminis- awarded in connection with paragraphs tration and performance, including re- (a)(3) through (a)(5) of this section. The medial actions. The unit of general maximum limits in this paragraph (g) local government will be considered apply to grants for economic develop- the grantee for the purpose of deter- ment projects awarded under NOFAs in mining grant limits. The unit of gen- which there is no set-aside of funds for eral local government’s statistics will such projects. be used for purposes of the selection factors referred to in § 570.421(a). §§ 570.422–425 [Reserved] (d) Public service activities cap. Public service activities may be funded up to § 570.426 Program income. a maximum of fifteen (15) percent of a (a) The provisions of § 570.504(b) apply State’s nonentitlement allocation for to all program income generated by a any fiscal year. HUD may award a specific grant and received prior to grant to a unit of general local govern- grant closeout. ment for public service activities with (b) If the unit of general local govern- up to 100 percent of the funds intended ment has another ongoing CDBG grant for public service activities. HUD will at the time of closeout, the program apply the 15 percent statewide cap to income will be considered to be pro- public service activities by funding gram income of the ongoing grant. The public service activities in the highest grantee can choose which grant to rated applications in each NOFA until credit the program income to if it has the cap is reached. multiple open CDBG grants. (e) Activities outside an applicant’s (c) If the unit of general local govern- boundaries. An applicant may conduct ment has no open ongoing CDBG grant eligible CDBG activities outside its at the time of closeout, program in- boundaries. These activities must be come of the unit of general local gov- demonstrated to be appropriate to ernment or its subrecipients which meeting the applicant’s needs and ob- amounts to less than $25,000 per year jectives, and must be consistent with will not be considered to be program State and local law. This provision in- income unless needed to repay a Sec- cludes using funds provided under this tion 108 guaranteed loan. When more subpart in a metropolitan city or an than $25,000 of program income is gen- urban county. erated from one or more closed out

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grants in a year after closeout, the en- the population of all eligible units of tire amount of the program income is general local government in the non- subject to the requirements of this entitlement areas of the State; part. This will be a subject of the close- (ii) The extent of poverty in that eli- out agreement described in § 570.509(c). gible unit of general local government and the extent of poverty in all the eli- § 570.427 Program amendments. gible units of general local government (a) HUD approval of certain program in the nonentitlement areas of the amendments. Grantees shall request State; and prior HUD approval for all program (iii) The extent of housing over- amendments involving new activities crowding in that eligible unit of gen- or alteration of existing activities that eral local government and the extent of will significantly change the scope, lo- housing overcrowding in all the eligi- cation, or objectives of the approved ble units of general local government activities or beneficiaries. Approval is in the nonentitlement areas of the subject to the amended activities State. meeting the requirements of this part (2) In determining the average of the and being able to be completed prompt- ratios under this paragraph (c), the ly. ratio involving the extent of poverty (b) Documentation of program amend- shall be counted twice and each of the ments. Any program amendments that other ratios shall be counted once. (0.25 do not require HUD approval must be + 0.50 + 0.25 = 1.00). fully documented in the grantee’s (d) Reallocation. (1) Any amounts that records. become available as a result of any re- (c) Citizen participation requirements. Whenever an amendment requires HUD ductions under subpart O of this part approval, the requirements for citizen shall be reallocated in the same or fu- participation in § 570.431 must be met. ture fiscal year to any remaining eligible applicants on a pro rata basis. [62 FR 62914, Nov. 25, 1997, as amended at 72 (2) Any formula grant amounts re- FR 46370, Aug. 17, 2007] served for an applicant that chooses § 570.428 [Reserved] not to submit an application shall be reallocated to any remaining eligible § 570.429 Hawaii general and grant re- applicants on a pro rata basis. quirements. (3) No amounts shall be reallocated (a) General. This section applies to under paragraph (d) of this section in non-entitlement CDBG grants in Ha- any fiscal year to any applicant whose waii. The non-entitlement counties in grant amount was reduced under sub- the State of Hawaii will be treated as part O of this part. entitlement grantees except for the (Approved by the Office of Management and calculation of allocations, and the Budget under control number 2506–0060) source of their funding, which will be from section 106(d) of the Act. [62 FR 62914, Nov. 25, 1997, as amended at 72 (b) Scope and applicability. Except as FR 46371, Aug. 17, 2007] modified or limited under the provi- § 570.431 Citizen participation. sions thereof or this subpart, the policies and procedures outlined in sub- (a) General. An applicant that is lo- parts A, C, D, J, K, and O of this part cated in a nonentitlement area of a apply to non-entitlement CDBG grants State that has not elected to distribute in Hawaii. funds shall comply with the citizen (c) Grant amounts. (1) For each eligi- participation requirements described ble unit of general local government, a in this section, including requirements formula grant amount will be deter- for the preparation of the proposed ap- mined which bears the same ratio to plication and the final application. The the total amount available for the non- requirements for citizen participation entitlement area of the State as the do not restrict the responsibility or au- weighted average of the ratios between: thority of the applicant for the devel- (i) The population of that eligible opment and execution of its commu- unit of general local government and nity development program.

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(b) Citizen participation plan. The ap- notice of the hearings and the hearings plicant must develop and follow a de- must be held at times and accessible tailed citizen participation plan and locations convenient to potential or ac- must make the plan public. The plan tual beneficiaries, with reasonable ac- must be completed and available before commodations including material in the application for assistance is sub- accessible formats for persons with dis- mitted to HUD, and the applicant must abilities. The applicant must specify in certify that it is following the plan. its plan how it will meet the require- The plan must set forth the applicant’s ment for hearings at times and loca- policies and procedures for: tions convenient to potential or actual (1) Giving citizens timely notice of beneficiaries; local meetings and reasonable and (4) Meeting the needs of non-English timely access to local meetings, infor- speaking residents in the case of public mation, and records relating to the hearings where a significant number of grantee’s proposed and actual use of non-English speaking residents can CDBG funds including, but not limited reasonably be expected to participate; to: (5) Responding to citizen complaints (i) The amount of CDBG funds ex- and grievances, including the proce- pected to be made available for the dures that citizens must follow when coming year, including the grant and submitting complaints and grievances. anticipated program income; The applicant’s policies and procedures (ii) The range of activities that may must provide for timely written an- be undertaken with those funds; swers to written complaints and griev- (iii) The estimated amount of those ances within 15 working days of the re- funds proposed to be used for activities ceipt of the complaint, where prac- that will benefit low- and moderate-in- ticable; and come persons; (6) Encouraging citizen participation, (iv) The proposed CDBG activities particularly by low- and moderate-in- likely to result in displacement and come persons who reside in slum or the applicant’s plans, consistent with blighted areas, and in other areas in the policies developed under § 570.606(b), which CDBG funds are proposed to be for minimizing displacement of persons used. as a result of its proposed activities; (c) Publication of proposed application. and (1) The applicant shall publish a pro- (v) The types and levels of assistance posed application consisting of the pro- the applicant plans to make available posed community development activi- (or to require others to make avail- ties and community development ob- able) to persons displaced by CDBG- jectives in order to afford affected citi- funded activities, even if the applicant zens an opportunity to: expects no displacement to occur; (i) Examine the application’s con- (2) Providing technical assistance to tents to determine the degree to which groups representative of persons of they may be affected; low- and moderate-income that request (ii) Submit comments on the pro- assistance in developing proposals. The posed application; and level and type of assistance to be pro- (iii) Submit comments on the per- vided is at the discretion of the appli- formance of the applicant. cant. The assistance need not include (2) The requirement for publishing in the provision of funds to the groups; paragraph (c)(1) of this section may be (3) Holding a minimum of two public met by publishing a summary of the hearings, for the purpose of obtaining proposed application in one or more citizens’ views and formulating or re- newspapers of general circulation, and sponding to proposals and questions. by making copies of the proposed appli- Each public hearing must be conducted cation available at libraries, govern- at a different stage of the CDBG pro- ment offices, and public places. The gram. Together, the hearings must ad- summary must describe the contents dress community development and and purpose of the proposed applica- housing needs, development of pro- tion, and must include a list of the lo- posed activities and review of program cations where copies of the entire pro- performance. There must be reasonable posed application may be examined.

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(d) Preparation of a final application. mits an abbreviated consolidated plan An applicant must prepare a final ap- under 24 CFR 91.235. The jurisdiction plication. In the preparation of the shall follow the citizen participation final application, the applicant shall requirements of 24 CFR 91.105 and 91.100 consider comments and views received (with the exception of § 91.100(a)(4)), if related to the proposed application and it submits a complete consolidated may, if appropriate, modify the final plan. application. The final application shall (c) Final statement. The insular area be made available to the public and jurisdiction shall submit to HUD a shall include the community develop- final statement describing its commu- ment objectives and projected use of nity development objectives and activi- funds, and the community development ties. The statement also must include a activities. priority nonhousing community devel- (e) New York grantee amendments. To opment plan in accordance with 24 CFR assure citizen participation on program 91.235. This final statement shall be amendments to final applications that submitted, together with the required require HUD approval under § 570.427, certifications, to the appropriate field the grantee shall: office in a form prescribed by HUD. (1) Furnish citizens information con- (d) Submission requirement. Each insu- cerning the amendment; lar area jurisdiction shall submit its (2) Hold one or more public hearings final statement to HUD no later than to obtain the views of citizens on the 45 days before the start of its program proposed amendment; year. Each jurisdiction may choose the (3) Develop and publish the proposed start date for the annual period of its amendment in such a manner as to af- program year that most closely fits its ford affected citizens an opportunity to own needs. HUD may grant an exten- examine the contents, and to submit sion of the submission deadline for comments on the proposed amendment; good cause. (4) Consider any comments and views (e) Certifications. The insular area ju- expressed by citizens on the proposed risdiction’s final statement must be ac- amendment and, if the grantee finds it companied by appropriate certifi- appropriate, modify the final amend- cations as further described under 24 ment accordingly; and CFR 91.225. The jurisdiction should (5) Make the final amendment to the submit all general certifications, as community development program well as all program certifications for available to the public before its submission to HUD. each program from which it receives funding, if it submits a complete con- § 570.440 Application requirements for solidated plan. For insular area juris- insular area grants funded under dictions receiving CDBG funds under section 106. an abbreviated consolidated plan, these (a) Applicability. The requirements of certifications shall include at a min- this section apply to insular grants imum: funded under section 106 of the Act. An (1) The following general certifi- insular area jurisdiction may choose to cations described at § 91.225(a) of this prepare program statements following title: Affirmatively furthering fair either: housing; anti-displacement and reloca- (1) The abbreviated consolidated plan tion plan; drug-free workplace; anti- procedures described in this subpart lobbying; authority of jurisdiction; and in 24 CFR 91.235; or consistency with plan; acquisition and (2) The complete consolidated plan relocation; and Section 3. procedures applicable to local govern- (2) The following CDBG certifications ments, discussed at 24 CFR 91.200 described at § 91.225(b) of this title: Cit- through 91.230. izen participation; community develop- (b) Proposed statement. An insular ment plan; following a plan; use of area jurisdiction shall prepare and pub- funds; excessive force; compliance with lish a proposed statement and comply anti-discrimination laws; compliance with the citizen participation require- with lead-based paint procedures; and ments described in § 570.441, if it sub- compliance with laws.

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(f) HUD action on final statement. Fol- reasonable notice and an opportunity lowing the review of the statement, to comment will be given, as well as HUD will promptly notify each juris- provide a period of not less than 30 diction of the action taken with regard days to receive comments on the sub- to its statement. HUD will approve a stantial amendment before the amend- grant if the jurisdiction’s submissions ment is implemented. have been made and approved in ac- (3) The citizen participation plan cordance with 24 CFR part 91, and if shall require the jurisdiction to con- the certifications required in such sub- sider comments or views of citizens re- missions are satisfactory to HUD. The ceived in writing, or orally at public certifications will be satisfactory to hearings, if any, in preparing the sub- HUD for this purpose, unless HUD de- stantial amendment of its statement. termines pursuant to subpart O of this A summary of comments or views not part that the jurisdiction has not com- accepted and the reasons for non-ac- plied with the requirements of this ceptance shall be attached to the subpart, has failed to carry out its consoli- stantial amendment. dated plan (or abbreviated consolidated (4) Any program amendment, regard- plan) as provided under § 570.903, or has less of whether it is considered to be determined that there is evidence, not substantial, must be fully documented directly involving the jurisdiction’s in the jurisdiction’s records. past performance under this program, (j) Performance reports. Each insular that tends to challenge in a substantial area jurisdiction must submit annual manner the jurisdiction’s certification performance reports in accordance of future performance. If HUD makes with 24 CFR 91.520. any such determination, however, fur- [69 FR 32780, June 10, 2004] ther assurances may be required to be submitted by the jurisdiction as HUD § 570.441 Citizen participation—insu- may deem warranted or necessary to lar areas. find the jurisdiction’s certification sat- (a) General. An insular area jurisdic- isfactory. tion submitting an abbreviated consoli- (g) Reimbursement for pre-award costs. dated plan under 24 CFR 91.235 shall Insular area jurisdictions may request comply with the citizen participation reimbursement for pre-award costs in requirements described in this section. accordance with § 570.200(h). An insular area jurisdiction submitting (h) Float funding. An insular area ju- a complete consolidated plan in accord- risdiction may use undisbursed funds ance with 24 CFR 91.200 through 91.230 in the line of credit and its CDBG pro- shall follow the citizen participation gram account that are budgeted in requirements of § 91.100 and § 91.105, ex- final statements or action plans for one cept for § 91.100(a)(4). For funding under or more activities that do not need the section 106 of the Act, these require- funds immediately, subject to the limi- ments are applicable to all aspects of tations described in § 570.301(b). the Insular Areas program, including (i) Program amendments. (1) The insu- the preparation of the proposed state- lar area jurisdiction’s citizen participa- ment and final statements as described tion plan (see § 570.441) must specify the in § 570.440. The requirements for cit- criteria the jurisdiction will use for de- izen participation do not restrict the termining what changes in the jurisdic- responsibility or authority of the juris- tion’s planned or actual activities will diction for the development and execu- constitute a substantial amendment to tion of its community development its final statement. It must include program. changes in the use of CDBG funds from (b) Citizen participation plan. The in- one eligible activity to another among sular area jurisdiction must develop the changes that qualify as a substan- and follow a detailed citizen participa- tial amendment. tion plan and must make the plan pub- (2) The citizen participation plan lic. The plan must be completed and must provide citizens with reasonable available before the statement for as- notice and an opportunity to comment sistance is submitted to HUD, and the on substantial amendments. The cit- jurisdiction must certify that it is fol- izen participation plan must state how lowing the plan. The plan must set

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forth the jurisdiction’s policies and abilities. The jurisdiction must specify procedures for: in its plan how it will meet the require- (1) Giving citizens timely notice of ment for hearings at times and loca- local meetings and reasonable and tions convenient to potential or actual timely access to local meetings, infor- beneficiaries; mation, and records relating to the (4) Meeting the needs of non-English grantee’s proposed and actual use of speaking residents in the case of public CDBG funds including, but not limited hearings where a significant number of to: non-English speaking residents can (i) The amount of CDBG funds ex- reasonably be expected to participate; pected to be made available for the (5) Responding to citizen complaints coming year, including the grant and and grievances, including the proce- anticipated program income; dures that citizens must follow when (ii) The range of activities that may submitting complaints and grievances. be undertaken with those funds; (iii) The estimated amount of those The jurisdiction’s policies and proce- funds proposed to be used for activities dures must provide for timely written that will benefit low- and moderate-in- answers to written complaints and come persons; grievances within 15 working days (iv) The proposed CDBG activities after the receipt of the complaint, likely to result in displacement and where practicable; and the jurisdiction’s plans, consistent (6) Encouraging citizen participation, with the policies developed under particularly by low- and moderate-in- § 570.606(b), for minimizing displace- come persons who reside in areas in ment of persons as a result of its pro- which CDBG funds are proposed to be posed activities; and used. (v) The types and levels of assistance (c) Publication of proposed statement. the jurisdiction plans to make avail- (1) The insular area jurisdiction shall able (or to require others to make publish a proposed statement con- available) to persons displaced by sisting of the proposed community de- CDBG-funded activities, even if the ju- velopment activities and community risdiction expects no displacement to development objectives in order to af- occur; ford affected citizens an opportunity (2) Providing technical assistance to to: groups representative of persons of (i) Examine the statement’s contents low- and moderate-income that request to determine the degree to which they assistance in developing proposals. The may be affected; level and type of assistance to be pro- (ii) Submit comments on the provided is at the discretion of the juris- posed statement; and diction. The assistance need not in- (iii) Submit comments on the per- clude the provision of funds to the formance of the jurisdiction. groups; (3) Holding a minimum of two public (2) The requirement for publishing in hearings for the purpose of obtaining paragraph (c)(1) of this section may be citizens’ views and formulating or re- met by publishing a summary of the sponding to proposals and questions. proposed statement in one or more Each public hearing must be conducted newspapers of general circulation and at a different stage of the CDBG pro- by making copies of the proposed state- gram. Together, the hearings must ad- ment available at libraries, govern- dress community development and ment offices, and public places. The housing needs, development of pro- summary must describe the contents posed activities, and review of program and purpose of the proposed statement performance. There must be reasonable and must include a list of the locations notice of the hearings, and the hear- where copies of the entire proposed ings must be held at times and acces- statement may be examined. sible locations convenient to potential (d) Preparation of a final statement. An or actual beneficiaries, with reasonable insular area jurisdiction must prepare accommodations including material in a final statement. In the preparation of accessible formats for persons with dis- the final statement, the jurisdiction

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shall consider comments and views re- and citizen participation requirements ceived relating to the proposed state- of § 570.704. ment and may, if appropriate, modify [69 FR 32780, June 10, 2004] the final statement. The final statement shall be made available to the § 570.442 Reallocations-Insular Areas. public and shall include the community development objectives, projected (a) Any Insular Area funds that be- use of funds, and the community devel- come available as a result of reduc- opment activities. tions under subpart O of this part, shall (e) Program amendments. To assure be reallocated in the same or future citizen participation on program fiscal year to any remaining eligible amendments to final statements, the Insular Area grantees pro rata accord- insular area grantee shall: ing to population. (1) Furnish citizens information con- (b) Any Insular Area grant funds for cerning the amendment; a fiscal year reserved for an applicant (2) Hold one or more public hearings that chooses not to submit a final to obtain the views of citizens on the statement in accordance with § 570.440 proposed amendment; to receive such funds, shall be reallo- (3) Develop and publish the proposed cated in the same or future fiscal year amendment in such a manner as to af- to any remaining eligible Insular Area ford affected citizens an opportunity to grantees pro rata according to popu- examine the contents, and to submit lation. comments on the proposed amendment; (c) No amounts shall be reallocated (4) Consider any comments and views under this section in any fiscal year to expressed by citizens on the proposed any applicant whose grant amount in amendment and, if the grantee finds it such fiscal year was reduced under sub- appropriate, modify the final amend- part O of this part or who did not sub- ment accordingly; and mit a final statement in accordance (5) Make the final amendment to the with § 570.440 for that fiscal year. community development program (d) Insular Area grantees receiving available to the public before its sub- additional funds under this section will mission to HUD. be evaluated for timeliness under (f) Performance reports. (1) The citizen § 570.902 based upon the original grant participation plan must provide citi- amount plus the additional funds re- zens with reasonable notice and an op- ceived. Accordingly, references in portunity to comment on performance § 570.902 to an Insular Area’s grant reports. The citizen participation plan amount for its current program year must state how reasonable notice and include such additional funds, and ref- an opportunity to comment will be erences to unexpended or undisbursed given. The citizen participation plan funds include such additional funds. must provide a period of not less than [72 FR 12536, Mar. 15, 2007] 15 days to receive comments on the performance report before it is to be submitted to HUD. Subpart G—Urban Development (2) The citizen participation plan Action Grants shall require the jurisdiction to consider comments or views of citizens re- SOURCE: 47 FR 7983, Feb. 23, 1982, unless ceived in writing or orally at public otherwise noted. hearings in preparing the performance report. A summary of these comments § 570.450 Purpose. or views shall be attached to the per- The purpose of urban development formance report. action grants is to assist cities and (g) Application for loan guarantees. In- urban counties that are experiencing sular area jurisdictions intending to severe economic distress to help stimu- apply for the Section 108 Loan Guar- late economic development activity antee program must ensure that they needed to aid in economic recovery. follow the applicable presubmission

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This subpart G contains those regula- (ii) The restrictions established in tions that are essential for the contin- this paragraph (c)(1) shall not apply if ued operation of this grant program. the Secretary determines that the relocation does not significantly and ad- [61 FR 11476, Mar. 20, 1996] versely affect the employment or economic base of the area from which the § 570.456 Ineligible activities and limitations on eligible activities. industrial or commercial plant or facility is to be relocated. However, the (a) Large cities and urban counties Secretary will not be required to make may not use assistance under this sub- a determination whether there is a sig- part for planning the project or devel- nificant and adverse effect. If such a oping the application. However, they determination is undertaken, the Sec- may use entitlement community devel- retary will presume that there is a sig- opment block grant funds for this pur- nificant and adverse effect where the pose, provided that the UDAG project significant pattern of job movement meets the eligibility test of this part. and the likelihood of continuation of Any small city which submits a project such a pattern has been from a dis- application which is selected for pre- tressed community. liminary approval and for which le- (iii) The presumptions established in gally binding grant agreement and for accordance with this paragraph (c)(1) which a release of funds pursuant to 24 are rebuttable by the applicant. How- CFR part 58 has been issued may de- ever, the burden of overcoming the pre- vote up to three (3) percent of the ap- sumptions will be on the applicant. proved amount of its action grant to (iv) The presumptions established in defray its actual costs in planning the this paragraph (c)(1) will not apply if project and preparing its application. the speculative space contained in a (b) Assistance under this subpart commercial or industrial plant or facil- may not be used for public services as ity included in a project constitutes a described in § 570.201(e). lesser percentage of the total space (c)(1) No assistance may be provided contained in that plant or facility than under this subpart for speculative the threshold amounts specified below: projects intended to facilitate the relo- Size of plant or fa- cation of industrial or commercial cility Amount of speculative space plants or facilities from one area to another. The provisions of this paragraph 0 to 50,000 sq. ft. ... 10 percent. 50,001 to 250,000 5,000 sq. ft. or 8 percent, whichever is (c)(1) shall not apply to a relocation of sq. ft. greater. any such plant or facility within a 250,001 to 20,000 sq. ft. or 5 percent, whichever metropolitan area. 1,000,000 sq. ft. is greater. 1,000,001 or more 50,000 sq. ft. or 3 percent, whichever (i) HUD will presume that a proposed sq. ft. is greater. project which includes speculative commercial or industrial space is in- (2) Projects with identified intended oc- tended to facilitate the relocation of a cupants. No assistance may be provided plant or facility from one area to an- or utilized under this subpart for any other, if it is demonstrated to HUD’s project with identified intended occu- satisfaction that: pants that is likely to facilitate: (A) The proposed project is reason- (i) A relocation of any operation of ably proximate (i.e., within 50 miles) to an industrial or commercial plant or an area from which there has been a facility or other business establish- significant current pattern of movement from any UDAG eligible jurisdic- ment, to areas reasonably proximate, tion; or of jobs of the category for which such (ii) An expansion of any operation of space is appropriate; and an industrial or commercial plant or (B) There is a likelihood of continu- facility or other business establish- ation of the pattern, based on measur- ment that results in a substantial re- able comparisons between the area duction of any such operation in any from which the movement has been oc- UDAG eligible jurisdiction. The provi- curring and the area of the proposed sions of this paragraph (c)(2) shall not project in terms of tax rates, energy apply to a relocation of an operation or costs, and similar relevant factors. to an expansion of an operation within

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a metropolitan area. The provisions of were employed by the operation in- this paragraph (c)(2) shall apply only to volved before the relocation or reduc- projects that do not have speculative tion and whose employment or terms space, or to projects that include both of employment were adversely affected identified intended occupant space and by the relocation or reduction. The as- speculative space. sistance shall include job training, job (iii) Significant and adverse effect. The retraining, and job placement. restrictions established in this para- (B) If any amount made available to graph (c)(2) shall not apply if the Sec- a grantee under this paragraph (c)(4) is retary determines that the relocation more than is required to provide the or expansion does not significantly and assistance described in paragraph adversely affect the employment or (c)(4)(ii)(A) of this section, the grantee economic base of the UDAG eligible ju- shall use the excess amount to carry risdiction from which the relocation or out community development activities expansion occurs. However, the Sec- eligible under section 105(a) of the retary will not be required to make a determination whether there is a sig- Housing and Community Development nificant and adverse effect. If such a Act of 1974. determination is undertaken, among (iii)(A) The provisions of this para- the factors which the Secretary will graph (c)(4) shall be applicable to any consider are: amount withdrawn by, recaptured by, (A) Whether it is reasonable to an- or paid to the Secretary under this sec- ticipate that there will be a significant tion, including any amount withdrawn, net loss of jobs in the plant or facility recaptured, or paid before the effective being abandoned; and date of this paragraph. (B) Whether an equivalent productive (B) Grants may be made under this use will be made of the plant or facility paragraph (c)(4) only to the extent of being abandoned by the relocating or amounts provided in appropriation expanding operation, thus creating no Acts. deterioration of economic base. (5) For purposes of this section, the (3) Within 90 days following notice of following definitions apply: intent to withhold, deny or cancel as- (i) ‘‘Operation’’ means any plant, sistance under paragraph (c) (1) or (2) equipment, facility, substantial num- of this section, the applicant may ap- ber of positions, substantial employ- peal in writing to the Secretary the ment opportunities, production capac- withholding, denial or cancellation of ity, or product line. assistance. The applicant will be noti- (ii) ‘‘Metropolitan area’’ means a fied and given an opportunity within a metropolitan area as defined in § 570.3 prescribed time for an informal con- and which consists of either a free- sultation regarding the action. standing metropolitan area or a pri- (4) Assistance for individuals adversely mary metropolitan statistical area affected by prohibited relocations. (i) Any amount withdrawn by, recaptured by, where both primary and consolidated or paid to the Secretary because of a areas exist. violation (or a settlement of an alleged (iii) ‘‘Likely’’ means probably or rea- violation) of this section (or any regu- sonably to be expected, as determined lation issued or contractual provision by firm evidence such as resolutions of entered into to carry out this section) a corporation to close a plant or facil- by a project with identified intended ity, notifications of closure to collec- occupants will be made available by tive bargaining units, correspondence the Secretary as a grant to the UDAG and notifications of corporate officials eligible jurisdiction from which the op- relative to a closure, and supportive eration of an industrial or commercial evidence, such as newspaper articles plant or facility or other business es- and notices to employees regarding tablishment was relocated, or in which closure of a plant or facility. Consult- the operation was reduced. ant studies and marketing studies may (ii)(A) Any amount made available be submitted as supportive evidence, under this paragraph shall be used by but by themselves are not firm evi- the grantee to assist individuals who dence.

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(iv) ‘‘UDAG eligible jurisdiction’’ to the Area Office. A significant means a distressed community, a Pock- amendment involves new activities or et of Poverty, a Pocket of Poverty alterations thereof which will change community, or an identifiable commu- the scope, location, scale, or bene- nity described in section 119(p) of the ficiaries of such activities or which, as Housing and Community Development a result of a number of smaller Act of 1974. changes, add up to an amount that ex- (6) Notwithstanding any other provi- ceeds ten percent of the grant. HUD ap- sion of this subpart, nothing in this proval of amendments may be granted subpart may be construed to permit an to those requests which meet all of the inference or conclusion that the policy following criteria: of the urban development action grant (1) New or significantly altered ac- program is to facilitate the relocation tivities must meet the criteria for se- of businesses from one area to another. lection applicable at the time of re- [47 FR 7983, Feb. 23, 1982, as amended at 53 ceipt of the program amendment. FR 33028, Aug. 29, 1988; 54 FR 21169, May 16, (2) The recipient must have complied 1989; 56 FR 56128, Oct. 31, 1991] with all requirements of this subpart. (3) The recipient may make amend- § 570.457 Displacement, relocation, acquisition, and replacement of hous- ments other than those requiring prior ing. HUD approval as defined in paragraph (b) of this section but each recipient The displacement, relocation, acqui- must notify both the Area and Central sition, and replacement of housing re- Offices of such changes. quirements of § 570.606 apply to applicants under this subpart G. [47 FR 7983, Feb. 23, 1982, as amended at 61 FR 11476, Mar. 20, 1996] [55 FR 29309, July 18, 1990]

§ 570.461 Post-preliminary approval re- § 570.464 Project closeout. quirements; lead-based paint. HUD will advise the recipient to ini- The recipient may receive prelimi- tiate closeout procedures when HUD nary approval prior to the accomplish- determines, in consultation with the ment of lead-based paint activities con- recipient, that there are not impedi- ducted pursuant to part 35, subparts A, ments to closeout. Closeout shall be B, J, K, and R of this title, but no funds carried out in accordance with § 570.509 will be released until such actions are and applicable HUD guidelines. complete and evidence of compliance is [53 FR 8058, Mar. 11, 1988] submitted to HUD. [64 FR 50225, Sept. 15, 1999] § 570.465 Applicability of rules and regulations. § 570.463 Project amendments and re- The provisions of subparts A, B, C, J, visions. K, and O of this part 570 shall apply to (a) Pre-approval revisions to the appli- this subpart except to the extent that cation. Applicants must submit to the they are modified or augmented by this HUD Area Office and to Central Office subpart. all revisions to the application. A revision is considered significant if it al- § 570.466 Additional application sub- ters the scope, location, or scale of the mission requirements for Pockets of project or changes the beneficiaries’ Poverty—employment opportuni- population. ties. The applicant must hold at least one Applicants for Action Grants under public hearing prior to making a sig- the Pockets of Poverty provision must nificant revision to the application. describe the number and, to the extent (b) Post preliminary approval amend- possible, the types of new jobs (con- ments. Applicants receiving prelimi- struction and permanent) that will be nary approval must submit to the HUD provided to the low- and moderate-in- Central Office, a request for approval come residents of the Pocket of Pov- of any significant amendment. A copy erty as a direct result of the proposed of the request must also be submitted project. If the application calls for job

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training programs (such as those re- § 570.480 General. lated to the CETA program) or job recruiting services for the pocket’s resi- (a) This subpart describes policies dents, then such proposed activities and procedures applicable to states must be clearly and fully explained. that have permanently elected to re- HUD requires applicants to ensure that ceive Community Development Block at least 75 percent of whatever perma- Grant (CDBG) funds for distribution to nent jobs initially result from the units of general local government in project are provided to low- and mod- the state’s nonentitlement areas under erate-income persons and that at least the Housing and Community Develop- 51 percent of whatever permanent jobs ment Act of 1974, as amended (the Act). initially result from the project are Other subparts of part 570 are not ap- provided to low- and moderate-income plicable to the State CDBG program, residents from the pocket. HUD en- except as expressly provided otherwise. courages applicants to ensure that at Regulations of part 570 outside of this least 20 percent of all permanent jobs subpart that apply to the State CDBG are filled by persons from the pocket program include §§ 570.200(j) and 570.606. qualified to participate in the CETA (b) HUD’s authority for the waiver of program on a continuous basis. HUD regulations and for the suspension of requires all applicants to continuously requirements to address damage in a use best efforts to ensure that at least Presidentially-declared disaster area is 75 percent of all permanent jobs result- described in 24 CFR part 5 and in sec- ing from any Action Grant-assisted tion 122 of the Act, respectively. project are provided to low- and mod- (c) In exercising the Secretary’s obli- erate-income persons and that at least gation and responsibility to review a 51 percent of all permanent jobs result- state’s performance, the Secretary will ing from any Action Grant-assisted give maximum feasible deference to project are provided to low- and mod- the state’s interpretation of the statu- erate-income residents from the pock- tory requirements and the require- et. The application should clearly de- ments of this regulation, provided that scribe how the applicant intends to these interpretations are not plainly meet initial and continuous job re- inconsistent with the Act and the Sec- quirements. Private participating par- retary’s obligation to enforce compli- ties must meet these employment re- ance with the intent of the Congress as quirements in the aggregate. To enable declared in the Act. The Secretary will the private participants to do so, lease not determine that a state has failed to agreements executed by a private par- carry out its certifications in compli- ticipating party shall include: ance with requirements of the Act (and (a) Provisions requiring lessees to this regulation) unless the Secretary follow hiring practices that the private finds that procedures and requirements participating party has determined will adopted by the state are insufficient to enable it to meet these requirements in afford reasonable assurance that ac- the aggregate; and tivities undertaken by units of general (b) Provisions that will enable the local government were not plainly in- private participating party to declare a appropriate to meeting the primary ob- default under the lease agreement if jectives of the Act, this regulation, and the lessees do not follow such prac- the state’s community development ob- tices. jectives. [61 FR 11476, Mar. 20, 1996] (d) Administrative action taken by the Secretary that is not explicitly and fully part of this regulation shall only Subpart H [Reserved] apply to a specific case or issue at a specific time, and shall not be gen- Subpart I—State Community De- erally applicable to the state-adminis- velopment Block Grant Pro- tered CDBG program. gram (e) Religious organizations are eligible to participate under the State SOURCE: 57 FR 53397, Nov. 9, 1992, unless CDBG Program as provided in otherwise noted. § 570.200(j).

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(f) In administering the CDBG pro- (1) Public improvements initially as- gram, a state may impose additional or sisted with CDBG funds. Where CDBG more restrictive provisions on units of funds are used to pay all or part of the general local government participating cost of a public improvement, special in the state’s program, provided that assessments may be imposed as fol- such provisions are not inconsistent lows: with the Act or other statutory or reg- (i) Special assessments to recover the ulatory provisions that are applicable CDBG funds may be made only against to the State CDBG program. properties owned and occupied by per- (g) States shall make CDBG program sons not of low and moderate income. grants only to units of general local These assessments constitute program government. This restriction does not income. limit a state’s authority to make pay- (ii) Special assessments to recover ments to other parties for state admin- the non-CDBG portion may be made, istrative expenses and technical assist- provided that CDBG funds are used to ance activities authorized in section pay the special assessment in behalf of 106(d) of the Act. all properties owned and occupied by [57 FR 53397, Nov. 9, 1992, as amended at 61 low and moderate income persons; ex- FR 11477, Mar. 20, 1996; 61 FR 54921, Oct. 22, cept that CDBG funds need not be used 1996; 69 FR 41718, July 9, 2004; 77 FR 24142, to pay the special assessments in be- Apr. 23, 2012] half of properties owned and occupied by moderate income persons if, when § 570.481 Definitions. permitted by the state, the unit of gen- (a) Except for terms defined in appli- eral local government certifies that it cable statutes or this subpart, the Sec- does not have sufficient CDBG funds to retary will defer to a state’s defini- pay the assessments in behalf of all of tions, provided that these definitions the low and moderate income owner- are explicit, reasonable and not plainly occupant persons. Funds collected inconsistent with the Act. As used in through such special assessments are this subpart, the following terms shall not program income. have the meaning indicated: (2) Public improvements not initially as- (1) Act means title I of the Housing sisted with CDBG funds. CDBG funds and Community Development Act of may be used to pay special assessments 1974 (42 U.S.C. 5301 et seq.). levied against property when this form (2) CDBG funds means Community of assessment is used to recover the Development Block Grant funds, in the capital cost of eligible public improve- form of grants under this subpart and ments initially financed solely from program income, and loans guaranteed sources other than CDBG funds. The under section 108 of the Act. payment of special assessments with (b) [Reserved] CDBG funds constitutes CDBG assist- [57 FR 53397, Nov. 9, 1992, as amended at 61 ance to the public improvement. FR 5209, Feb. 9, 1996; 74 FR 36389, July 22, Therefore, CDBG funds may be used to 2009] pay special assessments, provided that: (i) The installation of the public im- § 570.482 Eligible activities. provements was carried out in compli- (a) General. The choice of activities ance with requirements applicable to on which block grant funds are ex- activities assisted under this subpart, pended represents the determination including labor, environmental and cit- by state and local participants, devel- izen participation requirements; oped in accordance with the state’s (ii) The installation of the public im- program design and procedures, as to provement meets a criterion for na- which approach or approaches will best tional objectives. (See § 570.483(b)(1), serve these interests. The eligible ac- (c), and (d).) tivities are listed at section 105(a) of (iii) The requirements of the Act. § 570.482(b)(1)(ii) are met. (b) Special assessments under the CDBG (c) Special eligibility provisions. (1) Mi- program. The following policies relate croenterprise development activities to special assessments under the CDBG eligible under section 105(a)(23) of the program: Housing and Community Development

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Act of 1974, as amended (42 U.S.C. 5301 project eligible under section 105(a)(15) et seq.) (the Act) may be carried out ei- of the Act. The use of the underwriting ther through the recipient directly or guidelines published by HUD is not through public and private organiza- mandatory. However, states electing tions, agencies, and other subrecipients not to use these guidelines would be ex- (including nonprofit and for-profit sub- pected to ensure that the state or units recipients). of general local government conduct (2) Provision of public services. The fol- basic financial underwriting prior to lowing activities shall not be subject to the provision of CDBG financial assist- the restrictions on public services ance to a for-profit business. under section 105(a)(8) of the Act: (2) Objectives. The underwriting (i) Support services provided under guidelines are designed to provide the section 105(a)(23) of the Act, and para- recipient with a framework for finan- graph (c) of this section; cially underwriting and selecting (ii) Services carried out under the CDBG-assisted economic development provisions of section 105(a)(15) of the projects which are financially viable Act, that are specifically designed to and will make the most effective use of increase economic opportunities the CDBG funds. Where appropriate, through job training and placement HUD’s underwriting guidelines recog- and other employment support serv- nize that different levels of review are ices, including, but not limited to, peer appropriate to take into account dif- support programs, counseling, child ferences in the size and scope of a pro- care, transportation, and other similar posed project, and in the case of a mi- services; and croenterprise or other small business (iii) Services of any type carried out to take into account the differences in under the provisions of section the capacity and level of sophistication 105(a)(15) of the Act pursuant to a among businesses of differing sizes. Re- strategy approved by a state under the cipients are encouraged, when they de- provisions of § 91.315(e)(2) of this title. velop their own programs and under- (3) Environmental cleanup and eco- writing criteria, to also take these fac- nomic development or redevelopment tors into account. These underwriting of contaminated properties. Remedi- guidelines are published as appendix A ation of known or suspected environ- to this part. The objectives of the un- mental contamination may be under- derwriting guidelines are to ensure: taken under the authority of section (i) That project costs are reasonable; 205 of Public Law 105–276 and section 105(a)(4) of the Act. Economic develop- (ii) That all sources of project financ- ment activities carried out under sec- ing are committed; tions 105(a)(14), (a)(15), or (a)(17) of the (iii) That to the extent practicable, Act may include costs associated with CDBG funds are not substituted for project-specific assessment or remedi- non-Federal financial support; ation of known or suspected environ- (iv) That the project is financially mental contamination. feasible; (d) [Reserved] (v) That to the extent practicable, (e) Guidelines and objectives for evalu- the return on the owner’s equity in- ating project costs and financial require- vestment will not be unreasonably ments—(1) Applicability. The following high; and guidelines, also referred to as the un- (vi) That to the extent practicable, derwriting guidelines, are provided to CDBG funds are disbursed on a pro rata assist the recipient to evaluate and se- basis with other finances provided to lect activities to be carried out for eco- the project. nomic development purposes. Specifi- (f) Standards for evaluating public ben- cally, these guidelines are applicable to efit—(1) Purpose and applicability. The activities that are eligible for CDBG grantee is responsible for making sure assistance under section 105(a)(17) of that at least a minimum level of public the Act, economic development activi- benefit is obtained from the expendi- ties eligible under section 105(a)(14) of ture of CDBG funds under the cat- the Act, and activities that are part of egories of eligibility governed by these a community economic development standards. The standards set forth

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below identify the types of public ben- (iii) Where an activity is expected efit that will be recognized for this pur- both to create or retain jobs and to pose and the minimum level of each provide goods or services to residents that must be obtained for the amount of an area, the grantee may elect to of CDBG funds used. These standards count the activity under either the are applicable to activities that are eli- jobs standard or the area residents gible for CDBG assistance under sec- standard, but not both. tion 105(a)(17) of the Act, economic de- (iv) Where CDBG assistance for an velopment activities eligible under sec- activity is limited to job training and tion 105(a)(14) of the Act, and activities placement and/or other employment that are part of a community economic support services, the jobs assisted with development project eligible under sec- CDBG funds shall be considered to be tion 105(a)(15) of the Act. Certain pub- created or retained jobs for the pur- lic facilities and improvements eligible poses of applying the aggregate stand- under section 105(a)(2) of the Act, ards. which are undertaken for economic development purposes, are also subject to (v) Any activity subject to these these standards, as specified in standards which meets one or more of § 570.483(b)(4)(vi)(F)(2). Unlike the the following criteria may, at the guidelines for project costs and finan- grantee’s option, be excluded from the cial requirements covered under para- aggregate standards described in paragraph (a) of this section, the use of the graph (f)(2) of this section: standards for public benefit is manda- (A) Provides jobs exclusively for un- tory. employed persons or participants in (2) Standards for activities in the aggre- one or more of the following programs: gate. Activities covered by these stand- (1) Jobs Training Partnership Act ards must, in the aggregate, either: (JTPA); (i) Create or retain at least one full- (2) Jobs Opportunities for Basic time equivalent, permanent job per Skills (JOBS); or $35,000 of CDBG funds used; or (3) Aid to Families with Dependent (ii) Provide goods or services to resi- Children (AFDC); dents of an area, such that the number (B) Provides jobs predominantly for of low- and moderate-income persons residents of Public and Indian Housing residing in the areas served by the as- units; sisted businesses amounts to at least (C) Provides jobs predominantly for one low- and moderate-income person homeless persons; per $350 of CDBG funds used. (D) Provides jobs predominantly for (3) Applying the aggregate standards. low-skilled, low- and moderate-income (i) A state shall apply the aggregate persons, where the business agrees to standards under paragraph (e)(2) of this provide clear opportunities for pro- section to all funds distributed for ap- motion and economic advancement, plicable activities from each annual such as through the provision of train- grant. This includes the amount of the ing; annual grant, any funds reallocated by (E) Provides jobs predominantly for HUD to the state, any program income persons residing within a census tract distributed by the state and any guaranteed loan funds made under the pro- (or block numbering area) that has at visions of subpart M of this part cov- least 20 percent of its residents who are ered in the method of distribution in in poverty; the final statement for a given annual (F) Provides assistance to busi- grant year. ness(es) that operate(s) within a census (ii) The grantee shall apply the ag- tract (or block numbering area) that gregate standards to the number of has at least 20 percent of its residents jobs to be created/retained, or to the who are in poverty; number of persons residing in the area (G) Stabilizes or revitalizes a neigh- served (as applicable), as determined at borhood income that has at least 70 the time funds are obligated to activi- percent of its residents who are low- ties. and moderate-income;

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(H) Provides assistance to a Commu- (C) Assistance to privately-owned nity Development Financial Institu- recreational facilities that serve a pre- tion (as defined in the Community De- dominantly higher-income clientele, velopment Banking and Financial In- where the recreational benefit to users stitutions Act of 1994, (12 U.S.C. 4701 or members clearly outweighs employ- note)) serving an area that has at least ment or other benefits to low- and 70 percent of its residents who are low- moderate-income persons; and moderate-income; (D) Acquisition of land for which the (I) Provides assistance to an organi- specific proposed use has not yet been zation eligible to carry out activities identified; and under section 105(a)(15) of the Act serv- (E) Assistance to a for-profit business ing an area that has at least 70 percent while that business or any other busi- of its residents who are low- and mod- ness owned by the same person(s) or erate-income; entity(ies) is the subject of unresolved (J) Provides employment opportuni- findings of noncompliance relating to ties that are an integral component of previous CDBG assistance provided by a project designed to promote spatial the recipient. deconcentration of low- and moderate- (5) Applying the individual activity income and minority persons; standards. (i) Where an activity is ex- (K) With prior HUD approval, pro- pected both to create or retain jobs and vides substantial benefit to low-income to provide goods or services to resi- persons through other innovative ap- dents of an area, it will be disqualified proaches; only if the amount of CDBG assistance (L) Provides services to the residents exceeds both of the amounts in para- of an area pursuant to a strategy ap- graph (f)(4)(i) of this section. proved by the State under the provi- (ii) The individual activity tests in sions of § 91.315(e)(2) of this title; paragraph (f)(4)(i) of this section shall (M) Creates or retains jobs through be applied to the number of jobs to be businesses assisted in an area pursuant created or retained, or to the number to a strategy approved by the State of persons residing in the area served under the provisions of § 91.315(e)(2) of (as applicable), as determined at the this title. time funds are obligated to activities. (iii) Where CDBG assistance for an (N) Directly involves the economic activity is limited to job training and development or redevelopment of envi- placement and/or other employment ronmentally contaminated properties. support services, the jobs assisted with (4) Standards for individual activities. CDBG funds shall be considered to be Any activity subject to these standards created or retained jobs for the pur- which falls into one or more of the fol- poses of applying the individual activ- lowing categories will be considered by ity standards in paragraph (f)(4)(i) of HUD to provide insufficient public ben- this section. efit, and therefore may under no cir- (6) Documentation. The state and its cumstances be assisted with CDBG grant recipients must maintain suffi- funds: cient records to demonstrate the level (i) The amount of CDBG assistance of public benefit, based on the above exceeds either of the following, as ap- standards, that is actually achieved plicable: upon completion of the CDBG-assisted (A) $50,000 per full-time equivalent, economic development activity(ies) permanent job created or retained; or and how that compares to the level of (B) $1,000 per low- and moderate-in- such benefit anticipated when the come person to which goods or services CDBG assistance was obligated. If a are provided by the activity. state grant recipient’s actual results (ii) The activity consists of or in- show a pattern of substantial variation cludes any of the following: from anticipated results, the state and (A) General promotion of the commu- its recipient are expected to take those nity as a whole (as opposed to the pro- actions reasonably within their respec- motion of specific areas and programs); tive control to improve the accuracy of (B) Assistance to professional sports the projections. If the actual results teams; demonstrate that the state has failed

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the public benefit standards, HUD may Housing and Community Development require the state to meet more strin- Act of 1974, when the state’s grantee, gent standards in future years as ap- subrecipient, or nonprofit entity eligi- propriate. ble under section 105(a)(15) enters into (g) Amendments to economic develop- an agreement with a business to under- ment projects after review determinations. take one or more of these activities as If, after the grantee enters into a con- a condition of the business relocating a tract to provide assistance to a project, facility, plant, or operation to the the scope or financial elements of the LMA. Provision of public facilities and project change to the extent that a sig- indirect assistance that will provide nificant contract amendment is appro- benefit to multiple businesses does not priate, the project should be reevalu- fall under the definition of ‘‘directly ated under these and the recipient’s assist,’’ unless it includes the provision guidelines. (This would include, for ex- of infrastructure to aid a specific busi- ample, situations where the business ness that is the subject of an agree- requests a change in the amount or ment with the specific assisted busi- terms of assistance being provided, or ness. an extension to the loan payment pe- (ii) Labor market area (LMA). For riod required in the contract.) If a re- metropolitan areas, an LMA is an area evaluation of the project indicates that defined as such by the U.S. Bureau of the financial elements and public ben- Labor Statistics (BLS). An LMA is an efit to be derived have also substan- economically integrated geographic tially changed, then the recipient area within which individuals can live should make appropriate adjustments and find employment within a reason- in the amount, type, terms or condi- able distance or can readily change em- tions of CDBG assistance which has ployment without changing their place been offered, to reflect the impact of of residence. In addition, LMAs are the substantial change. (For example, nonoverlapping and geographically ex- if a change in the project elements re- haustive. For metropolitan areas, sults in a substantial reduction of the grantees must use employment data, as total project costs, it may be appro- defined by the BLS, for the LMA in priate for the recipient to reduce the which the affected business is cur- amount of total CDBG assistance.) If rently located and from which current the amount of CDBG assistance pro- jobs may be lost. For non-metropolitan vided to the project is increased, the areas, grantees must use employment amended project must still comply data, as defined by the BLS, for the with the public benefit standards under LMA in which the assisted business is paragraph (f) of this section. currently located and from which cur- (h) Prohibition on use of assistance for rent jobs may be lost. For non-metro- employment relocation activities—(1) Pro- politan areas, a LMA is either an area hibition. CDBG funds may not be used defined by the BLS as an LMA, or a to directly assist a business, including state may choose to combine non-met- a business expansion, in the relocation ropolitan LMAs. States are required to of a plant, facility, or operation from define or reaffirm prior definitions of one labor market area (LMA) to an- their LMAs on an annual basis and re- other LMA if the relocation is likely to tain records to substantiate such areas result in a significant loss of jobs in prior to any business relocation that the LMA from which the relocation oc- would be impacted by this rule. Metro- curs. politan LMAs cannot be combined, nor (2) Definitions. The following defini- can a non-metropolitan LMA be com- tions apply to the section: bined with a metropolitan LMA. For (i) Directly assist. Directly assist the Insular Areas, each jurisdiction means the provision of CDBG funds to will be considered to be an LMA. For a business pursuant to section the HUD-administered Small Cities 105(a)(15) or (17) of the Housing and Program, each of the three partici- Community Development Act of 1974 pating counties in Hawaii will be con- (42 U.S.C. 5301 et seq). Direct assistance sidered to be its own LMA. Recipients also includes assistance under section of Fiscal Year 1999 Small Cities Pro- 105(a)(1), (2), (4), (7), and (14) of the gram funding in New York will follow

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the requirements for State CDBG re- ance results in a relocation prohibited cipients. under this section. (iii) Operation. A business operation (4) Assistance not covered by this para- includes, but is not limited to, any graph. This paragraph does not apply equipment, employment opportunity, to: production capacity, or product line of (i) Relocation assistance. Relocation the business. assistance required by the Uniform As- (iv) Significant loss of jobs. (A) A loss sistance and Real Property Acquisition of jobs is significant if: The number of Policies Act of 1970 (URA), (42 U.S.C. jobs to be lost in the LMA in which the 4601–4655); optional relocation assist- affected business is currently located is ance under section 105(a)(11), as imple- equal to or greater than one-tenth of mented at 570.606(d); one percent of the total number of per- (ii) Microenterprises. Assistance to sons in the labor force of that LMA; or microenterprises as defined by section in all cases, a loss of 500 or more jobs. 102(a)(22) of the Housing and Commu- Notwithstanding the aforementioned, a nity Development Act of 1974; and loss of 25 jobs or fewer does not con- (iii) Arms-length transactions. Assist- stitute a significant loss of jobs. ance to a business that purchases business equipment, inventory, or other (B) A job is considered to be lost due physical assets in an arms-length to the provision of CDBG assistance if transaction, including the assets of an the job is relocated within three years existing business, provided that the from the date the assistance is pro- purchase does not result in the reloca- vided to the business or the time period tion of the sellers’ business operation within which jobs are to be created as (including customer base or list, good- specified by the agreement among the will, product lines, or trade names) business, the recipient, and the state from one LMA to another LMA and (as applicable) if it is longer than three does not produce a significant loss of years. jobs in the LMA from which the reloca- (3) Written agreement. Before directly tion occurs. assisting a business with CDBG funds, the recipient, subrecipient, or (in the [57 FR 53397, Nov. 9, 1992, as amended at 60 case of any activity carried out pursu- FR 1949, Jan. 5, 1995; 61 FR 54921, Oct. 22, 1996; 70 FR 76370, Dec. 23, 2005; 71 FR 30035, May 24, ant to 105(a)(15)) nonprofit entity shall 2006] sign a written agreement with the assisted business. The written agreement § 570.483 Criteria for national objec- shall include: tives. (i) Statement. A statement from the (a) General. The following criteria assisted business as to whether the as- shall be used to determine whether a sisted activity will result in the reloca- CDBG assisted activity complies with tion of any industrial or commercial one or more of the national objectives plant, facility, or operation from one as required to section 104(b)(3) of the LMA to another and, if so, the number Act. (HUD is willing to consider a of jobs that will be relocated from each waiver of these requirements in accord- LMA; ance with § 570.480(b)). (ii) Required certification. If the assist- (b) Activities benefiting low and mod- ance will not result in a relocation cov- erate income persons. An activity will be ered by this section, a certification considered to address the objective of from the assisted business that neither benefiting low and moderate income it, nor any of its subsidiaries, has plans persons if it meets one of the criteria to relocate jobs at the time the agree- in paragraph (b) of this section, unless ment is signed that would result in a there is substantial evidence to the significant job loss as defined in this contrary. In assessing any such evi- rule; and dence, the full range of direct effects of (iii) Reimbursement of assistance. The the assisted activity will be considered. agreement shall provide for reimburse- The activities, when taken as a whole, ment to the recipient of any assistance must not benefit moderate income per- provided to, or expended on behalf of, sons to the exclusion of low income the business in the event that assist- persons:

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(1) Area benefit activities. (i) An activ- enumeration districts, block groups, or ity, the benefits of which are available combinations thereof that are con- to all the residents in a particular tained within the segment) of the serv- area, where at least 51 percent of the ice area from which the calls were gen- residents are low and moderate income erated. In analyzing this data to meet persons. Such an area need not be co- the requirements of this section, the terminous with census tracts or other state will assume that the distribution officially recognized boundaries but of income among callers generally re- must be the entire area served by the flects the income characteristics of the activity. Units of general local govern- general population residing in the same ment may, at the discretion of the geographic area where the callers re- state, use either HUD-provided data side. Alternatively, the state’s certifi- comparing census data with appro- cation may be based upon other data, priate low and moderate income levels agreed to by HUD and the state, which or survey data that is methodologi- shows that over the preceding twelve- cally sound. An activity that serves an month period the users of all the serv- area that is not primarily residential ices to be included in the emergency in character shall not qualify under telephone number system consisted of this criterion. at least 51 percent low and moderate (ii) An activity, where the assistance income persons. is to a public improvement that pro- (3) Other federal funds received by vides benefits to all the residents of an the unit of general local government area, that is limited to paying special are insufficient or unavailable for a assessments levied against residential uniform emergency telephone number properties owned and occupied by per- system. The unit of general local gov- sons of low and moderate income. ernment must submit a statement ex- (iii)(A) An activity to develop, estab- plaining whether the problem is caused lish and operate (not to exceed two by the insufficiency of the amount of years after establishment), a uniform such funds, the restrictions on the use emergency telephone number system of such funds, or the prior commitment serving an area having less than 51 per- of such funds for other purposes by the cent of low and moderate income resi- unit of general local government. dents, when the system has not been (4) The percentage of the total costs made operational before the receipt of of the system paid for by CDBG funds CDBG funds, provided a prior written does not exceed the percentage of low determination is obtained from HUD. and moderate income persons in the HUD’s determination will be based service area of the system. The unit of upon certifications by the State that: general local government must include (1) The system will contribute sig- a description of the boundaries of the nificantly to the safety of the residents service area of the system; the census of the area. The unit of general local tracts or enumeration districts within government must provide the state a the boundaries; the total number of list of jurisdictions and unincorporated persons and the total number of low areas to be served by the system and a and moderate income persons in each list of the emergency services that will census tract or enumeration district, participate in the emergency telephone and the percentage of low and mod- number system; erate income persons in the service (2) At least 51 percent of the use of area; and the total cost of the system. the system will be by low and moderate (B) The certifications of the state income persons. The state’s certifi- must be submitted along with a brief cation may be based upon information statement describing the factual basis which identifies the total number of upon which the certifications were calls actually received over the pre- made. ceding twelve-month period for each of (iv) Activities meeting the require- the emergency services to be covered ments of paragraph (e)(4)(i) of this sec- by the emergency telephone number tion may be considered to qualify system and relates those calls to the under paragraph (b)(1) of this section. geographic segment (expressed as near- (v) HUD will consider activities ly as possible in terms of census tracts, meeting the requirements of paragraph

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(e)(5)(i) of this section to qualify under a group of persons in any one or a com- paragraph (b)(1) of this section, pro- bination of the following categories vided that the area covered by the may be presumed to benefit persons, 51 strategy meets one of the following cri- percent of whom are low and moderate teria: income: abused children, battered (A) The area is in a Federally-des- spouses, elderly persons, adults meet- ignated Empowerment Zone or Enter- ing the Bureau of the Census’ Current prise Community; Population Reports definition of ‘‘se- (B) The area is primarily residential verely disabled,’’ homeless persons, il- and contains a percentage of low and literate adults, persons living with moderate income residents that is no AIDS, and migrant farm workers; or less than 70 percent; (B) It must require information on (C) All of the census tracts (or block family size and income so that it is evi- numbering areas) in the area have pov- dent that at least 51 percent of the cli- erty rates of at least 20 percent, at entele are persons whose family in- least 90 percent of the census tracts (or come does not exceed the low and mod- block numbering areas) in the area erate income limit; or have poverty rates of at least 25 per- (C) It must have income eligibility cent, and the area is primarily residen- requirements which limit the activity tial. (If only part of a census tract or exclusively to low and moderate in- block numbering area is included in a come persons; or strategy area, the poverty rate shall be (D) It must be of such a nature, and computed for those block groups (or be in such a location, that it may be any part thereof) which are included in concluded that the activity’s clientele the strategy area.) will primarily be low and moderate in- (D) Upon request by the State, HUD come persons. may grant exceptions to the 70 percent (iii) An activity that serves to re- low and moderate income or 25 percent move material or architectural bar- poverty minimum thresholds on a case- riers to the mobility or accessibility of by-case basis. In no case, however, may elderly persons or of adults meeting a strategy area have both a percentage the Bureau of the Census’ Current Pop- of low and moderate income residents ulation Reports definition of ‘‘severely less than 51 percent and a poverty rate disabled’’ will be presumed to qualify less than 20 percent. under this criterion if it is restricted, (2) Limited clientele activities. (i) An to the extent practicable, to the re- activity which benefits a limited clien- moval of such barriers by assisting: tele, at least 51 percent of whom are (A) The reconstruction of a public fa- low and moderate income persons. The cility or improvement, or portion following kinds of activities may not thereof, that does not qualify under qualify under paragraph (b)(2) of this § 570.483(b)(1); section: (B) The rehabilitation of a privately (A) Activities, the benefits of which owned nonresidential building or im- are available to all the residents of an provement that does not qualify under area; § 570.483(b) (1) or (4); or (B) Activities involving the acquisi- (C) The rehabilitation of the common tion, construction or rehabilitation of areas of a residential structure that property for housing; or contains more than one dwelling unit (C) Activities where the benefit to and that does not qualify under low- and moderate-income persons to § 570.483(b)(3). be considered is the creation or reten- (iv) A microenterprise assistance action of jobs, except as provided in para- tivity (carried out in accordance with graph (b)(2)(v) of this section. the provisions of section 105(a)(23) of (ii) To qualify under paragraph (b)(2) the Act or § 570.482(c) and limited to of this section, the activity must meet microenterprises) with respect to those one or the following tests: owners of microenterprises and persons (A) It must benefit a clientele who developing microenterprises assisted are generally presumed to be prin- under the activity who are low- and cipally low and moderate income per- moderate-income persons. For purposes sons. Activities that exclusively serve of this paragraph, persons determined

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to be low and moderate income may be pancy by low and moderate income presumed to continue to qualify as households must be at affordable rents such for up to a three-year period. to qualify under this criterion. The (v) An activity designed to provide unit of general local government shall job training and placement and/or adopt and make public its standards other employment support services, infor determining ‘‘affordable rents’’ for cluding, but not limited to, peer sup- this purpose. The following shall also port programs, counseling, child care, qualify under this criterion: transportation, and other similar serv- (i) When less than 51 percent of the ices, in which the percentage of low- units in a structure will be occupied by and moderate-income persons assisted low and moderate income households, is less than 51 percent may qualify CDBG assistance may be provided in under this paragraph in the following the following limited circumstances: limited circumstances: (A) The assistance is for an eligible (A) In such cases where such training activity to reduce the development or provision of supportive services is an cost of the new construction of a mul- integrally-related component of a larg- tifamily, non-elderly rental housing er project, the only use of CDBG assist- project; and ance for the project is to provide the (B) Not less than 20 percent of the job training and/or supportive services; units will be occupied by low and mod- and erate income households at affordable (B) The proportion of the total cost rents; and of the project borne by CDBG funds is no greater than the proportion of the (C) The proportion of the total cost total number of persons assisted who of developing the project to be borne by are low or moderate income. CDBG funds is no greater than the pro- (3) Housing activities. An eligible ac- portion of units in the project that will tivity carried out for the purpose of be occupied by low and moderate in- providing or improving permanent resi- come households. dential structures that, upon comple- (ii) Where CDBG funds are used to as- tion, will be occupied by low and mod- sist rehabilitation delivery services or erate income households. This would in direct support of the unit of general include, but not necessarily be limited local government’s Rental Rehabilita- to, the acquisition or rehabilitation of tion Program authorized under 24 CFR property by the unit of general local part 511, the funds shall be considered government, a subrecipient, an entity to benefit low and moderate income eligible to receive assistance under sec- persons where not less than 51 percent tion 105(a)(15) of the Act, a developer, of the units assisted, or to be assisted, an individual homebuyer, or an indi- by the Rental Rehabilitation Program vidual homeowner; conversion of non- overall are for low and moderate in- residential structures; and new housing come persons. construction. If the structure contains (iii) When CDBG funds are used for two dwelling units, at least one must housing services eligible under section be so occupied, and if the structure 105(a)(21) of the Act, such funds shall be contains more than two dwelling units, considered to benefit low and moderate at least 51 percent of the units must be income persons if the housing units for so occupied. If two or more rental which the services are provided are buildings being assisted are or will be HOME-assisted and the requirements of located on the same or contiguous § 92.252 or § 92.254 of this title are met. properties, and the buildings will be (4) Job creation or retention activities. under common ownership and manage- (i) An activity designed to create per- ment, the grouped buildings may be manent jobs where at least 51 percent considered for this purpose as a single of the jobs, computed on a full time structure. If housing activities being equivalent basis, involve the employ- assisted meet the requirements of para- ment of low and moderate income per- graph (e)(4)(ii) or (e)(5)(ii) of this sec- sons. For an activity that creates jobs, tion, all such housing may also be con- the unit of general local government sidered for this purpose as a single must document that at least 51 percent structure. For rental housing, occu- of the jobs will be held by, or will be

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made available to low and moderate in- prise Community or meets the fol- come persons. lowing criteria: (ii) For an activity that retains jobs, (A) It has a poverty rate of at least 20 the unit of general local government percent as determined by the most re- must document that the jobs would ac- cently available decennial census infor- tually be lost without the CDBG assist- mation; ance and that either or both of the fol- (B) It does not include any portion of lowing conditions apply with respect to a central business district, as this term at least 51 percent of the jobs at the is used in the most recent Census of time the CDBG assistance is provided: Retail Trade, unless the tract has a The job is known to be held by a low or poverty rate of at least 30 percent as moderate income person; or the job can determined by the most recently avail- reasonably be expected to turn over able decennial census information; and within the following two years and (C) It evidences pervasive poverty that it will be filled by, or that steps and general distress by meeting at will be taken to ensure that it is made least one of the following standards: available to, a low or moderate income (1) All block groups in the census person upon turnover. tract have poverty rates of at least 20 (iii) Jobs will be considered to be percent; available to low and moderate income (2) The specific activity being under- persons for these purposes only if: taken is located in a block group that (A) Special skills that can only be ac- has a poverty rate of at least 20 per- quired with substantial training or cent; or work experience or education beyond (3) Upon the written request of the high school are not a prerequisite to recipient, HUD determines that the fill such jobs, or the business agrees to census tract exhibits other objectively hire unqualified persons and provide determinable signs of general distress training; and such as high incidence of crime, nar- cotics use, homelessness, abandoned (B) The unit of general local govern- housing, and deteriorated infrastruc- ment and the assisted business take ac- ture or substantial population decline. tions to ensure that low and moderate (vi) As a general rule, each assisted income persons receive first consider- business shall be considered to be a ation for filling such jobs. separate activity for purposes of deter- (iv) For purposes of determining mining whether the activity qualifies whether a job is held by or made avail- under this paragraph, except: able to a low- or moderate-income per- (A) In certain cases such as where son, the person may be presumed to be CDBG funds are used to acquire, de- a low- or moderate-income person if: velop or improve a real property (e.g., (A) He/she resides within a census a business incubator or an industrial tract (or block numbering area) that park) the requirement may be met by either: measuring jobs in the aggregate for all (1) Meets the requirements of para- the businesses that locate on the prop- graph (b)(4)(v) of this section; or erty, provided the businesses are not (2) Has at least 70 percent of its resi- otherwise assisted by CDBG funds. dents who are low- and moderate-in- (B) Where CDBG funds are used to come persons; or pay for the staff and overhead costs of (B) The assisted business is located an entity specified in section 105(a)(15) within a census tract (or block num- of the Act making loans to businesses bering area) that meets the require- exclusively from non-CDBG funds, this ments of paragraph (b)(4)(v) of this sec- requirement may be met by aggre- tion and the job under consideration is gating the jobs created by all of the to be located within that census tract. businesses receiving loans during any (v) A census tract (or block num- one-year period. bering area) qualifies for the presump- (C) Where CDBG funds are used by a tions permitted under paragraphs recipient or subrecipient to provide (b)(4)(iv) (A)(1) and (B) of this section if technical assistance to businesses, this it is either part of a Federally-des- requirement may be met by aggre- ignated Empowerment Zone or Enter- gating the jobs created or retained by

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all of the businesses receiving tech- service area of the public facility/im- nical assistance during any one-year provement between the date the state period. awards the CDBG funds to the recipi- (D) Where CDBG funds are used for ent and the date one year after the activities meeting the criteria listed at physical completion of the public facil- § 570.482(f)(3)(v), this requirement may ity/improvement. In addition, the as- be met by aggregating the jobs created sisted activity must comply with the or retained by all businesses for which public benefit standards at § 570.482(f). CDBG assistance is obligated for such (5) Planning-only activities. An activ- activities during any one-year period, ity involving planning (when such ac- except as provided at paragraph (e)(6) tivity is the only activity for which the of this section. grant to the unit of general local gov- (E) Where CDBG funds are used by a ernment is given, or if the planning ac- Community Development Financial In- tivity is unrelated to any other activ- stitution to carry out activities for the ity assisted by the grant) if it can be purpose of creating or retaining jobs, documented that at least 51 percent of this requirement may be met by aggre- the persons who would benefit from im- gating the jobs created or retained by plementation of the plan are low and all businesses for which CDBG assist- moderate income persons. Any such ance is obligated for such activities planning activity for an area or a com- during any one-year period, except as munity composed of persons of whom provided at paragraph (e)(6) of this sec- at least 51 percent are low and mod- tion. erate income shall be considered to (F) Where CDBG funds are used for meet this national objective. public facilities or improvements (c) Activities which aid in the preven- which will result in the creation or re- tion or elimination of slums or blight. Ac- tention of jobs by more than one busi- tivities meeting one or more of the fol- ness, this requirement may be met by lowing criteria, in the absence of sub- aggregating the jobs created or re- stantial evidence to the contrary, will tained by all such businesses as a re- be considered to aid in the prevention sult of the public facility or improve- or elimination of slums or blight: ment. (1) Activities to address slums or blight (1) Where the public facility or im- on an area basis. An activity will be provement is undertaken principally considered to address prevention or for the benefit of one or more par- elimination of slums or blight in an ticular businesses, but where other area if the state can determine that: businesses might also benefit from the (i) The area, delineated by the unit of assisted activity, the requirement may general local government, meets a defi- be met by aggregating only the jobs nition of a slum, blighted, deteriorated created or retained by those businesses or deteriorating area under state or for which the facility/improvement is local law; principally undertaken, provided that (ii) The area also meets the condi- the cost (in CDBG funds) for the facil- tions in either paragraph (c)(1)(ii)(A) ity/improvement is less than $10,000 per or(c)(1)(ii)(B) of this section. permanent full-time equivalent job to (A) At least 25 percent of properties be created or retained by those busi- throughout the area experience one or nesses. more of the following conditions: (2) In any case where the cost per job (1) Physical deterioration of build- to be created or retained (as deter- ings or improvements; mined under paragraph (b)(4)(vi)(F)(1) (2) Abandonment of properties; of this section) is $10,000 or more, the (3) Chronic high occupancy turnover requirement must be met by aggre- rates or chronic high vacancy rates in gating the jobs created or retained as a commercial or industrial buildings; result of the public facility or improve- (4) Significant declines in property ment by all businesses in the service values or abnormally low property val- area of the facility/improvement. This ues relative to other areas in the com- aggregation must include businesses munity; or which, as a result of the public facility/ (5) Known or suspected environ- improvement, locate or expand in the mental contamination.

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(B) The public improvements (3) Planning only activities. An activ- throughout the area are in a general ity involving planning (when the activ- state of deterioration. ity is the only activity for which the (iii) The assisted activity addresses grant to the unit of general local gov- one or more of the conditions which ernment is given, or the planning ac- contributed to the deterioration of the tivity is unrelated to any other activ- area. Rehabilitation of residential ity assisted by the grant) if the plans buildings carried out in an area meet- are for a slum or blighted area, or if all ing the above requirements will be con- elements of the planning are necessary sidered to address the area’s deteriora- for and related to an activity which, if tion only where each such building re- funded, would meet one of the other habilitated is considered substandard criteria of elimination of slums or before rehabilitation, and all defi- blight. ciencies making a building substandard (d) Activities designed to meet commu- have been eliminated if less critical nity development needs having a par- work on the building is also under- ticular urgency. In the absence of sub- taken. The State shall ensure that the stantial evidence to the contrary, an unit of general local government has activity will be considered to address developed minimum standards for this objective if the unit of general building quality which may take into local government certifies, and the account local conditions. state determines, that the activity is designed to alleviate existing condi- (iv) The state keeps records suffi- tions which pose a serious and imme- cient to document its findings that a diate threat to the health or welfare of project meets the national objective of the community which are of recent ori- prevention or elimination of slums and gin or which recently became urgent, blight. The state must establish defini- that the unit of general local govern- tions of the conditions listed at ment is unable to finance the activity § 570.483(c)(1)(ii)(A) and maintain on its own, and that other sources of records to substantiate how the area funding are not available. A condition met the slums or blighted criteria. The will generally be considered to be of re- designation of an area as slum or cent origin if it developed or became blighted under this section is required urgent within 18 months preceding the to be redetermined every 10 years for certification by the unit of general continued qualification. Documenta- local government. tion must be retained pursuant to the (e) Additional criteria. (1) In any case recordkeeping requirements contained where the activity undertaken is a pub- at § 570.490. lic improvement and the activity is (2) Activities to address slums or blight clearly designed to serve a primarily on a spot basis. The following activities residential area, the activity must can be undertaken on a spot basis to meet the requirements of paragraph eliminate specific conditions of blight, (b)(1) of this section whether or not the physical decay, or environmental con- requirements of paragraph (b)(4) of this tamination that are not located in a section are met in order to qualify as slum or blighted area: Acquisition; benefiting low and moderate income clearance; relocation; historic preser- persons. vation; remediation of environ- (2) Where the assisted activity is ac- mentally contaminated properties; or quisition of real property, a prelimi- rehabilitation of buildings or improve- nary determination of whether the ac- ments. However, rehabilitation must tivity addresses a national objective be limited to eliminating those condi- may be based on the planned use of the tions that are detrimental to public property after acquisition. A final de- health and safety. If acquisition or re- termination shall be based on the ac- location is undertaken, it must be a tual use of the property, excluding any precursor to another eligible activity short-term, temporary use. Where the (funded with CDBG or other resources) acquisition is for the purpose of clear- that directly eliminates the specific ance which will eliminate specific con- conditions of blight or physical decay, ditions of blight or physical decay, the or environmental contamination. clearance activity shall be considered

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the actual use of the property. How- section under the criteria at ever, any subsequent use or disposition § 570.483(b)(1)(v) instead of the criteria of the cleared property shall be treated at § 570.483(b)(4); and as a ‘‘change of use’’ under § 570.489(j). (ii) All housing activities in the area (3) Where the assisted activity is re- undertaken pursuant to the strategy location assistance that the unit of may be considered to be a single struc- general local government is required to ture for purposes of applying the cri- provide, the relocation assistance shall teria at paragraph (b)(3) of this section. be considered to address the same na- (6) If an activity meeting the criteria tional objective as is addressed by the in § 570.482(f)(3)(v) also meets the re- displacing activity. Where the reloca- quirements of either paragraph (e)(4)(i) tion assistance is voluntary, the unit or (e)(5)(i) of this section, the unit of of general local government may qual- general local government may elect to ify the assistance either on the basis of qualify the activity either under the the national objective addressed by the area benefit criteria at paragraph displacing activity or, if the relocation (b)(1)(iv) or (v) of this section or under assistance is to low and moderate in- the job aggregation criteria at para- come persons, on the basis of the na- graph (b)(4)(vi)(D) of this section, but tional objective of benefiting low and not under both. Where an activity may moderate income persons. meet the job aggregation criteria at (4) Where CDBG-assisted activities both paragraphs (b)(4)(vi)(D) and (E) of are carried out by a Community Devel- this section, the unit of general local opment Financial Institution whose government may elect to qualify the charter limits its investment area to a activity under either criterion, but not primarily residential area consisting of both. at least 51 percent low- and moderate- (f) Planning and administrative costs. income persons, the unit of general CDBG funds expended for eligible plan- local government may also elect the ning and administrative costs by units following options: of general local government in con- (i) Activities carried out by the Com- junction with other CDBG assisted ac- munity Development Financial Insti- tivities will be considered to address tution for the purpose of creating or re- the national objectives. taining jobs may, at the option of the [57 FR 53397, Nov. 9, 1992, as amended at 60 unit of general local government, be FR 1951, Jan. 5, 1995; 60 FR 17445, Apr. 6, 1995; considered to meet the requirements of 61 FR 54921, Oct. 22, 1996; 71 FR 30036, May 24, this paragraph under the criteria at 2006] paragraph (b)(1)(iv) of this section in lieu of the criteria at paragraph (b)(4) § 570.484 Overall benefit to low and of this section; and moderate income persons. (ii) All housing activities for which (a) General. The State must certify the Community Development Finan- that, in the aggregate, not less than 70 cial Institution obligates CDBG assist- percent of the CDBG funds received by ance during any one-year period may the state during a period specified by be considered to be a single structure the state, not to exceed three years, for purposes of applying the criteria at will be used for activities that benefit paragraph (b)(3) of this section. persons of low and moderate income. (5) If the unit of general local govern- The period selected and certified to by ment has elected to prepare a commu- the state shall be designated by fiscal nity revitalization strategy pursuant year of annual grants, and shall be for to the authority of § 91.315(e)(2) of this one, two or three consecutive annual title, and the State has approved the grants. The period shall be in effect strategy, the unit of general local gov- until all included funds are expended. ernment may also elect the following No CDBG funds may be included in options: more than one period selected, and all (i) Activities undertaken pursuant to CDBG funds received must be included the strategy for the purpose of creating in a selected period. or retaining jobs may, at the option of (b) Computation of 70 percent benefit. the grantee, be considered to meet the Determination that a state has carried requirements of paragraph (b) of this out its certification under paragraph

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(a) of this section requires evidence quirements for the content of the con- that not less than 70 percent of the ag- solidated plan, for the process of devel- gregate of the designated annual oping the plan, including citizen par- grant(s), any funds reallocated by HUD ticipation provisions, for the submis- to the state, any distributed program sion date, for HUD approval, and for income and any guaranteed loan funds the amendment process. under the provisions of subpart M of (b) Failure to make submission. The this part covered in the method of dis- state’s failure to make the submission tribution in the final statement or required by paragraph (a) of this sec- statements for the designated annual tion within the prescribed deadline grant year or years have been expended constitutes the state’s election not to for activities meeting criteria as pro- receive and distribute amounts allo- vided in § 570.483(b) for activities bene- cated for its nonentitlement areas for fiting low and moderate income per- the applicable fiscal year. Funds will sons. In calculating the percentage of be either: funds expended for such activities: (1) Administered by HUD pursuant to (1) All CDBG funds included in the subpart F of this part if the state has period selected and certified to by the not administered the program in any state shall be accounted for, except for previous fiscal year; or funds used by the State, or by the units (2) Reallocated to all states in the of general local government, for pro- succeeding fiscal year according to the gram administration, or for planning formula of section 106(d) of the Act, if activities other than those which must the state administered the program in meet a national objective under any previous year. § 570.483 (b)(5) or (c)(3). (c) Approval of grant. HUD will ap- (2) Any funds expended by a state for prove a grant if the State’s submis- the purpose of repayment of loans sions have been made and approved in guaranteed under the provisions of sub- accordance with 24 CFR part 91, and part M of this part shall be excepted the certifications required therein are from inclusion in this calculation. satisfactory to the Secretary. The cer- (3) Except as provided in paragraph tifications will be satisfactory to the (b)(4) of this section, CDBG funds ex- Secretary for this purpose unless the pended for an eligible activity meeting Secretary has determined pursuant to the criteria for activities benefiting § 570.493 that the State has not com- low and moderate income persons shall plied with the requirements of this sub- count in their entirety towards meet- part, or has determined that there is ing the 70 percent benefit to persons of evidence, not directly involving the low and moderate income requirement. State’s past performance under this (4) Funds expended for the acquisi- program, that tends to challenge in a tion, new construction or rehabilita- substantial manner the State’s certifi- tion of property for housing that quali- cation of future performance. If the fies under § 570.483(b)(3) shall be count- Secretary makes any such determina- ed for this purpose, but shall be limited tion, however, the State may be re- to an amount determined by multi- quired to submit further assurances as plying the total cost (including CDBG the Secretary may deem warranted or and non-CDBG costs) of the acquisi- necessary to find the grantee’s certifi- tion, construction or rehabilitation by cation satisfactory. the percent of units in such housing to [57 FR 53397, Nov. 9, 1992, as amended at 60 be occupied by low and moderate in- FR 1916, Jan. 5, 1995; 61 FR 54922, Oct. 22, come persons, except that the amount 1996] counted shall not exceed the amount of CDBG funds provided. § 570.486 Local government requirements. § 570.485 Making of grants. (a) Citizen participation requirements of (a) Required submissions. In order to a unit of general local government. Each receive its annual CDBG grant under unit of general local government shall this subpart, a State must submit a meet the following requirements as re- consolidated plan in accordance with 24 quired by the state at § 91.115(e) of this CFR part 91. That part includes re- title.

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(1) Provide for and encourage citizen dents can reasonably be expected to participation, particularly by low and participate; moderate income persons who reside in (6) Provide citizens with reasonable slum or blighted areas and areas in advance notice of, and opportunity to which CDBG funds are proposed to be comment on, proposed activities in an used; application to the state and, for grants (2) Ensure that citizens will be given already made, activities which are pro- reasonable and timely access to local posed to be added, deleted or substan- meetings, information, and records re- tially changed from the unit of general lating to the unit of local government’s local government’s application to the proposed and actual use of CDBG funds; state. Substantially changed means (3) Furnish citizens information, in- changes made in terms of purpose, cluding but not limited to: (i) The amount of CDBG funds ex- scope, location or beneficiaries as de- pected to be made available for the fined by criteria established by the current fiscal year (including the grant state. and anticipated program income); (7) Provide citizens the address, (ii) The range of activities that may phone number, and times for submit- be undertaken with the CDBG funds; ting complaints and grievances, and (iii) The estimated amount of the provide timely written answers to writ- CDBG funds proposed to be used for ac- ten complaints and grievances, within tivities that will meet the national ob- 15 working days where practicable. jective of benefit to low and moderate (b) Activities serving beneficiaries out- income persons; and side the jurisdiction of the unit of general (iv) The proposed CDBG activities local government. Any activity carried likely to result in displacement and out by a recipient of State CDBG pro- the unit of general local government’s gram funds must significantly benefit antidisplacement and relocation plans residents of the jurisdiction of the required under § 570.488. grant recipient, and the unit of general (4) Provide technical assistance to local government must determine that groups representative of persons of low the activity is meeting its needs in ac- and moderate income that request as- cordance with section 106(d)(2)(D) of sistance in developing proposals in ac- the Act. For an activity to signifi- cordance with the procedures devel- cantly benefit residents of the recipi- oped by the state. Such assistance need not include providing funds to such ent jurisdiction, the CDBG funds ex- groups; pended by the unit of general local gov- (5) Provide for a minimum of two ernment must not be unreasonably dis- public hearings, each at a different proportionate to the benefits to its stage of the program, for the purpose of residents. obtaining citizens’ views and respond- (c) Activities located in Entitlement ju- ing to proposals and questions. To- risdictions. Any activity carried out by gether the hearings must cover com- a recipient of State CDBG program munity development and housing funds in entitlement jurisdictions must needs, development of proposed activi- significantly benefit residents of the ties and a review of program perform- jurisdiction of the grant recipient, and ance. The public hearings to cover the State CDBG recipient must deter- community development and housing mine that the activity is meeting its needs must be held before submission needs in accordance with section of an application to the state. There 106(d)(2)(D) of the Act. For an activity must be reasonable notice of the hear- to significantly benefit residents of the ings and they must be held at times recipient jurisdiction, the CDBG funds and locations convenient to potential expended by the unit of general local or actual beneficiaries, with accom- government must not be unreasonably modations for the handicapped. Public disproportionate to the benefits to its hearings shall be conducted in a man- residents. In addition, the grant cannot ner to meet the needs of non-English speaking residents where a significant be used to provide a significant benefit number of non-English speaking resi- to the entitlement jurisdiction unless

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the entitlement grantee provides a (d) States shall comply with section 3 meaningful contribution to the project. of the Housing and Urban Development [57 FR 53397, Nov. 9, 1992, as amended at 61 Act of 1968 (12 U.S.C. 1701u) and the im- FR 54922, Oct. 22, 1996; 77 FR 24143, Apr. 23, plementing regulations in 24 CFR part 2012] 135. Section 3 requires that employment and other economic opportunities § 570.487 Other applicable laws and re- arising in connection with housing related program requirements. habilitation, housing construction, or (a) General. Certain statutes are ex- other public construction projects pressly made applicable to activities shall, to the greatest extent feasible, assisted under the Act by the Act and consistent with existing Federal, itself, while other laws not referred to State, and local laws and regulations, in the Act may be applicable to such be given to low- and very low-income activities by their own terms. Certain persons. statutes or executive orders that may (e) Architectural Barriers Act and the be applicable to activities assisted Americans with Disabilities Act. The Ar- under the Act by their own terms are chitectural Barriers Act of 1968 (42 administered or enforced by govern- U.S.C. 4151–4157) requires certain Fed- mental officials, departments or agen- eral and Federally-funded buildings cies other than HUD. Paragraphs (d) and (c) of this section contain two of and other facilities to be designed, con- the requirements expressly made appli- structed, or altered in accordance with cable to CDBG activities by the Act standards that ensure accessibility to, itself. and use by, physically handicapped (b) Affirmatively furthering fair hous- people. A building or facility designed, ing. The Act requires the state to cer- constructed, or altered with funds allo- tify to the satisfaction of HUD that it cated or reallocated under this subpart will affirmatively further fair housing. after November 21, 1996 and that meets The act also requires each unit of gen- the definition of residential structure as eral local government to certify that it defined in 24 CFR 40.2, or the definition will affirmatively further fair housing. of building as defined in 41 CFR 101– The certification that the State will 19.602(a), is subject to the requirements affirmatively further fair housing shall of the Architectural Barriers Act of specifically require the State to as- 1968 and shall comply with the Uniform sume the responsibility of fair housing Federal Accessibility Standards. For planning by: general type buildings, these standards (1) Conducting an analysis to identify are in appendix A to 41 CFR part 101– impediments to fair housing choice 19.6. For residential structures, these within the State; standards are available from the De- (2) Taking appropriate actions to partment of Housing and Urban Devel- overcome the effects of any impedi- opment, Office of Fair Housing and ments identified through that analysis; Equal Opportunity, Disability Rights (3) Maintaining records reflecting the Division, Room 5240, 451 Seventh analysis and actions in this regard; and Street, SW, Washington, DC 20410; tele- (4) Assuring that units of local gov- phone (202) 708–2333 (voice) or (202) 708– ernment funded by the State comply 1734 (TTY) (these are not toll-free num- with their certifications to affirma- bers). tively further fair housing. (c) Lead-Based Paint Poisoning Preven- [57 FR 53397, Nov. 9, 1992, as amended at 59 tion Act. States shall devise, adopt and FR 33894, June 30, 1994; 60 FR 1916, Jan. 5, carry out procedures with respect to 1995; 61 FR 54922, Oct. 22, 1996; 64 FR 50225, CDBG assistance that fulfill the objec- Sept. 15, 1999] tives and requirements of the Lead- Based Paint Poisoning Prevention Act § 570.488 Displacement, relocation, ac- (42 U.S.C. 4821–4846), the Residential quisition, and replacement of hous- Lead-Based Paint Hazard Reduction ing. Act of 1992 (42 U.S.C. 4851–4856), and im- The requirements for States and plementing regulations at part 35, sub- state recipients with regard to the dis- parts A, B, J, K, and R of this title. placement, relocation, acquisition, and

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replacement of housing are in § 570.606 technical assistance costs paid pursu- and 24 CFR part 42. ant to paragraph (a)(1)(ii) of this section must not exceed 3 percent of the [61 FR 11477, Mar. 20, 1996] sum of a state’s annual grant, program § 570.489 Program administrative re- income received by units of general quirements. local government during each program (a) Administrative and planning costs— year, regardless of the fiscal year in (1) State administrative and technical as- which the state grant funds generate sistance costs. (i) The state is respon- the program income were appropriated sible for the administration of all (whether retained by the unit of gen- CDBG funds. The state shall pay from eral local government or paid to the its own resources all administrative ex- state), and funds reallocated by HUD to penses incurred by the state in car- the state. rying out its responsibilities under this (iv) In calculating the amount of subpart, except as provided in this CDBG funds that may be used to pay paragraph (a)(1)(i) of this section, state administrative expenses prior to which is subject to the time limita- January 23, 2004, the state may include tions in paragraph (a)(1)(iv) of this sec- in the calculation the following ele- tion. To pay administrative expenses, ments only to the extent that they are the state may use CDBG funds not to within the following time limitations: exceed $100,000, plus 50 percent of ad- (A) $100,000 per annual grant begin- ministrative expenses incurred in ex- ning with FY 1984 allocations; cess of $100,000. Amounts of CDBG (B) Two percent of the sum of a funds used to pay administrative ex- state’s annual grant and funds reallo- penses in excess of $100,000 shall not, cated by HUD to the state within a pro- subject to paragraph (a)(1)(iii) of this gram year, without limitation based on section, exceed 3 percent of the sum of when such amounts were received; the state’s annual grant, program in- (C) Two percent of program income come received by units of general local returned by units of general local gov- government during each program year, ernment to states after August 21, 1985; regardless of the fiscal year in which and the state grant funds that generate the (D) Two percent of program income program income were appropriated received and retained by units of gen- (whether retained by units of general eral local government after February local government or paid to the state), 11, 1991. and of funds reallocated by HUD to the (v) In regard to its administrative state. costs, the state has the option of se- (ii) To pay the costs of providing lecting its approach for demonstrating technical assistance to local govern- compliance with the requirements of ments and nonprofit program recipi- this paragraph (a)(1) of this section. ents, a state may, subject to paragraph Any state whose matching cost con- (a)(1)(iii) of this section, use CDBG tributions toward state administrative funds received on or after January 23, expense matching requirements are in 2004, in an amount not to exceed arrears must bring matching cost con- 3 percent of the sum of its annual tributions up to the level of CDBG grant, program income received by funds expended for such costs. A state units of general local government dur- grant may not be closed out if the ing each program year, regardless of state’s matching cost contribution is the fiscal year in which the state grant not at least equal to the amount of funds that generate the program in- CDBG funds in excess of $100,000 ex- come were appropriated (whether re- pended for administration. Funds from tained by units of general local govern- any year’s grant may be used to pay ment or paid to the state), and funds administrative costs associated with reallocated by HUD to the state during any other year’s grant. The two ap- each program year. proaches for demonstrating compliance (iii) The amount of CDBG funds used with this paragraph (a)(1) of this sec- to pay the sum of administrative costs tion are: in excess of $100,000 paid pursuant to (A) Cumulative accounting of adminis- paragraph (a)(1)(i) of this section and trative costs incurred by the state since its

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assumption of the CDBG program. Under amount of matching funds that the this approach, the state will identify, state has expended for that grant year for each grant it has received, the is equal to or greater than the amount CDBG funds eligible to be used for of CDBG funds in excess of $100,000 state administrative expenses, as well spent during that same grant year. as the minimum amount of matching Under this approach, the state must funds that the state is required to con- demonstrate that it has paid from its tribute. The amounts will then be ag- own funds at least 50 percent of its ad- gregated for all grants received. The ministrative expenses in excess of state must keep records demonstrating $100,000 by the end of each grant year. the actual amount of CDBG funds from (2) The state may not charge fees of each grant received that were used for any entity for processing or consid- state administrative expenses, as well ering any application for CDBG fund, as matching amounts that were con- or for carrying out its responsibilities tributed by the state. The state will be under this subpart. considered to be in compliance with (3) The state and its funded units of the applicable requirements if the ag- general local government shall not ex- gregate of the actual amounts of CDBG pend for planning, management and ad- funds spent on state administrative ex- ministrative costs more than 20 per- penses does not exceed the aggregate cent of the aggregate amount of the maximum allowable amount and if the annual grant, plus program income and aggregate amount of matching funds funds reallocated by HUD to the State that the state has expended is equal to which are distributed during the time or greater than the aggregate amount the final Statement for the annual of CDBG funds in excess of $100,000 (for grant is in effect. Administrative costs each annual grant within the subject are those described at § 570.489(a)(1) for period) spent on administrative ex- states, and for units of general local penses during its government those described at sections 3- to 5-year Consolidated Planning pe- 105(a)(12) and (a)(13) of the Act. riod. If the state grant for any grant (b) Reimbursement of pre-agreement year within the 3- to 5-year period has costs. The state may permit, in accord- been closed out, the aggregate amount ance with such procedures as the state of CDBG funds spent on state adminis- may establish, a unit of general local trative expenses, the aggregate max- government to incur costs for CDBG imum allowable amount, the aggregate activities before the establishment of a matching funds expended, and the ag- formal grant relationship between the gregate amount of CDBG funds in ex- state and the unit of general local gov- cess of $100,000 (for each annual grant ernment and to charge these pre-agree- within the subject period) will be re- ment costs to the grant, provided that duced by amounts attributable to the the activities are eligible and under- grant year for which the state grant taken in accordance with the require- has been closed out. ments of this part and 24 CFR part 58. (B) Year-to-year tracking and limitation A state may incur costs prior to enter- on drawdown of funds. For each grant ing into a grant agreement with HUD year, the state will calculate the max- and charge those pre-agreement costs imum allowable amount of CDBG funds to the grant, provided that the activi- that may be used for state administra- ties are eligible and are undertaken in tive expenses, and will draw down accordance with the requirements of amounts of those funds only upon its this part, part 58 of this title, and the own expenditure of an equal or greater citizen participation requirements of amount of matching funds from its own part 91 of this title. resources after the expenditure of the (c) Federal grant payments. The state’s initial $100,000 for state administrative requests for payment, and the Federal expenses. The state will be considered Government’s payments upon such re- to be in compliance with the applicable quests, must comply with 31 CFR part requirements if the actual amount of 205. The state must use procedures to CDBG funds spent on state administra- minimize the time elapsing between tive expenses does not exceed the max- the transfer of grant funds and dis- imum allowable amount, and if the bursement of funds by the state to

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units of general local government. ceived by a state, a unit of general States must also have procedures in local government, or a subgrantee of place, and units of general local gov- the unit of general local government ernment must use these procedures to that was generated from the use of minimize the time elapsing between CDBG funds, regardless of when the the transfer of funds by the state and CDBG funds were appropriated and disbursement for CDBG activities. whether the activity has been closed (d) Fiscal controls and accounting pro- out, except as provided in paragraph cedures. (1) A state shall have fiscal and (e)(2) of this section. When income is administrative requirements for ex- generated by an activity that is only pending and accounting for all funds partially assisted with CDBG funds, received under this subpart. These re- the income must be prorated to reflect quirements must be available for Fed- the percentage of CDBG funds used eral inspection and must: (e.g., a single loan supported by CDBG (i) Be sufficiently specific to ensure funds and other funds; or a single par- that funds received under this subpart cel of land purchased with CDBG funds are used in compliance with all appli- and other funds). Program income in- cable statutory and regulatory provi- cludes, but is not limited to, the fol- sions: lowing: (ii) Ensure that funds received under (i) Proceeds from the disposition by this subpart are only spent for reason- sale or long-term lease of real property able and necessary costs of operating purchased or improved with CDBG programs under this subpart; and funds, except as provided in paragraph (iii) Ensure that funds received under (e)(2)(v) of this section; this subpart are not used for general (ii) Proceeds from the disposition of expenses required to carry out other equipment purchased with CDBG funds; responsibilities of state and local gov- (iii) Gross income from the use or ernments. rental of real or personal property ac- (2) A state may satisfy this require- quired by the unit of general local gov- ment by: (i) Using fiscal and administrative re- ernment or subgrantee of the unit of quirements applicable to the use of its general local government with CDBG own funds; funds, less the costs incidental to the (ii) Adopting new fiscal and adminis- generation of the income; trative requirements; or (iv) Gross income from the use or (iii) Applying the provisions in 24 rental of real property, owned by the CFR part 85 ‘‘Uniform Administrative unit of general local government or Requirements for Grants and Coopera- other entity carrying out a CDBG active Agreements to State and Local tivity that was constructed or im- Governments.’’ proved with CDBG funds, less the costs (A) A state that opts to satisfy this incidental to the generation of the in- requirement for fiscal controls and ad- come; ministrative procedures by applying (v) Payments of principal and inter- the provisions of part 85 must comply est on loans made using CDBG funds, with the requirements therein. except as provided in paragraph (B) A state that opts to satisfy this (e)(2)(iii) of this section; requirement for fiscal controls and ad- (vi) Proceeds from the sale of loans ministrative procedures by applying made with CDBG funds, less reasonable the provisions of part 85 of this title legal and other costs incurred in the must also ensure that recipients of the course of such sale that are not other- state’s CDBG funds comply with part 84 wise eligible costs under sections of this title, ‘‘Uniform Administrative 105(a)(13) or 106(d)(3)(A) of the Act; Requirements for Grants and Agree- (vii) Proceeds from the sale of obliga- ments with Institutions of Higher Edu- tions secured by loans made with cation, Hospitals, and Other Non-Profit CDBG funds, less reasonable legal and Organizations,’’ as applicable. other costs incurred in the course of (e) Program income. (1) For the pur- such sale that are not otherwise eligi- poses of this subpart, ‘‘program in- ble costs under sections 105(a)(13) or come’’ is defined as gross income re- 106(d)(3)(A) of the Act;

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(viii) Interest earned on funds held in (B) Interest income from deposits of a revolving fund account; amounts reimbursed to a state’s CDBG (ix) Interest earned on program in- program account prior to the state’s come pending disposition of the in- disbursement of the reimbursed funds come; for eligible purposes; and (x) Funds collected through special (C) Interest income received by units assessments made against nonresiden- of general local government on depos- tial properties and properties owned its of grant funds before disbursement and occupied by households not of low of the funds for activities, except that and moderate income, if the special as- the unit of general local government sessments are used to recover all or may keep interest payments of up to part of the CDBG portion of a public $100 per year for administrative ex- improvement; and penses otherwise permitted to be paid (xi) Gross income paid to a unit of with CDBG funds. general local government or sub- (v) Proceeds from the sale of real grantee of the unit of general local property purchased or improved with government from the ownership inter- CDBG funds, if the proceeds are re- est in a for-profit entity acquired in received more than 5 years after expira- turn for the provision of CDBG assist- tion of the grant agreement between ance. the state and the unit of general local (2) ‘‘Program income’’ does not in- government. clude the following: (3) The state may permit the unit of (i) The total amount of funds, which general local government which re- does not exceed $35,000 received in a ceives or will receive program income single year from activities, other than to retain the program income, subject revolving loan funds that is retained by to the requirements of paragraph a unit of general local government and (e)(3)(ii) of this section, or the state its subgrantees (all funds received from may require the unit of general local revolving loan funds are considered government to pay the program income program income, regardless of to the state. The state, however, must amount); permit the unit of general local gov- (ii) Amounts generated by activities ernment to retain the program income eligible under section 105(a)(15) of the if the program income will be used to Act and carried out by an entity under continue the activity from which the the authority of section 105(a)(15) of program income was derived. The state the Act; will determine when an activity will be (iii) Payments of principal and inter- considered to be continued. est made by a subgrantee carrying out (i) Program income paid to the state. a CDBG activity for a unit of general Except as described in paragraph local government, toward a loan from (e)(3)(ii)(A) of this section, the state the local government to the sub- may require the unit of general local grantee, to the extent that program in- government that receives or will re- come received by the subgrantee is ceive program income to return the used for such payments; program income to the state. Program (iv) The following classes of interest, income that is paid to the state is which must be remitted to HUD for treated as additional CDBG funds sub- transmittal to the Department of the ject to the requirements of this sub- Treasury, and will not be reallocated part. Except for program income re- under section 106(c) or (d) of the Act: tained and used by the state for admin- (A) Interest income from loans or istrative costs or technical assistance other forms of assistance provided with under paragraph (a) of this section, CDBG funds that are used for activities program income paid to the state must determined by HUD to be not eligible be distributed to units of general local under § 570.482 or section 105(a) of the government in accordance with the Act, to fail to meet a national objec- method of distribution in the action tive in accordance with the require- plan under § 91.320(k)(1)(i) of this title ments of § 570.483, or to fail substan- that is in effect at the time the pro- tially to meet any other requirement gram income is distributed. To the of this subpart or the Act; maximum extent feasible, the state

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must distribute program income before general local government to return it makes additional withdrawals from program income in accordance with the Department of the Treasury, ex- this paragraph (e)(3)(ii)(A) of this sec- cept as provided in paragraph (f) of this tion must describe its approach in the section. state’s action plan required under (ii) Program income retained by a unit § 91.320 of this title or in a substantial of general local government. A state may amendment if the state intends to im- permit a unit of general local govern- plement this option after the action ment that receives or will receive pro- plan is submitted to and approved by gram income to retain the program in- HUD. come. Alternatively, subject to the ex- (B) Program income that is received ception in paragraph (e)(3)(ii)(A) of this and retained by the unit of general section, a state may require that the local government is treated as addi- unit of general local government pay tional CDBG funds and is subject to all any such income to the state. applicable requirements of this sub- (A) A state must permit the unit of part, regardless of whether the activity general local government to retain the that generated the program income has program income if the program income been closed out. If the grant that gen- will be used to continue the activity erated the program income is still open from which it was derived. A state will when the program income is generated, determine when an activity will be program income permitted to be re- considered to be continued, and HUD tained will be considered part of the will give maximum feasible deference unit of general local government’s to a state’s determination, in accord- grant that generated the program in- ance with § 570.480(c). In making such a come. If the grant is closed, program determination, a state may consider income permitted to be retained will be whether the unit of general local gov- considered to be part of the unit of gen- ernment is or will be unable to comply eral local government’s most recently with the requirements of paragraph awarded open grant. If the unit of gen- (e)(3)(ii)(B) of this section or other re- eral local government has no open quirements of this part, and the extent grants, the program income retained to which the program income is un- by the unit of general local govern- likely to be applied to continue the ac- ment will be counted as part of the tivity within the reasonably near fu- state’s grant year in which the pro- ture. When a state determines that the gram income was generated. A state program income will be applied to con- must employ one or more of the fol- tinue the activity from which it was lowing methods to ensure that units of derived, but that the amount of pro- general local government comply with gram income held by the unit of gen- applicable program income require- eral local government exceeds pro- ments: jected cash needs for the reasonably (1) Maintaining contractual relation- near future, the state may require the ships with units of general local gov- local government to return all or part ernment for the duration of the exist- of the program income to the state ence of the program income; until such time as the program income (2) Closing out the underlying activ- is needed by the unit of general local ity, but requiring as a condition of government. When a state determines closeout that the unit of general local that a unit of local government is not government obtain advance state ap- likely to apply any significant amount proval of either a unit of general local of program income to continue the ac- government’s plan for the use of pro- tivity within a reasonable amount of gram income, or of each use of program time, or that it will not likely apply income by grant recipients via regu- the program income in accordance with larly occurring reports and requests for applicable requirements, the state may approval; require the unit of general local gov- (3) Closing out the underlying activ- ernment to return all of the program ity, but requiring as a condition of income to the state for disbursement closeout that the unit of general local to other units of local government. A government notify the state when new state that intends to require units of program income is received; or

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(4) With prior HUD approval, other (f) Revolving funds. (1) The state may approaches that demonstrate that the permit units of general local govern- state will ensure compliance with the ment to establish revolving funds to requirements of this subpart by units carry out specific, identified activities. of general local government. A revolving fund, for this purpose, is a (C) The state must require units of separate fund (with a set of accounts general local government, to the max- that are independent of other program imum extent feasible, to disburse pro- accounts) established to carry out spe- gram income that is subject to the re- cific activities which, in turn, generate quirements of this subpart before re- payments to the fund for use in car- questing additional funds from the rying out such activities. These pay- state for activities, except as provided ments to the revolving fund are pro- in paragraph (f) of this section. gram income and must be substantially (iii) Transfer of program income to En- disbursed from the revolving fund be- titlement program. A unit of general fore additional grant funds are drawn local government that becomes eligible from the Treasury for revolving fund to be an Entitlement grantee may re- activities. Such program income is not quest the state’s approval to transfer required to be disbursed for non-revolv- State CDBG grant-generated program ing fund activities. income to the unit of general local gov- (2) The state may establish one or ernment’s Entitlement program. A more state revolving funds to dis- state may approve the transfer, pro- tribute grants to units of general local vided that the unit of general local government throughout a state or a re- government: gion of the state to carry out specific, (A) Has officially elected to partici- identified activities. A revolving fund, pate in the Entitlement grant program; for this purpose, is a separate fund (B) Agrees to use such program in- (with a set of accounts that are inde- come in accordance with Entitlement pendent of other program accounts) es- program requirements; and tablished to fund grants to units of (C) Has set up Integrated Disburse- general local government to carry out ment Information System (IDIS) ac- specific activities which, in turn, gen- cess and agrees to enter receipt of pro- erate payments to the fund for addi- gram income into IDIS. tional grants to units of general local (iv) Transfer of program income of government to carry out such activi- grantees losing Entitlement status. Upon ties. Program income in the revolving entry into the State CDBG program, a fund must be disbursed from the fund unit of general local government that before additional grant funds are drawn has lost or relinquished its Entitle- from the Treasury for payments to ment status must, with respect to pro- units of general local government gram income that a unit of general which could be funded from the revolv- local government would otherwise be ing fund. permitted to retain, either: (3) A revolving fund established by ei- (A) Retain program income generated ther the State or unit of general local under Entitlement grants and continue government shall not be directly fund- to comply with Entitlement program ed or capitalized with grant funds. requirements for program income; or (g) Procurement. When procuring (B) Retain the program income and property or services to be paid for in transfer it to the State CDBG program, whole or in part with CDBG funds, the in which case the unit of general local state shall follow its procurement poli- government must comply with the cies and procedures. The state shall es- state’s rules for program income and tablish requirements for procurement the requirements of this paragraph (e). policies and procedures for units of (4) The state must report on the re- general local government, based on full ceipt and use of all program income and open competition. Methods of pro- (whether retained by units of general curement (e.g., small purchase, sealed local government or paid to the state) bids/formal advertising, competitive in its annual performance and evalua- proposals, and noncompetitive pro- tion report. posals) and their applicability shall be

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specified by the state. Cost plus a per- public agencies, or subrecipients which centage of cost and percentage of con- are receiving CDBG funds. struction costs methods of contracting (4) Exceptions: Thresholds requirements. shall not be used. The policies and pro- Upon written request by the State, an cedures shall also include standards of exception to the provisions of para- conduct governing employees engaged graph (h)(2) of this section involving an in the award or administration of con- employee, agent, consultant, officer, or tracts. (Other conflicts of interest are elected official or appointed official of covered by § 570.489(h).) The state shall the state may be granted by HUD on a ensure that all purchase orders and case-by-case basis. In all other cases, contracts include any clauses required the state may grant such an exception by Federal statutes, executive orders upon written request of the unit of gen- and implementing regulations. eral local government provided the (h) Conflict of interest—(1) Applica- state shall fully document its deter- bility. (i) In the procurement of sup- mination in compliance with all re- plies, equipment, construction, and quirements of paragraph (h)(4) of this services by the States, units of local section including the state’s position general governments, and subrecipi- with respect to each factor at para- ents, the conflict of interest provisions graph (h)(5) of this section and such in paragraph (g) of this section shall documentation shall be available for apply. review by the public and by HUD. An (ii) In all cases not governed by para- exception may be granted after it is determined that such an exception will graph (g) of this section, this para- serve to further the purpose of the Act graph (h) shall apply. Such cases in- and the effective and efficient adminis- clude the acquisition and disposition of tration of the program or project of the real property and the provision of as- state or unit of general local govern- sistance with CDBG funds by the unit ment as appropriate. An exception may of general local government or its sub- be considered only after the state or recipients, to individuals, businesses unit of general local government, as and other private entities. appropriate, has provided the fol- (2) Conflicts prohibited. Except for eli- lowing: gible administrative or personnel (i) A disclosure of the nature of the costs, the general rule is that no per- conflict, accompanied by an assurance sons described in paragraph (h)(3) of that there has been public disclosure of this section who exercise or have exer- the conflict and a description of how cised any functions or responsibilities the public disclosure was made; and with respect to CDBG activities as- (ii) An opinion of the attorney for the sisted under this subpart or who are in state or the unit of general local gov- a position to participate in a decision- ernment, as appropriate, that the in- making process or gain inside informa- terest for which the exception is tion with regard to such activities, sought would not violate state or local may obtain a financial interest or ben- law. efit from the activity, or have an inter- (5) Factors to be considered for excep- est or benefit from the activity, or tions. In determining whether to grant have an interest in any contract, sub- a requested exception after the require- contract or agreement with respect ments of paragraph (h)(4) of this sec- thereto, or the proceeds thereunder, ei- tion have been satisfactorily met, the ther for themselves or those with cumulative effect of the following fac- whom they have family or business tors, where applicable, shall be consid- ties, during their tenure or for one year ered: thereafter. (i) Whether the exception would pro- (3) Persons covered. The conflict of in- vide a significant cost benefit or an es- terest provisions for paragraph (h)(2) of sential degree of expertise to the pro- this section apply to any person who is gram or project which would otherwise an employee, agent, consultant, officer, not be available; or elected official or appointed official (ii) Whether an opportunity was proof the state, or of a unit of general vided for open competitive bidding or local government, or of any designated negotiation;

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(iii) Whether the person affected is a notice of and opportunity to comment member of a group or class of low or on any proposed change, and either: moderate income persons intended to (i) The new use of the property quali- be the beneficiaries of the assisted ac- fies as meeting one of the national ob- tivity, and the exception will permit jectives and is not a building for the such person to receive generally the general conduct of government; or same interests or benefits as are being (ii) The requirements in paragraph made available or provided to the (j)(2) of this section are met. group or class; (2) If the unit of general local govern- (iv) Whether the affected person has ment determines, after consultation withdrawn from his or her functions or with affected citizens, that it is appro- responsibilities, or the decisionmaking priate to change the use of the prop- process with respect to the specific as- erty to a use which does not qualify sisted activity in question; under paragraph (j)(1) of this section, it (v) Whether the interest or benefit may retain or dispose of the property was present before the affected person for the changed use if the unit of gen- was in a position as described in para- eral local government’s CDBG program graph (h)(3) of this section; is reimbursed or the state’s CDBG pro- (vi) Whether undue hardship will re- gram is reimbursed, at the discretion sult either to the State or the unit of of the state. The reimbursement shall general local government or the person be in the amount of the current fair affected when weighed against the pub- market value of the property, less any lic interest served by avoiding the proportion of the value attributable to ex- hibited conflict; and penditures of non-CDBG funds for ac- (vii) Any other relevant consider- quisition of, and improvements to, the ations. property, except that if the change in (i) Closeout of grants to units of general use occurs after grant closeout but local government. The State shall estab- within 5 years of such closeout, the lish requirements for timely closeout unit of general local government shall of grants to units of general local gov- make the reimbursement to the State’s ernment and shall take action to en- CDBG program account. sure the timely closeout of such (3) Following the reimbursement of grants. the CDBG program in accordance with (j) Change of use of real property. The paragraph (j)(2) of this section, the standards described in this section property no longer will be subject to apply to real property within the unit any CDBG requirements. of general local government’s control (k) Accountability for real and personal (including activities undertaken by property. The State shall establish and subrecipients) which was acquired or implement requirements, consistent improved in whole or in part using with State law and the purposes and CDBG funds in excess of the threshold requirements of this subpart (including for small purchase procurement (24 paragraph (j) of this section) governing CFR 85.36, ‘‘Administrative Require- the use, management, and disposition ments for Grants and Cooperative of real and personal property acquired Agreements to State, Local and Feder- with CDBG funds. ally Recognized Indian Tribal Govern- (l) Debarment and suspension. The re- ments’’). These standards shall apply quirements in 2 CFR part 2424 are ap- from the date CDBG funds are first plicable. CDBG funds may not be pro- spent for the property until five years vided to excluded or disqualified per- after closeout of the unit of general sons. local government’s grant. (m) Audits. Notwithstanding any (1) A unit of general local govern- other provision of this title, audits of a ments may not change the use or state and units of general local govern- planned use of any such property (in- ment shall be conducted in accordance cluding the beneficiaries of such use) with § 85.26 of this title, which imple- from that for which the acquisition or ments the Single Audit Act (31 U.S.C. improvement was made, unless the 7501–07) and incorporates OMB Circular unit of general local government pro- A–133. States shall develop and admin- vides affected citizens with reasonable ister an audits management system to

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ensure that audits of units of general states in accordance with 24 CFR part local government are conducted in ac- 85. cordance with OMB Circular A–133, if (2) The state shall keep records to applicable. document its funding decisions reached (n) Cost principles and prior approval. under the method of distribution de- (1) A state must ensure that costs in- scribed in 24 CFR 91.320(j)(1), including curred by the state and by its recipi- all the criteria used to select applica- ents are in conformance with the fol- tions from local governments for fund- lowing cost principles, as applicable: ing and the relative importance of the (i) ‘‘Cost Principles for State, Local, criteria (if applicable), regardless of and Indian Tribal Governments (OMB the organizational level at which final Circular A–87),’’ which is codified at 2 funding decisions are made, so that CFR part 225; they can be reviewed by HUD, the In- (ii) ‘‘Cost Principles for Non-Profit spector General, the Government Ac- Organizations (OMB Circular A–122),’’ countability Office, and citizens pursu- which is codified at 2 CFR part 230; and ant to the requirements of § 570.490(c). (iii) ‘‘Cost Principles for Educational (3) Integrated Disbursement and Infor- Institutions (OMB Circular A–21),’’ mation System (IDIS). The state shall which is codified at 2 CFR part 220. make entries into IDIS in a form pre- (2) All cost items described in Appen- scribed by HUD to accurately capture dix B of 2 CFR part 225 that require the state’s accomplishment and fund- federal agency approval are allowable ing data, including program income, without prior approval of HUD, to the for each program year. It is rec- extent that they otherwise comply ommended that the state enter IDIS with the requirements of 2 CFR part data on a quarterly basis and it is re- 225 and are otherwise eligible under quired to be entered annually. this subpart I, except for the following: (b) Unit of general local government’s (i) Depreciation methods for fixed as- record. The State shall establish rec- sets shall not be changed without the ordkeeping requirements for units of express approval of HUD or, if charged general local government receiving through a cost allocation plan, of the CDBG funds that are sufficient to fa- cognizant federal agency. cilitate reviews and audits of such (ii) Fines and penalties (including pu- units of general local government nitive damages) are unallowable costs under §§ 570.492 and 570.493. For fair to the CDBG program. housing and equal opportunity purposes, and as applicable, such records [57 FR 53397, Nov. 9, 1992, as amended at 60 FR 1952, Jan. 5, 1995; 61 FR 54922, Oct. 22, 1996; shall include data on the racial, ethnic, 67 FR 15112, Mar. 29, 2002; 72 FR 73496, Dec. 27, and gender characteristics of persons 2007; 77 FR 24143, Apr. 23, 2012] who are applicants for, participants in, or beneficiaries of the program. § 570.490 Recordkeeping requirements. (c) Access to records. (1) Representa- (a) State records. (1) The state shall tives of HUD, the Inspector General, establish and maintain such records as and the General Accounting Office may be necessary to facilitate review shall have access to all books, ac- and audit by HUD of the state’s admin- counts, records, reports, files, and istration of CDBG funds under § 570.493. other papers, or property pertaining to The content of records maintained by the administration, receipt and use of the state shall be as jointly agreed CDBG funds and necessary to facilitate upon by HUD and the states and suffi- such reviews and audits. cient to enable HUD to make the deter- (2) The State shall provide citizens minations described at § 570.493. For with reasonable access to records re- fair housing and equal opportunity pur- garding the past use of CDBG funds and poses, and as applicable, such records ensure that units of general local gov- shall include data on the racial, ethnic, ernment provide citizens with reason- and gender characteristics of persons able access to records regarding the who are applicants for, participants in, past use of CDBG funds consistent with or beneficiaries of the program. The State or local requirements concerning records shall also permit audit of the the privacy of personal records.

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(d) Record retention. Records of the (b) Information considered. In con- State and units of general local govern- ducting performance reviews and au- ment, including supporting documenta- dits, HUD will rely primarily on infor- tion, shall be retained for the greater mation obtained from the state’s per- of three years from closeout of the formance report, records maintained grant to the state, or the period re- by the state, findings from on-site quired by other applicable laws and monitoring, audit reports, and the sta- regulations as described in § 570.487 and tus of the state’s unexpended grant § 570.488. funds. HUD may also consider relevant information on the state’s performance [57 FR 53397, Nov. 9, 1992, as amended at 71 gained from other sources, including FR 6971, Feb. 9, 2006; 77 FR 24146, Apr. 23, 2012] litigation, citizens’ comments, and other information provided by the § 570.491 Performance and evaluation state. A State’s failure to maintain report. records in accordance with § 570.490 The annual performance and evalua- may result in a finding that the State tion report shall be submitted in ac- has failed to meet the applicable re- cordance with 24 CFR part 91. quirement to which the record pertains. (Approved by the Office of Management and Budget under control number 2506–0117) [57 FR 53397, Nov. 9, 1992, as amended at 61 FR 54922, Oct. 22, 1996] [60 FR 1916, Jan. 5, 1995] § 570.494 Timely distribution of funds § 570.492 State’s reviews and audits. by states. (a) The state shall make reviews and (a) States are encouraged to adopt audits including on-site reviews, of and achieve a goal of obligating and units of general local government as announcing 95 percent of funds to units may be necessary or appropriate to of general local government within 12 meet the requirements of section months of the state signing its grant 104(e)(2) of the Act. agreement with HUD. (b) In the case of noncompliance with (b) HUD will review each state to de- these requirements, the State shall termine if the state has distributed take such actions as may be appro- CDBG funds in a timely manner. The priate to prevent a continuance of the state’s distribution of CDBG funds is deficiency, mitigate any adverse ef- timely if: fects or consequences and prevent a re- (1) All of the state’s annual grant (ex- currence. The state shall establish cluding state administration) has been remedies for units of general local gov- obligated and announced to units of ernment noncompliance. general local government within 15 months of the state signing its grant § 570.493 HUD’s reviews and audits. agreement with HUD; and (a) General. At least on an annual (2) Recaptured funds and program in- basis, HUD shall make such reviews come received by the state are expedi- and audits as may be necessary or ap- tiously obligated and announced to propriate to determine: units of general local government. (1) Whether the state has distributed (c) HUD may collect necessary infor- CDBG funds to units of general local mation from states to determine government in a timely manner in con- whether CDBG funds have been distrib- formance to the method of distribution uted in a timely manner. described in its action plan under part 91 of this title; § 570.495 Reviews and audits response. (2) Whether the state has carried out (a) If HUD’s review and audit under its certifications in compliance with § 570.493 results in a negative deter- the requirements of the Act and this mination, or if HUD otherwise deter- subpart and other applicable laws; and mines that a state or unit of general (3) Whether the state has made re- local government has failed to comply views and audits of the units of general with any requirement of this subpart, local government required by § 570.492. the state will be given an opportunity

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to contest the finding and will be re- (i) Refer the matter to the Attorney quested to submit a plan for corrective General with a recommendation that action. If the state is unsuccessful in an appropriate civil action be insti- contesting the validity of the finding tuted; to the satisfaction of HUD, or if the (ii) Exercise the powers and functions state’s plan for corrective action is not provided by title VI of the Civil Rights satisfactory to HUD, HUD may take Act of 1964 (42 U.S.C. 2000d–2000d–7); one or more of the following actions to (iii) Exercise the powers and func- prevent a continuation of the defi- tions provided for in § 570.496; or ciency; mitigate, to the extent pos- (iv) Take such other action as may be sible, the adverse effects or con- provided by law. sequence of the deficiency; or prevent a (2) When a matter is referred to the recurrence of the deficiency: Attorney General pursuant to para- (1) Issue a letter of warning that ad- graph (b)(1)(i) of this section, or when- vises the State of the deficiency and ever HUD has reason to believe that a puts the state on notice that additional State or unit of general local govern- action will be taken if the deficiency is ment is engaged in a pattern or prac- not corrected or is repeated; tice in violation of the provisions of (2) Advise the state that additional section 109 of the Act, the Attorney information or assurances will be re- General may bring a civil action in any quired before acceptance of one or appropriate United States district more of the certifications required for court for such relief as may be appro- the succeeding year grant; priate, including injunctive relief. (3) Advise the state to suspend or terminate disbursement of funds for a de- § 570.496 Remedies for noncompliance; ficient activity or grant; opportunity for hearing. (4) Advise the state to reimburse its (a) General. Action pursuant to this grant in any amounts improperly ex- section will be taken only after at least pended; one of the corrective or remedial ac- (5) Change the method of payment to tions specified in § 570.495 has been the state from an advance basis to a re- taken, and only then if the State or imbursement basis; unit of general local government has (6) Based on the state’s current fail- not made an appropriate or timely re- ure to comply with a requirement of sponse. this subpart which will affect the use (b) Remedies. (1) If HUD finds after of the succeeding year grant, condition reasonable notice and opportunity for the use of the succeeding fiscal years hearing that a State or unit of general grant funds upon appropriate correc- local government has failed to comply tive action by the state. When the use with any provision of this subpart, of funds is conditioned, HUD shall until HUD is satisfied that there is no specify the reasons for the conditions longer failure to comply, HUD shall: and the actions necessary to satisfy (i) Terminate payments to the state; the conditions. (ii) Reduce payments for current or (b)(1) Whenever HUD determines that future grants to the state by an a state or unit of general local govern- amount equal to the amount of CDBG ment which is a recipient of CDBG funds distributed or used without com- funds has failed to comply with section pliance with the requirements of this 109 of the Act (nondiscrimination re- subpart; quirements), HUD shall notify the gov- (iii) Limit the availability of pay- ernor of the State or chief executive of- ments to the state to activities not af- ficer of the unit of general local gov- fected by the failure to comply or to ernment of the noncompliance and activities designed to overcome the shall request the governor or the chief failure to comply; executive officer to secure compliance. (iv) Based on the state’s failure to If within a reasonable time, not to ex- comply with a requirement of this sub- ceed sixty days, the governor or chief part (other than the state’s current executive officer fails or refuses to se- failure to comply which will affect the cure compliance, HUD may take the use of the succeeding year grant), con- following action: dition the use of the grant funds upon

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appropriate corrective action by the (i) In a manner which is adequate to state specified by HUD; or allow the respondent to prepare its re- (v) With respect to a CDBG grant sponse, the basis upon which HUD de- awarded by the state to a unit of gen- termined that the respondent failed to eral local government, withhold, re- comply with a provision of this sub- duce, or withdraw the grant, require part; the state to withhold, reduce, or with- (ii) That the hearing procedures are draw the grant, or take other action as governed by these rules; appropriate, except that CDBG funds (iii) That the respondent has 14 days expended on eligible activities shall from receipt of the notice within which not be recaptured or deducted from fu- to provide a written request for a hear- ture CDBG grants to such unit of gen- ing to the Docket Clerk, Office of Ad- eral local government. ministrative Law Judges, and the ad- (2) HUD may on due notice suspend dress and telephone number of the payments at any time after the Docket Clerk; issuance of a notice of opportunity for (iv) Of the action which HUD pro- hearing pursuant to paragraph (d) of poses to take and that the authority this section, pending such hearing and for this action is § 570.496 of this sub- a final decision, to the extent HUD depart; termines such action necessary to pre- (v) That if the respondent fails to re- vent a continuation of the noncompli- quest a hearing within the time speci- ance. fied, HUD’s determination that the re- (c) In lieu of, or in addition to, the spondent failed to comply with a provi- action authorized by paragraph (b) of sion of this subpart shall be final and this section, if HUD has reason to be- HUD may proceed to take the proposed lieve that the state or unit of general action. local government has failed to comply (2) Initiation of hearing. The respond- substantially with any provision of ent shall be allowed 14 days from re- this subpart, HUD may: ceipt of the notice within which to no- (1) Refer the matter to the Attorney tify HUD in writing of its request for a General of the United States with a hearing. If no request is received with- recommendation that an appropriate in the time specified, HUD’s deter- civil action be instituted; and mination that the respondent failed to (2) Upon such a referral, the Attorney comply with a provision of this subpart General may bring a civil action in any shall be final and HUD may proceed to United States district court having take the proposed action. venue thereof for such relief as may be (3) Administrative Law Judge. Pro- appropriate, including an action to re- ceedings conducted under these rules cover the amount of the CDBG funds shall be presided over by an Adminis- which was not expended in accordance trative Law Judge (ALJ), appointed as with this subpart, or for mandatory or provided by section 11 of the Adminis- injunctive relief. trative Procedure Act (5 U.S.C. 3105). (d) Proceedings. When HUD proposes The case shall be referred to the ALJ to take action pursuant to this section, by HUD at the time a hearing is re- the respondent in the proceedings will quested. The ALJ shall promptly no- be the state. At the option of HUD, a tify the parties of the time and place at unit of general local government may which the hearing will be held. The also be a respondent. These procedures ALJ shall conduct a fair and impartial are to be followed before imposition of hearing and take all action necessary a sanction described in paragraph (b)(1) to avoid delay in the disposition of proof this section: ceedings and to maintain order. The (1) Notice of opportunity for hearing. ALJ shall have all powers necessary to HUD shall notify the respondent in those ends, including but not limited writing of the proposed action and of to the power: the opportunity for a hearing. The no- (i) To administer oaths and affirma- tice shall be sent to the respondent by tions; first class mail and shall provide no- (ii) To issue subpoenas as authorized tice: by law;

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(iii) To rule upon offers of proof and parties may appear and participate in receive relevant evidence; the hearing. (iv) To order or limit discovery be- (6) Transcripts. Hearings shall be re- fore the hearing as the interests of jus- corded and transcribed only by a re- tice may require; porter under the supervision of the (v) To regulate the course of the ALJ. The original transcript shall be a hearing and the conduct of the parties part of the record and shall constitute and their counsel; the sole official transcript. Respond- (vi) To hold conferences for the set- ents and the public, at their own ex- tlement or simplification of the issues pense, shall obtain copies of the tran- by consent of the parties; script. (vii) To consider and rule upon all (7) The ALJ’s decisions. At the conclu- procedural and other motions appro- sion of the hearing, the ALJ shall give priate in adjudicative proceedings; and the parties a reasonable opportunity to (viii) To make and file initial deter- submit proposed findings and conclu- minations. sions and supporting reasons therefor. (4) Ex parte communications. An ex Generally, within 60 days after the con- parte communication is any commu- clusion of the hearing, the ALJ shall nication with an ALJ, direct or indi- prepare a written decision which in- rect, oral or written, concerning the cludes a Statement of findings and con- merits or procedures of any pending clusions, and the reasons or basis proceeding which is made by a party in therefor, on all the material issues of the absence of any other party. Ex fact, law or discretion presented on the parte communications are prohibited record and the appropriate sanction or except where the purpose and content denial thereof. The decision shall be of the communication have been dis- based on consideration of the whole closed in advance or simultaneously to record or those parts thereof cited by a all parties, or the communication is a party and supported by and in accord- request for information concerning the ance with the reliable, probative, and status of the case. Any ALJ who re- substantial evidence. A copy of the de- ceives an ex parte communication cision shall be furnished to the parties which the ALJ knows or has reason to immediately by first class mail and believe is unauthorized shall promptly shall include a notice that any requests place the communication, or its sub- for review by the Secretary must be stance, in all files and shall furnish made in writing to the Secretary with- copies to all parties. Unauthorized ex in 30 days of the receipt of the decision. parte communications shall not be (8) Record. The transcript of testi- taken into consideration in deciding mony and exhibits, together with the any matter in issue. decision of the ALJ and all papers and (5) The hearing. All parties shall have requests filed in the proceeding, con- the right to be represented at the hear- stitutes the exclusive record for deci- ing by counsel. The ALJ shall conduct sion and, on payment of its reasonable the proceedings in an expeditious man- cost, shall be made available to the ner while allowing the parties to parties. After reaching the initial deci- present all oral and written evidence sion, the ALJ shall certify to the com- which tends to support their respective plete record and forward the record to positions, but the ALJ shall exclude ir- the Secretary. relevant, immaterial or unduly repeti- (9) Review by the Secretary. The deci- tious evidence. HUD has the burden of sion by the ALJ shall constitute the proof in showing by a preponderance of final decision of HUD unless, within 30 evidence that the respondent failed to days after the receipt of the decision, comply with a provision of this sub- either the respondent or the Assistant part. Each party shall be allowed to Secretary for Community Planning and cross-examine adverse witnesses and to Development files an exception and re- rebut and comment upon evidence pre- quest for review by the Secretary. The sented by the other party. Hearings excepting party must transmit simul- shall be open to the public. So far as taneously to the Secretary and the the orderly conduct of the hearing per- other party the request for review and mits, interested persons other than the the bases of the party’s exceptions to

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the findings of the ALJ. The other § 570.500 Definitions. party shall be allowed 30 days from re- For the purposes of this subpart, the ceipt of the exception to provide the following terms shall apply: Secretary and the excepting party with (a) Program income means gross in- a written reply. The Secretary shall come received by the recipient or a then review the record of the case, in- subrecipient directly generated from cluding the exceptions and the reply. the use of CDBG funds, except as pro- On the basis of such review, the Sec- vided in paragraph (a)(4) of this secretary shall issue a written determination. tion, including a Statement of the ra- (1) Program income includes, but is tionale therefor, affirming, modifying not limited to, the following: or revoking the decision of the ALJ. (i) Proceeds from the disposition by The Secretary’s decision shall be made sale or long-term lease of real property and transmitted to the parties within purchased or improved with CDBG 60 days after the decision of the ALJ funds; was furnished to the parties. (ii) Proceeds from the disposition of (10) Judicial review. The respondent equipment purchased with CDBG funds; may seek judicial review of HUD’s de- (iii) Gross income from the use or cision pursuant to section 111(c) of the rental of real or personal property acquired by the recipient or by a sub- Act. recipient with CDBG funds, less costs [74 FR 4636, Jan. 26, 2009] incidental to generation of the income; (iv) Gross income from the use or § 570.497 Condition of State election to rental of real property, owned by the administer State CDBG Program. recipient or by a subrecipient, that was Pursuant to section 106(d)(2)(A)(i) of constructed or improved with CDBG the Act, a State has the right to elect, funds, less costs incidental to genera- in such manner and at such time as the tion of the income; Secretary may prescribe, to administer (v) Payments of principal and inter- funds allocated under subpart A of this est on loans made using CDBG funds, part for use in nonentitlement areas of except as provided in paragraph (a)(3) the State. After January 26, 1995, any of this section; State which elects to administer the (vi) Proceeds from the sale of loans allocation of CDBG funds for use in made with CDBG funds; (vii) Proceeds from sale of obliga- nonentitlement areas of the State in tions secured by loans made with any year must, in addition to all other CDBG funds; requirements of this subpart, submit a (viii) [Reserved] pledge by the State in accordance with (ix) Interest earned on program in- section 108(d)(2) of the Act, and in a come pending its disposition; and form acceptable to HUD, of any future (x) Funds collected through special CDBG grants it may receive under sub- assessments made against properties part A and this subpart. Such pledge owned and occupied by households not shall be for the purpose of assuring re- of low and moderate income, where the payment of any debt obligations (as de- assessments are used to recover all or fined in § 570.701), in accordance with part of the CDBG portion of a public their terms, that HUD may have guar- improvement. anteed in the respective State on be- (2) Program income does not include half of any nonentitlement public enti- income earned (except for interest de- ty (as defined in § 570.701) or its des- scribed in § 570.513) on grant advances ignated public agency prior to the from the U.S. Treasury. The following State’s election. items of income earned on grant advances must be remitted to HUD for [59 FR 66604, Dec. 27, 1994] transmittal to the U.S. Treasury, and will not be reallocated under section Subpart J—Grant Administration 106(c) or (d) of the Act: (i) Interest earned from the invest- SOURCE: 53 FR 8058, Mar. 11, 1988, unless ment of the initial proceeds of a grant otherwise noted. advance by the U.S. Treasury;

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(ii) Interest earned on loans or other financed with loans guaranteed under forms of assistance provided with section 108 which are not defined as CDBG funds that are used for activities program income shall be treated as determined by HUD either to be ineli- miscellaneous revenue and shall not be gible or to fail to meet a national ob- subject to any of the requirements of jective in accordance with the require- this part, except that the use of such ments of subpart C of this part, or that funds shall be limited to activities that fail substantially to meet any other re- are located in a revitalization strategy quirement of this part; and area and implement a HUD approved (iii) Interest earned on the invest- area revitalization strategy pursuant ment of amounts reimbursed to the to § 91.215(e) of this title. However, such CDBG program account prior to the treatment shall not affect the right of use of the reimbursed funds for eligible the Secretary to require the section 108 purposes. borrower to pledge such amounts as se- (3) The calculation of the amount of curity for the guaranteed loan. The de- program income for the recipient’s termination whether such amounts CDBG program as a whole (i.e., com- shall constitute program income shall prising activities carried out by a be governed by the provisions of the grantee and its subrecipients) shall ex- contract required at § 570.705(b)(1). clude payments made by subrecipients (5) Examples of other receipts that of principal and/or interest on CDBG- are not considered program income are funded loans received from grantees if proceeds from fund raising activities such payments are made using program carried out by subrecipients receiving income received by the subrecipient. CDBG assistance (the costs of fund- (By making such payments, the sub- raising are generally unallowable recipient shall be deemed to have under the applicable OMB circulars ref- transferred program income to the erenced in 24 CFR 84.27), funds col- grantee.) The amount of program in- lected through special assessments come derived from this calculation used to recover the non-CDBG portion shall be used for reporting purposes, for of a public improvement, and proceeds purposes of applying the requirement from the disposition of real property under § 570.504(b)(2)(iii), and in determining limitations on planning and ad- acquired or improved with CDBG funds ministration and public services activi- when the disposition occurs after the ties to be paid for with CDBG funds. applicable time period specified in (4) Program income does not include: § 570.503(b)(8) for subrecipient-con- (i) Any income received in a single trolled property, or in § 570.505 for reprogram year by the recipient and all cipient-controlled property. its subrecipients if the total amount of (b) Revolving fund means a separate such income does not exceed $25,000; fund (with a set of accounts that are and independent of other program ac- (ii) Amounts generated by activities counts) established for the purpose of that are financed by a loan guaranteed carrying out specific activities which, under section 108 of the Act and meet in turn, generate payments to the fund one or more of the public benefit cri- for use in carrying out the same activi- teria specified at § 570.209(b)(2)(v) or are ties. Each revolving loan fund’s cash carried out in conjunction with a grant balance must be held in an interest- under section 108(q) in an area deter- bearing account, and any interest paid mined by HUD to meet the eligibility on CDBG funds held in this account requirements for designation as an shall be considered interest earned on Urban Empowerment Zone pursuant to grant advances and must be remitted 24 CFR part 597, subpart B. Such exclu- to HUD for transmittal to the U.S. sion shall not apply if CDBG funds are Treasury no less frequently than annu- used to repay the guaranteed loan. ally. (Interest paid by borrowers on eli- When such a guaranteed loan is par- gible loans made from the revolving tially repaid with CDBG funds, the loan fund shall be program income and amount generated shall be prorated to treated accordingly.) reflect the percentage of CDBG funds (c) Subrecipient means a public or pri- used. Amounts generated by activities vate nonprofit agency, authority, or

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organization, or a for-profit entity au- of the metropolitan city or urban coun- thorized under § 570.201(o), receiving ty, as applicable, instead of the date CDBG funds from the recipient or an- that the subrecipient agreement ex- other subrecipient to undertake activi- pires. ties eligible for such assistance under [53 FR 8058, Mar. 11, 1988, as amended at 57 subpart C of this part. The term ex- FR 27120, June 17, 1992] cludes an entity receiving CDBG funds from the recipient under the authority § 570.502 Applicability of uniform ad- of § 570.204, unless the grantee explic- ministrative requirements. itly designates it as a subrecipient. The (a) Recipients and subrecipients that term includes a public agency des- are governmental entities (including ignated by a unit of general local gov- public agencies) shall comply with the ernment to receive a loan guarantee requirements and standards of OMB under subpart M of this part, but does Circular No. A–87, ‘‘Cost Principles for not include contractors providing sup- State, Local, and Indian Tribal Govern- plies, equipment, construction, or serv- ments’’; OMB Circular A–128, ‘‘Audits ices subject to the procurement re- of State and Local Governments’’ (im- quirements in 24 CFR 85.36 or 84.40, as plemented at 24 CFR part 44); and with applicable. the following sections of 24 CFR part 85 [53 FR 8058, Mar. 11, 1988, as amended at 57 ‘‘Uniform Administrative Require- FR 27120, June 17, 1992; 60 FR 1952, Jan. 5, ments for Grants and Cooperative 1995; 60 FR 17445, Apr. 6, 1995; 60 FR 56914, Agreements to State and Local Gov- Nov. 9, 1995] ernments’’ or the related CDBG provi- § 570.501 Responsibility for grant ad- sion, as specified in this paragraph: ministration. (1) Section 85.3, ‘‘Definitions’’; (2) Section 85.6, ‘‘Exceptions’’; (a) One or more public agencies, in- (3) Section 85.12, ‘‘Special grant or cluding existing local public agencies, subgrant conditions for ‘high-risk’ may be designated by the chief execu- grantees’’; tive officer of the recipient to under- (4) Section 85.20, ‘‘Standards for fi- take activities assisted by this part. A nancial management systems,’’ except public agency so designated shall be paragraph (a); subject to the same requirements as are applicable to subrecipients. (5) Section 85.21, ‘‘Payment,’’ except (b) The recipient is responsible for as modified by § 570.513; ensuring that CDBG funds are used in (6) Section 85.22, ‘‘Allowable costs’’; accordance with all program require- (7) Section 85.26, ‘‘Non-federal au- ments. The use of designated public dits’’; agencies, subrecipients, or contractors (8) Section 85.32, ‘‘Equipment,’’ ex- does not relieve the recipient of this re- cept in all cases in which the equip- sponsibility. The recipient is also re- ment is sold, the proceeds shall be pro- sponsible for determining the adequacy gram income; of performance under subrecipient (9) Section 85.33, ‘‘Supplies’’; agreements and procurement con- (10) Section 85.34, ‘‘Copyrights’’; tracts, and for taking appropriate ac- (11) Section 85.35, ‘‘Subawards to tion when performance problems arise, debarred and suspended parties’’; such as the actions described in (12) Section 85.36, ‘‘Procurement,’’ ex- § 570.910. Where a unit of general local cept paragraph (a); government is participating with, or as (13) Section 85.37, ‘‘Subgrants’’; part of, an urban county, or as part of (14) Section 85.40, ‘‘Monitoring and a metropolitan city, the recipient is re- reporting program performance,’’ ex- sponsible for applying to the unit of cept paragraphs (b) through (d) and general local government the same re- paragraph (f); quirements as are applicable to sub- (15) Section 85.41, ‘‘Financial report- recipients, except that the five-year pe- ing,’’ except paragraphs (a), (b), and (e); riod identified under § 570.503(b)(8)(i) (16) Section 85.42, ‘‘Retention and ac- shall begin with the date that the unit cess requirements for records,’’ except of general local government is no that the period shall be four years; longer considered by HUD to be a part (17) Section 85.43, ‘‘Enforcement’’;

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(18) Section 85.44, ‘‘Termination for transferred to the recipient for the convenience’’; CDBG program or shall be retained (19) Section 85.51 ‘‘Later disallow- after compensating the recipient; ances and adjustments’’ and (vii) Section 84.51 (b), (c), (d), (e), (f), (20) Section 85.52, ‘‘Collection of (g), and (h), ‘‘Monitoring and Reporting amounts due.’’ Program Performance’’; (b) Subrecipients, except subrecipi- (viii) Section 84.52, ‘‘Financial Re- ents that are governmental entities, porting’’; shall comply with the requirements (ix) Section 84.53(b), ‘‘Retention and and standards of OMB Circular No. A– access requirements for records.’’ Sec- 122, ‘‘Cost Principles for Non-profit Or- tion 84.53(b) applies with the following ganizations,’’ or OMB Circular No. A– exceptions: 21, ‘‘Cost Principles for Educational In- (A) The retention period referenced stitutions,’’ as applicable, and OMB in § 84.53(b) pertaining to individual Circular A–133, ‘‘Audits of Institutions CDBG activities shall be four years; of Higher Education and Other Non- and profit Institutions’’ (as set forth in 24 (B) The retention period starts from CFR part 45). Audits shall be conducted the date of submission of the annual annually. Such subrecipients shall also performance and evaluation report, as comply with the following provisions of prescribed in 24 CFR 91.520, in which the Uniform Administrative require- the specific activity is reported on for ments of OMB Circular A–110 (imple- the final time rather than from the mented at 24 CFR part 84, ‘‘Uniform date of submission of the final expendi- Administrative Requirements for ture report for the award; Grants and Agreements With Institu- (x) Section 84.61, ‘‘Termination.’’ In tions of Higher Education, Hospitals lieu of the provisions of § 84.61, CDBG and Other Non-Profit Organizations’’) subrecipients shall comply with or the related CDBG provision, as spec- § 570.503(b)(7); and ified in this paragraph: (4) Subpart D—‘‘After-the-Award Re- (1) Subpart A—‘‘General’’; quirements,’’ except for § 84.71, ‘‘Close- (2) Subpart B—‘‘Pre-Award Require- out Procedures.’’ ments,’’ except for § 84.12, ‘‘Forms for [53 FR 8058, Mar. 11, 1988, as amended at 60 Applying for Federal Assistance’’; FR 1916, Jan. 5, 1995; 60 FR 56915, Nov. 9, 1995] (3) Subpart C—‘‘Post-Award Require- ments,’’ except for: § 570.503 Agreements with subrecipi- (i) Section 84.22, ‘‘Payment Require- ents. ments.’’ Grantees shall follow the (a) Before disbursing any CDBG funds standards of §§ 85.20(b)(7) and 85.21 in to a subrecipient, the recipient shall making payments to subrecipients; sign a written agreement with the sub- (ii) Section 84.23, ‘‘Cost Sharing and recipient. The agreement shall remain Matching’’; in effect during any period that the (iii) Section 84.24, ‘‘Program In- subrecipient has control over CDBG come.’’ In lieu of § 84.24, CDBG sub- funds, including program income. recipients shall follow § 570.504; (b) At a minimum, the written agree- (iv) Section 84.25, ‘‘Revision of Budg- ment with the subrecipient shall in- et and Program Plans’’; clude provisions concerning the fol- (v) Section 84.32, ‘‘Real Property.’’ In lowing following items: lieu of § 84.32, CDBG subrecipients shall (1) Statement of work. The agreement follow § 570.505; shall include a description of the work (vi) Section 84.34(g), ‘‘Equipment.’’ In to be performed, a schedule for com- lieu of the disposition provisions of pleting the work, and a budget. These § 84.34(g), the following applies: items shall be in sufficient detail to (A) In all cases in which equipment is provide a sound basis for the recipient sold, the proceeds shall be program in- effectively to monitor performance come (prorated to reflect the extent to under the agreement. which CDBG funds were used to acquire (2) Records and reports. The recipient the equipment); and shall specify in the agreement the par- (B) Equipment not needed by the sub- ticular records the subrecipient must recipient for CDBG activities shall be maintain and the particular reports

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the subrecipient must submit in order (i) Used to meet one of the national to assist the recipient in meeting its objectives in § 570.208 (formerly recordkeeping and reporting require- § 570.901) until five years after expira- ments. tion of the agreement, or for such (3) Program income. The agreement longer period of time as determined to shall include the program income re- be appropriate by the recipient; or quirements set forth in § 570.504(c). The (ii) Not used in accordance with para- agreement shall also specify that, at graph (b)(7)(i) of this section, in which the end of the program year, the grant- event the subrecipient shall pay to the ee may require remittance of all or recipient an amount equal to the cur- part of any program income balances rent market value of the property less (including investments thereof) held by any portion of the value attributable the subrecipient (except those needed for immediate cash needs, cash bal- to expenditures of non-CDBG funds for ances of a revolving loan fund, cash the acquisition of, or improvement to, balances from a lump sum drawdown, the property. The payment is program or cash or investments held for section income to the recipient. (No payment 108 security needs). is required after the period of time (4) Uniform administrative require- specified in paragraph (b)(7)(i) of this ments. The agreement shall require the section.) subrecipient to comply with applicable [53 FR 8058, Mar. 11, 1988, as amended at 53 uniform administrative requirements, FR 41331, Oct. 21, 1988; 57 FR 27120, June 17, as described in § 570.502. 1992; 60 FR 56915, Nov. 9, 1995; 68 FR 56405, (5) Other program requirements. The Sept. 30, 2003] agreement shall require the subrecipient to carry out each activity in § 570.504 Program income. compliance with all Federal laws and (a) Recording program income. The re- regulations described in subpart K of ceipt and expenditure of program in- these regulations, except that: come as defined in § 570.500(a) shall be (i) The subrecipient does not assume the recipient’s environmental respon- recorded as part of the financial trans- sibilities described at § 570.604; and actions of the grant program. (ii) The subrecipient does not assume (b) Disposition of program income re- the recipient’s responsibility for initi- ceived by recipients. (1) Program income ating the review process under the pro- received before grant closeout may be visions of 24 CFR part 52. retained by the recipient if the income (6) Suspension and termination. The is treated as additional CDBG funds agreement shall specify that, in ac- subject to all applicable requirements cordance with 24 CFR 85.43, suspension governing the use of CDBG funds. or termination may occur if the sub- (2) If the recipient chooses to retain recipient materially fails to comply program income, that program income with any term of the award, and that shall be disposed of as follows: the award may be terminated for con- (i) Program income in the form of re- venience in accordance with 24 CFR payments to, or interest earned on, a 85.44. revolving fund as defined in § 570.500(b) (7) Reversion of assets. The agreement shall be substantially disbursed from shall specify that upon its expiration the fund before additional cash with- the subrecipient shall transfer to the drawals are made from the U.S. Treas- recipient any CDBG funds on hand at ury for the same activity. (This rule the time of expiration and any accounts receivable attributable to the does not prevent a lump sum disburse- use of CDBG funds. It shall also include ment to finance the rehabilitation of provisions designed to ensure that any privately owned properties as provided real property under the subrecipient’s for in § 570.513.) control that was acquired or improved (ii) Substantially all other program in whole or in part with CDBG funds income shall be disbursed for eligible (including CDBG funds provided to the activities before additional cash with- subrecipient in the form of a loan) in drawals are made from the U.S. Treas- excess of $25,000 is either: ury.

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(iii) At the end of each program year, the recipient or retained by the sub- the aggregate amount of program in- recipient. Where program income is to come cash balances and any invest- be retained by the subrecipient, the ment thereof (except those needed for agreement shall specify the activities immediate cash needs, cash balances of that will be undertaken with the pro- a revolving loan fund, cash balances gram income and that all provisions of from a lump-sum drawdown, or cash or the written agreement shall apply to investments held for section 108 loan the specified activities. When the sub- guarantee security needs) that, as of recipient retains program income, the last day of the program year, ex- transfers of grant funds by the recipi- ceeds one-twelfth of the most recent ent to the subrecipient shall be ad- grant made pursuant to § 570.304 shall justed according to the principles de- be remitted to HUD as soon as prac- scribed in paragraphs (b)(2) (i) and (ii) ticable thereafter, to be placed in the of this section. Any program income on recipient’s line of credit. This provi- hand when the agreement expires, or sion applies to program income cash received after the agreement’s expira- balances and investments thereof held tion, shall be paid to the recipient as by the grantee and its subrecipients. required by § 570.503(b)(8). (This provision shall be applied for the (d) Disposition of certain program in- first time at the end of the program come received by urban counties. Pro- year for which Federal Fiscal Year 1996 gram income derived from urban coun- funds are provided.) ty program activities undertaken by or (3) Program income on hand at the within the jurisdiction of a unit of gen- time of closeout shall continue to be eral local government which thereafter subject to the eligibility requirements terminates its participation in the in subpart C and all other applicable urban county shall continue to be pro- provisions of this part until it is ex- gram income of the urban county. The pended. urban county may transfer the pro- (4) Unless otherwise provided in any gram income to the unit of general grant closeout agreement, and subject local government, upon its termination to the requirements of paragraph (b)(5) of urban county participation, provided of this section, income received after that the unit of general local govern- closeout shall not be governed by the ment has become an entitlement grant- provisions of this part, except that, if ee and agrees to use the program in- at the time of closeout the recipient come in its own CDBG entitlement pro- has another ongoing CDBG grant re- gram. ceived directly from HUD, funds re- (e)(1) Transfer of program income to ceived after closeout shall be treated Entitlement program. A unit of general as program income of the ongoing local government that becomes eligible grant program. to be an Entitlement grantee may re- (5) If the recipient does not have an- quest the state’s approval to transfer other ongoing grant received directly State CDBG grant-generated program from HUD at the time of closeout, in- income to the unit of general local gov- come received after closeout from the ernment’s Entitlement program. A disposition of real property or from state may approve the transfer, pro- loans outstanding at the time of close- vided that the unit of general local out shall not be governed by the provi- government: sions of this part, except that such in- (i) Has officially elected to partici- come shall be used for activities that pate in the Entitlement grant program; meet one of the national objectives in (ii) Agrees to use such program in- § 570.901 and the eligibility require- come in accordance with Entitlement ments described in section 105 of the program requirements; and Act. (iii) Has set up Integrated Disburse- (c) Disposition of program income re- ment and Information System (IDIS) ceived by subrecipients. The written access and agrees to enter receipt of agreement between the recipient and program income into IDIS. the subrecipient, as required by (2) Transfer of program income of grant- § 570.503, shall specify whether program ees losing Entitlement status. Upon entry income received is to be returned to into the State CDBG program, a unit of

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general local government that has lost cipient’s CDBG program is reimbursed or relinquished its Entitlement status in the amount of the current fair mar- must, with respect to program income ket value of the property, less any por- that a unit of general local government tion of the value attributable to ex- would otherwise be permitted to re- penditures of non-CDBG funds for ac- tain, either: quisition of, and improvements to, the (i) Retain the program income gen- property. erated under Entitlement grants and (c) If the change of use occurs after continue to comply with Entitlement closeout, the provisions governing in- program requirements for program income from the disposition of the real come; or property in § 570.504(b)(4) or (5), as ap- (ii) Retain the program income and plicable, shall apply to the use of funds transfer it to the State CDBG program, reimbursed. in which case the unit of general local (d) Following the reimbursement of government must comply with the the CDBG program in accordance with state’s rules for program income and paragraph (b) of this section, the prop- the requirements of § 570.489(e). erty no longer will be subject to any CDBG requirements. [53 FR 8058, Mar. 11, 1988, as amended at 60 FR 56915, Nov. 9, 1995; 77 FR 24146, Apr. 23, [53 FR 8058, Mar. 11, 1988, as amended at 53 2012] FR 41331, Oct. 21, 1988]

§ 570.505 Use of real property. § 570.506 Records to be maintained. The standards described in this sec- Each recipient shall establish and tion apply to real property within the maintain sufficient records to enable recipient’s control which was acquired the Secretary to determine whether or improved in whole or in part using the recipient has met the requirements CDBG funds in excess of $25,000. These of this part. At a minimum, the fol- standards shall apply from the date lowing records are needed: CDBG funds are first spent for the (a) Records providing a full descrip- property until five years after closeout tion of each activity assisted (or being of an entitlement recipient’s participa- assisted) with CDBG funds, including tion in the entitlement CDBG program its location (if the activity has a geo- or, with respect to other recipients, graphical locus), the amount of CDBG until five years after the closeout of funds budgeted, obligated and expended the grant from which the assistance to for the activity, and the provision in the property was provided. subpart C under which it is eligible. (a) A recipient may not change the (b) Records demonstrating that each use or planned use of any such property activity undertaken meets one of the (including the beneficiaries of such criteria set forth in § 570.208. (Where in- use) from that for which the acquisi- formation on income by family size is tion or improvement was made unless required, the recipient may substitute the recipient provides affected citizens evidence establishing that the person with reasonable notice of, and oppor- assisted qualifies under another pro- tunity to comment on, any proposed gram having income qualification cri- change, and either: teria at least as restrictive as that (1) The new use of such property used in the definitions of ‘‘low and qualifies as meeting one of the na- moderate income person’’ and ‘‘low and tional objectives in § 570.208 (formerly moderate income household’’ (as appli- § 570.901) and is not a building for the cable) at § 570.3, such as Job Training general conduct of government; or Partnership Act (JTPA) and welfare (2) The requirements in paragraph (b) programs; or the recipient may sub- of this section are met. stitute evidence that the assisted per- (b) If the recipient determines, after son is homeless; or the recipient may consultation with affected citizens, substitute a copy of a verifiable certifi- that it is appropriate to change the use cation from the assisted person that of the property to a use which does not his or her family income does not ex- qualify under paragraph (a)(1) of this ceed the applicable income limit estab- section, it may retain or dispose of the lished in accordance with § 570.3; or the property for the changed use if the re- recipient may substitute a notice that

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the assisted person is a referral from a housing which is determined to benefit state, county or local employment low and moderate income persons: agency or other entity that agrees to (i) A copy of a written agreement refer individuals it determines to be with each landlord or developer receiv- low and moderate income persons ing CDBG assistance indicating the based on HUD’s criteria and agrees to total number of dwelling units in each maintain documentation supporting multifamily structure assisted and the these determinations.) Such records number of those units which will be oc- shall include the following informa- cupied by low and moderate income tion: households after assistance; (1) For each activity determined to (ii) The total cost of the activity, in- benefit low and moderate income per- cluding both CDBG and non-CDBG sons, the income limits applied and the funds. point in time when the benefit was de- (iii) For each unit occupied by a low termined. and moderate income household, the (2) For each activity determined to size and income of the household; benefit low and moderate income per- (iv) For rental housing only: sons based on the area served by the (A) The rent charged (or to be activity: charged) after assistance for each (i) The boundaries of the service area; dwelling unit in each structure as- (ii) The income characteristics of sisted; and families and unrelated individuals in (B) Such information as necessary to the service area; and show the affordability of units occu- (iii) If the percent of low and mod- pied (or to be occupied) by low and erate income persons in the service moderate income households pursuant area is less than 51 percent, data show- to criteria established and made public ing that the area qualifies under the by the recipient; exception criteria set forth at (v) For each property acquired on § 570.208(a)(1)(ii). which there are no structures, evidence (3) For each activity determined to of commitments ensuring that the cri- benefit low and moderate income per- teria in § 570.208(a)(3) will be met when sons because the activity involves a fa- the structures are built; cility or service designed for use by a (vi) Where applicable, records dem- limited clientele consisting exclusively onstrating that the activity qualifies or predominantly of low and moderate under the special conditions at income persons: § 570.208(a)(3)(i); (i) Documentation establishing that (vii) For any homebuyer assistance the facility or service is designed for activity qualifying under § 570.201(e), the particular needs of or used exclu- 570.201(n), or 570.204, identification of sively by senior citizens, adults meet- the applicable eligibility paragraph ing the Bureau of the Census’ Current and evidence that the activity meets Population Reports definition of ‘‘se- the eligibility criteria for that provi- verely disabled,’’ persons living with sion; for any such activity qualifying AIDS, battered spouses, abused chil- under § 570.208(a), the size and income dren, the homeless, illiterate adults, or of each homebuyer’s household; and migrant farm workers, for which the (viii) For a § 570.201(k) housing serv- regulations provide a presumption con- ices activity, identification of the cerning the extent to which low- and HOME project(s) or assistance that the moderate-income persons benefit; or housing services activity supports, and (ii) Documentation describing how evidence that project(s) or assistance the nature and, if applicable, the loca- meet the HOME program income tar- tion of the facility or service estab- geting requirements at 24 CFR 92.252 or lishes that it is used predominantly by 92.254. low and moderate income persons; or (5) For each activity determined to (iii) Data showing the size and an- benefit low and moderate income per- nual income of the family of each persons based on the creation of jobs, the son receiving the benefit. recipient shall provide the documenta- (4) For each activity carried out for tion described in either paragraph the purpose of providing or improving (b)(5)(i) or (ii) of this section.

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(i) Where the recipient chooses to prior to the person being hired for the document that at least 51 percent of job. the jobs will be available to low and (6) For each activity determined to moderate income persons, documenta- benefit low and moderate income per- tion for each assisted business shall in- sons based on the retention of jobs: clude: (i) Evidence that in the absence of (A) A copy of a written agreement CDBG assistance jobs would be lost; containing: (ii) For each business assisted, a list- (1) A commitment by the business ing by job title of permanent jobs re- that it will make at least 51 percent of tained, indicating which of those jobs the jobs available to low and moderate are part-time and (where it is known) income persons and will provide train- which are held by low and moderate in- ing for any of those jobs requiring spe- come persons at the time the CDBG as- cial skills or education; sistance is provided. Where applicable, (2) A listing by job title of the perma- identification of any of the retained nent jobs to be created indicating jobs (other than those known to be which jobs will be available to low and held by low and moderate income per- moderate income persons, which jobs sons) which are projected to become require special skills or education, and available to low and moderate income which jobs are part-time, if any; and persons through job turnover within (3) A description of actions to be two years of the time CDBG assistance taken by the recipient and business to is provided. Information upon which ensure that low and moderate income the job turnover projections were based persons receive first consideration for shall also be included in the record; those jobs; and (iii) For each retained job claimed to be held by a low and moderate income (B) A listing by job title of the per- person, information on the size and an- manent jobs filled, and which jobs of nual income of the person’s family; those were available to low and mod- (iv) For jobs claimed to be available erate income persons, and a description to low and moderate income persons of how first consideration was given to based on job turnover, a description such persons for those jobs. The de- covering the items required for ‘‘avail- scription shall include what hiring able to’’ jobs in paragraph (b)(5) of this process was used; which low and mod- section; and erate income persons were interviewed (v) Where jobs were claimed to be for a particular job; and which low and available to low and moderate income moderate income persons were hired. persons through turnover, a listing of (ii) Where the recipient chooses to each job which has turned over to date, document that at least 51 percent of indicating which of those jobs were ei- the jobs will be held by low and mod- ther taken by, or available to, low and erate income persons, documentation moderate income persons. For jobs for each assisted business shall include: made available, a description of how (A) A copy of a written agreement first consideration was given to such containing: persons for those jobs shall also be in- (1) A commitment by the business cluded in the record. that at least 51 percent of the jobs, on (7) For purposes of documenting, pur- a full-time equivalent basis, will be suant to paragraph (b)(5)(i)(B), held by low and moderate income per- (b)(5)(ii)(C), (b)(6)(iii) or (b)(6)(v) of this sons; and section, that the person for whom a job (2) A listing by job title of the perma- was either filled by or made available nent jobs to be created, identifying to a low- or moderate-income person which are part-time, if any; based upon the census tract where the (B) A listing by job title of the per- person resides or in which the business manent jobs filled and which jobs were is located, the recipient, in lieu of initially held by low and moderate in- maintaining records showing the per- come persons; and son’s family size and income, may sub- (C) For each such low and moderate stitute records showing either the per- income person hired, the size and an- son’s address at the time the deter- nual income of the person’s family mination of income status was made or

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the address of the business providing (12) For each activity determined to the job, as applicable, the census tract meet a community development need in which that address was located, the having a particular urgency: percent of persons residing in that (i) Documentation concerning the na- tract who either are in poverty or who ture and degree of seriousness of the are low- and moderate-income, as ap- condition requiring assistance; plicable, the data source used for deter- (ii) Evidence that the recipient cer- mining the percentage, and a descrip- tified that the CDBG activity was de- tion of the pervasive poverty and gen- signed to address the urgent need; eral distress in the census tract in suf- (iii) Information on the timing of the ficient detail to demonstrate how the development of the serious condition; census tract met the criteria in and § 570.208(a)(4)(v), as applicable. (iv) Evidence confirming that other (8) For each activity determined to financial resources to alleviate the aid in the prevention or elimination of need were not available. slums or blight based on addressing one (c) Records that demonstrate that or more of the conditions which quali- the recipient has made the determina- fied an area as a slum or blighted area: tions required as a condition of eligi- (i) The boundaries of the area; and bility of certain activities, as pre- (ii) A description of the conditions scribed in §§ 570.201(f), 570.201(i)(2), which qualified the area at the time of 570.201(p), 570.201(q), 570.202(b)(3), its designation in sufficient detail to 570.206(f), 570.209, 570.210, and 570.309. demonstrate how the area met the cri- (d) Records which demonstrate com- teria in § 570.208(b)(1). pliance with § 570.505 regarding any (9) For each residential rehabilita- change of use of real property acquired tion activity determined to aid in the or improved with CDBG assistance. prevention or elimination of slums or (e) Records that demonstrate compli- blight in a slum or blighted area: ance with the citizen participation re- (i) The local definition of ‘‘sub- quirements prescribed in 24 CFR part standard’’; 91, subpart B, for entitlement recipi- (ii) A pre-rehabilitation inspection ents, or in 24 CFR part 91, subpart C, report describing the deficiencies in for HUD-administered small cities re- each structure to be rehabilitated; and cipients. (iii) Details and scope of CDBG as- (f) Records which demonstrate com- sisted rehabilitation, by structure. pliance with the requirements in (10) For each activity determined to § 570.606 regarding acquisition, displace- aid in the prevention or elimination of ment, relocation, and replacement slums or blight based on the elimi- housing. nation of specific conditions of blight (g) Fair housing and equal oppor- or physical decay not located in a slum tunity records containing: or blighted area: (1) Documentation of the analysis of (i) A description of the specific condi- impediments and the actions the re- tion of blight or physical decay treat- cipient has carried out with its housing ed; and and community development and other (ii) For rehabilitation carried out resources to remedy or ameliorate any under this category, a description of impediments to fair housing choice in the specific conditions detrimental to the recipient’s community. public health and safety which were (2) Data on the extent to which each identified and the details and scope of racial and ethnic group and single- the CDBG assisted rehabilitation by headed households (by gender of house- structure. hold head) have applied for, partici- (11) For each activity determined to pated in, or benefited from, any pro- aid in the prevention or elimination of gram or activity funded in whole or in slums or blight based on addressing part with CDBG funds. Such informa- slums or blight in an urban renewal tion shall be used only as a basis for area, a copy of the Urban Renewal further investigation as to compliance Plan, as in effect at the time the activ- with nondiscrimination requirements. ity is carried out, including maps and No recipient is required to attain or supporting documentation. maintain any particular statistical

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measure by race, ethnicity, or gender not include preferring any business in in covered programs. the award of any contract or sub- (3) Data on employment in each of contract solely or in part on the basis the recipient’s operating units funded of race or gender. in whole or in part with CDBG funds, (7) Documentation of the affirmative with such data maintained in the cat- action measures the recipient has egories prescribed on the Equal Em- taken to overcome prior discrimina- ployment Opportunity Commission’s tion, where the courts or HUD have EEO–4 form; and documentation of any found that the recipient has previously actions undertaken to assure equal em- discriminated against persons on the ployment opportunities to all persons ground of race, color, national origin regardless of race, color, national ori- or sex in administering a program or gin, sex or handicap in operating units activity funded in whole or in part funded in whole or in part under this with CDBG funds. part. (h) Financial records, in accordance (4) Data indicating the race and eth- with the applicable requirements listed nicity of households (and gender of sin- in § 570.502, including source docu- gle heads of households) displaced as a mentation for entities not subject to result of CDBG funded activities, to- parts 84 and 85 of this title. Grantees gether with the address and census shall maintain evidence to support how tract of the housing units to which the CDBG funds provided to such enti- each displaced household relocated. ties are expended. Such documentation Such information shall be used only as must include, to the extent applicable, a basis for further investigation as to invoices, schedules containing com- compliance with nondiscrimination re- parisons of budgeted amounts and ac- quirements. No recipient is required to tual expenditures, construction attain or maintain any particular sta- progress schedules signed by appro- tistical measure by race, ethnicity, or priate parties (e.g., general contractor gender in covered programs. and/or a project architect), and/or (5) Documentation of actions under- other documentation appropriate to taken to meet the requirements of the nature of the activity. § 570.607(b) which implements section 3 (i) Agreements and other records re- of the Housing Development Act of lated to lump sum disbursements to 1968, as amended (12 U.S.C. 1701U) rel- private financial institutions for fi- ative to the hiring and training of low nancing rehabilitation as prescribed in and moderate income persons and the § 570.513; and use of local businesses. (j) Records required to be maintained (6) Data indicating the racial/ethnic in accordance with other applicable character of each business entity re- laws and regulations set forth in sub- ceiving a contract or subcontract of part K of this part. $25,000 or more paid, or to be paid, with CDBG funds, data indicating which of (Approved by the Office of Management and those entities are women’s business en- Budget under control number 2506–0077) terprises as defined in Executive Order [53 FR 34454, Sept. 6, 1988; 53 FR 41330, Oct. 21, 12138, the amount of the contract or 1988, as amended at 60 FR 1916, 1953, Jan. 5, subcontract, and documentation of re- 1995; 60 FR 56915, Nov. 9, 1995; 61 FR 18674, cipient’s affirmative steps to assure Apr. 29, 1996; 64 FR 38813, July 19, 1999; 70 FR that minority business and women’s 76370, Dec. 23, 2005] business enterprises have an equal opportunity to obtain or compete for con- § 570.507 Reports. tracts and subcontracts as sources of (a) Performance and evaluation re- supplies, equipment, construction and port—(1) Entitlement grant recipients and services. Such affirmative steps may HUD-administered small cities recipients include, but are not limited to, tech- in Hawaii. The annual performance and nical assistance open to all businesses evaluation report shall be submitted in but designed to enhance opportunities accordance with 24 CFR part 91. for these enterprises and special out- (2) HUD-administered Small Cities re- reach efforts to inform them of con- cipients in New York, and Hawaii recipi- tract opportunities. Such steps shall ents for pre-FY 1995 grants—(i) Content.

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Each performance and evaluation re- Urban Development Action Grants port must contain completed copies of shall submit to HUD, by April 30, a re- all forms and narratives prescribed by port on contracts and subcontract ac- HUD, including a summary of the cit- tivity during the first half of the fiscal izen comments received on the report. year and by October 31 a report on such (ii) Timing. The performance and activity during the second half of the evaluation report on each grant shall year. be submitted: (d) Other reports. Recipients may be (A) No later than October 31 for all required to submit such other reports grants executed before April 1 of the and information as HUD determines same calendar year. The first report are necessary to carry out its respon- should cover the period from the execu- sibilities under the Act or other appli- tion of the grant until September 30. cable laws. Reports on grants made after March 31 (Approved by the Office of Management and of a calendar year will be due October Budget under control numbers 2506–0077 for 31 of the following calendar year, and paragraph (a) and 2529–0008 for paragraph (b) the reports will cover the period of and 2506–0066 for paragraph (c)) time from the execution of the grant [53 FR 34456, Sept. 6, 1988, as amended at 60 until September 30 of the calendar year FR 1916, Jan. 5, 1995; 61 FR 32269, June 21, following grant execution. After the 1996] initial submission, the performance and evaluation report will be sub- § 570.508 Public access to program mitted annually on October 31 until records. completion of the activities funded Notwithstanding 24 CFR 85.42(f), re- under the grant; cipients shall provide citizens with rea- (B) Hawaii grantees will submit their sonable access to records regarding the small cities performance and evalua- past use of CDBG funds, consistent tion report for each pre-FY 1995 grant with applicable State and local laws re- no later than 90 days after the comple- garding privacy and obligations of con- tion of their most recent program year. fidentiality. After the initial submission, the performance and evaluation report will be § 570.509 Grant closeout procedures. submitted annually until completion of (a) Criteria for closeout. A grant will the activities funded under the grant; be closed out when HUD determines, in and consultation with the recipient, that (C) No later than 90 days after the the following criteria have been met: criteria for grant closeout, as described (1) All costs to be paid with CDBG in § 570.509(a), have been met. funds have been incurred, with the ex- (iii) Citizen comments on the report. ception of closeout costs (e.g., audit Each recipient shall make copies of the costs) and costs resulting from contin- performance and evaluation report gent liabilities described in the close- available to its citizens in sufficient out agreement pursuant to paragraph time to permit the citizens to com- (c) of this section. Contingent liabil- ment on the report before its submis- ities include, but are not limited to, sion to HUD. Each recipient may deter- third-party claims against the recipi- mine the specific manner and times the ent, as well as related administrative report will be made available to citi- costs. zens consistent with the preceding sen- (2) With respect to activities (such as tence. rehabilitation of privately owned prop- (b) Equal employment opportunity re- erties) which are financed by means of ports. Recipients of entitlement grants escrow accounts, loan guarantees, or or HUD-administered small cities similar mechanisms, the work to be as- grants shall submit to HUD each year a sisted with CDBG funds (but excluding report (HUD/EEO–4) on recipient em- program income) has actually been ployment containing data as of June completed. 30. (3) Other responsibilities of the re- (c) Minority business enterprise reports. cipient under the grant agreement and Recipients of entitlement grants, HUD- applicable laws and regulations appear administered small cities grants or to have been carried out satisfactorily

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or there is no further Federal interest (i) Compliance with all program re- in keeping the grant agreement open quirements, certifications and assur- for the purpose of securing perform- ances in using program income on de- ance. posit at the time the closeout agree- (b) Closeout actions. (1) Within 90 days ment is signed and in using any other of the date it is determined that the remaining CDBG funds available for criteria for closeout have been met, the closeout costs and contingent liabil- recipient shall submit to HUD a copy ities; of the final performance and evalua- (ii) Use of real property assisted with tion report described in 24 CFR part 91. CDBG funds in accordance with the If an acceptable report is not sub- principles described in § 570.505; mitted, an audit of the recipient’s (iii) Compliance with requirements grant activities may be conducted by governing program income received HUD. subsequent to grant closeout, as de- (2) Based on the information provided scribed in § 570.504(b)(4) and (5); and in the performance report and other (iv) Ensuring that flood insurance relevant information, HUD, in con- coverage for affected property owners sultation with the recipient, will pre- is maintained for the mandatory pe- pare a closeout agreement in accord- riod; ance with paragraph (c) of this section. (5) Other provisions appropriate to (3) HUD will cancel any unused por- any special circumstances of the grant tion of the awarded grant, as shown in closeout, in modification of or in addi- the signed grant closeout agreement. tion to the obligations in paragraphs Any unused grant funds disbursed from (c)(1) through (4) of this section. The the U.S. Treasury which are in the pos- agreement shall authorize monitoring session of the recipient shall be re- by HUD, and shall provide that find- funded to HUD. ings of noncompliance may be taken (4) Any costs paid with CDBG funds into account by HUD, as unsatisfactory which were not audited previously performance of the recipient, in the shall be subject to coverage in the re- consideration of any future grant cipient’s next single audit performed in award under this part. accordance with 24 CFR part 44. The re- (d) Status of consolidated plan after cipient may be required to repay HUD closeout. Unless otherwise provided in a any disallowed costs based on the re- closeout agreement, the Consolidated sults of the audit, or on additional Plan will remain in effect after close- HUD reviews provided for in the closeout until the expiration of the program out agreement. year covered by the last approved con- (c) Closeout agreement. Any obliga- solidated plan. tions remaining as of the date of the (e) Termination of grant for conven- closeout shall be covered by the terms ience. Grant assistance provided under of a closeout agreement. The agree- this part may be terminated for con- ment shall be prepared by the HUD venience in whole or in part before the field office in consultation with the re- completion of the assisted activities, in cipient. The agreement shall identify accordance with the provisions of 24 the grant being closed out, and include CFR 85.44. The recipient shall not incur provisions with respect to the fol- new obligations for the terminated por- lowing: tions after the effective date, and shall (1) Identification of any closeout cancel as many outstanding obliga- costs or contingent liabilities subject tions as possible. HUD shall allow full to payment with CDBG funds after the credit to the recipient for those por- closeout agreement is signed; tions of obligations which could not be (2) Identification of any unused grant canceled and which had been properly funds to be canceled by HUD; incurred by the recipient in carrying (3) Identification of any program in- out the activities before the termi- come on deposit in financial institu- nation. The closeout policies contained tions at the time the closeout agree- in this section shall apply in such ment is signed: cases, except where the approved grant (4) Description of the recipient’s re- is terminated in its entirety. Responsi- sponsibility after closeout for: bility for the environmental review to

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be performed under 24 CFR part 50 or 24 (3) The county’s responsibility for all CFR part 58, as applicable, shall be de- expenditures and unliquidated obliga- termined as part of the closeout proc- tions associated with the activities be- ess. fore the time of transfer, including a (f) Termination for cause. In cases in statement that responsibility for all which the Secretary terminates the re- audit and monitoring findings associ- cipient’s grant under the authority of ated with those expenditures and obli- subpart O of this part, or under the gations shall remain with the county; terms of the grant agreement, the (4) The responsibility of the metro- closeout policies contained in this sec- politan city for all other audit and tion shall apply, except where the ap- monitoring findings; proved grant is cancelled in its en- (5) How program income (if any) from tirety. The provisions in 24 CFR 85.43(c) the activities specified shall be divided on the effects of termination shall also between the metropolitan city and the apply. HUD shall determine whether an urban county; and environmental assessment or finding of (6) Such other provisions as may be inapplicability is required, and if such required by HUD. review is required, HUD shall perform (b) Upon receipt of a request for the it in accordance with 24 CFR part 50. transfer of funds from an urban county to a metropolitan city and a copy of [53 FR 8058, Mar. 11, 1988, as amended at 56 the executed agreement, HUD, in con- FR 56128, Oct. 31, 1991; 60 FR 1916, Jan. 5, 1995; sultation with the Department of the 60 FR 16379, Mar. 30, 1995] Treasury, shall establish a date upon which the funds shall be transferred § 570.510 Transferring projects from urban counties to metropolitan cit- from the letter of credit of the urban ies. county to the letter of credit of the metropolitan city, and shall take all Section 106(c)(3) of the Act authorizes necessary actions to effect the re- the Secretary to transfer unobligated quested transfer of funds. grant funds from an urban county to a (c) HUD shall notify the metropoli- new metropolitan city, provided: the tan city and urban county of any spe- city was an included unit of general cial audit and monitoring rules which local government in the urban county apply to the transferred funds when the immediately before its qualification as date of the transfer is communicated a metropolitan city; the funds to be to the city and the county. transferred were received by the county before the qualification of the city § 570.511 Use of escrow accounts for as a metropolitan city; the funds to be rehabilitation of privately owned transferred had been programmed by residential property. the urban county for use in the city be- (a) Limitations. A recipient may with- fore such qualification; and the city draw funds from its letter of credit for and county agree to transfer responsi- immediate deposit into an escrow ac- bility for the administration of the count for use in funding loans and funds being transferred from the coun- grants for the rehabilitation of pri- ty’s letter of credit to the city’s letter vately owned residential property of credit. The following rules apply to under § 570.202(a)(1). The following addi- the transfer of responsibility for an ac- tional limitations apply to the use of tivity from an urban county to the new escrow accounts for residential reha- metropolitan city. bilitation loans and grants closed after (a) The urban county and the metro- September 7, 1990: politan city must execute a legally (1) The use of escrow accounts under binding agreement which shall specify: this section is limited to loans and (1) The amount of funds to be trans- grants for the rehabilitation of pri- ferred from the urban county’s letter of marily residential properties con- credit to the metropolitan city’s letter taining no more than four dwelling of credit; units (and accessory neighborhood- (2) The activities to be carried out by scale non-residential space within the the city with the funds being trans- same structure, if any, e.g., a store ferred; front below a dwelling unit).

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(2) An escrow account shall not be est earned on escrow accounts is not used unless the contract between the required to be remitted to HUD to the property owner and the contractor se- extent the interest is attributable to lected to do the rehabilitation work the investment of program income. specifically provides that payment to (c) Remedies for noncompliance. If HUD the contractor shall be made through determines that a recipient has failed an escrow account maintained by the to use an escrow account in accordance recipient, by a subrecipient as defined with this section, HUD may, in addi- in § 570.500(c), by a public agency des- tion to imposing any other sanctions ignated under § 570.501(a), or by an provided for under this part, require agent under a procurement contact the recipient to discontinue the use of governed by the requirements of 24 escrow accounts, in whole or in part. CFR 85.36. No deposit to the escrow ac- [55 FR 32369, Aug. 8, 1990] count shall be made until after the contract has been executed between § 570.512 [Reserved] the property owner and the rehabilitation contractor. § 570.513 Lump sum drawdown for fi- (3) All funds withdrawn under this nancing of property rehabilitation section shall be deposited into one in- activities. terest earning account with a financial Subject to the conditions prescribed institution. Separate bank accounts in this section, recipients may draw shall not be established for individual funds from the letter of credit in a loans and grants. lump sum to establish a rehabilitation (4) The amount of funds deposited fund in one or more private financial into an escrow account shall be limited institutions for the purpose of financ- to the amount expected to be disbursed ing the rehabilitation of privately within 10 working days from the date owned properties. The fund may be of deposit. If the escrow account, for used in conjunction with various reha- whatever reason, at any time contains bilitation financing techniques, includ- funds exceeding 10 days cash needs, the ing loans, interest subsidies, loan guar- grantee immediately shall transfer the antees, loan reserves, or such other excess funds to its program account. In uses as may be approved by HUD con- the program account, the excess funds sistent with the objectives of this sec- shall be treated as funds erroneously tion. The fund may also be used for drawn in accordance with the require- making grants, but only for the pur- ments of U.S. Treasury Financial Man- pose of leveraging non-CDBG funds for ual, paragraph 6–2075.30. the rehabilitation of the same prop- (5) Funds deposited into an escrow erty. account shall be used only to pay the (a) Limitation on drawdown of grant actual costs of rehabilitation incurred funds. (1) The funds that a recipient de- by the owner under the contract with a posits to a rehabilitation fund shall not private contractor. Other eligible costs exceed the grant amount that the re- related to the rehabilitation loan or cipient reasonably expects will be re- grant, e.g., the recipient’s administra- quired, together with anticipated pro- tive costs under § 570.206 or rehabilita- gram income from interest and loan re- tion services costs under § 570.202(b)(9), payments, for the rehabilitation activi- are not permissible uses of escrowed ties during the period specified in the funds. Such other eligible rehabilita- agreement to undertake activities, tion costs shall be paid under normal based on either: CDBG payment procedures (e.g., from (i) Prior level of rehabilitation activ- withdrawals of grant funds under the ity; or recipient’s letter of credit with the (ii) Rehabilitation staffing and man- Treasury). agement capacity during the period (b) Interest. Interest earned on escrow specified in the agreement to under- accounts established in accordance take activities. with this section, less any service (2) No grant funds may be deposited charges for the account, shall be remit- under this section solely for the pur- ted to HUD at least quarterly but not pose of investment, notwithstanding more frequently than monthly. Inter- that the interest or other income is to

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be used for the rehabilitation activi- the deposit. In addition, substantial ties. disbursements from the fund must (3) The recipient’s rehabilitation pro- occur within 180 days of the receipt of gram administrative costs and the ad- the deposit. (Where CDBG funds are ministrative costs of the financial in- used as a guarantee, the funds that stitution may not be funded through must be substantially disbursed are the lump sum drawdown. Such costs must guaranteed funds.) For a recipient with be paid from periodic letter of credit an agreement specifying two years to withdrawals in accordance with stand- undertake activities, the disbursement ard procedures or from program in- of 25 percent of the fund (deposit plus come, other than program income gen- any interest earned) within 180 days erated by the lump sum distribution. will be regarded as meeting this re- (b) Standards to be met. The following quirement. If a recipient with an agree- standards shall apply to all lump sum ment specifying two years to under- drawdowns of CDBG funds for rehabili- take activities determines that it has tation: had substantial disbursement from the (1) Eligible rehabilitation activities. The fund within the 180 days although it rehabilitation fund shall be used to fi- had not met this 25 percent threshold, nance the rehabilitation of privately the justification for the recipient’s de- owned properties eligible under the termination shall be included in the general policies in § 570.200 and the spe- program file. Should use of deposited cific provisions of either § 570.202, in- funds not start within 45 days, or sub- cluding the acquisition of properties stantial disbursement from such fund for rehabilitation, or § 570.203. not occur within 180 days, the recipient (2) Requirements for agreement. The re- may be required by HUD to return all cipient shall execute a written agree- or part of the deposited funds to the re- ment with one or more private finan- cipient’s letter of credit. cial institutions for the operation of (5) Program activity. Recipients shall the rehabilitation fund. The agreement review the level of program activity on shall specify the obligations and re- a yearly basis. Where activity is sub- sponsibilities of the parties, the terms stantially below that anticipated, pro- and conditions on which CDBG funds are to be deposited and used or re- gram funds shall be returned to the returned, the anticipated level of reha- cipient’s letter of credit. bilitation activities by the financial in- (6) Termination of agreement. In the stitution, the rate of interest and other case of substantial failure by a private benefits to be provided by the financial financial institution to comply with institution in return for the lump sum the terms of a lump sum drawdown deposit, and such other terms as are agreement, the recipient shall termi- necessary for compliance with the pro- nate its agreement, provide written visions of this section. Upon execution justification for the action, withdraw of the agreement, a copy must be pro- all unobligated deposited funds from vided to the HUD field office for its the private financial institution, and record and use in monitoring. Any return the funds to the recipient’s let- modifications made during the term of ter of credit. the agreement must also be provided to (7) Return of unused deposits. At the HUD. end of the period specified in the agree- (3) Period to undertake activities. The ment for undertaking activities, all un- agreement must provide that the reha- obligated deposited funds shall be re- bilitation fund may only be used for turned to the recipient’s letter of cred- authorized activities during a period of it unless the recipient enters into a no more than two years. The lump sum new agreement conforming to the re- deposit shall be made only after the quirements of this section. In addition, agreement is fully executed. the recipient shall reserve the right to (4) Time limit on use of deposited funds. withdraw any unobligated deposited Use of the deposited funds for rehabili- funds required by HUD in the exercise tation financing assistance must start of corrective or remedial actions au- (e.g., first loan must be made, sub- thorized under § 570.910(b), § 570.911, sidized or guaranteed) within 45 days of § 570.912 or § 570.913.

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(8) Rehabilitation loans made with non- (C) Provision of administrative serv- CDBG funds. If the deposited funds or ices in support of the rehabilitation program income derived from deposited program by the participating financial funds are used to subsidize or guar- institution at no cost or at lower than antee repayment of rehabilitation actual cost. loans made with non-CDBG funds, or to (c) Program income. Interest earned on provide a supplemental loan or grant lump sum deposits and payments on to the borrower of the non-CDBG loans made from such deposits are pro- funds, the rehabilitation activities are gram income and, during the period of considered to be CDBG-assisted activi- the agreement, shall be used for reha- ties subject to the requirements appli- bilitation activities under the provi- cable to such activities, except that re- sions of this section. payment of non-CDBG funds shall not (d) Outstanding findings. Notwith- be treated as program income. standing any other provision of this (9) Provision of consideration. In con- section, no recipient shall enter into a sideration for the lump sum deposit by new agreement during any period of the recipient in a private financial in- time in which an audit or monitoring stitution, the deposit must result in finding on a previous lump sum draw- appropriate benefits in support of the down agreement remains unresolved. recipient’s local rehabilitation pro- (e) Prior notification. The recipient gram. Minimum requirements for such shall provide the HUD field office with benefits are: written notification of the amount of (i) Grantees shall require the finan- funds to be distributed to a private ficial institution to pay interest on the nancial institution before distribution lump sum deposit. under the provisions of this section. (A) The interest rate paid by the fi- (f) Recordkeeping requirements. The re- nancial institution shall be no more cipient shall maintain in its files a than three points below the rate on one copy of the written agreement and re- year Treasury obligations at constant lated documents establishing conform- maturity. ance with this section and concerning (B) When an agreement sets a fixed performance by a financial institution interest rate for the entire term of the in accordance with the agreement. agreement, the rate should be based on the rate at the time the agreement is excuted. Subpart K—Other Program (C) The agreement may provide for Requirements an interest rate that would fluctuate periodically during the term of the SOURCE: 53 FR 34456, Sept. 6, 1988, unless agreement, but at no time shall the otherwise noted. rate be established at more than three points below the rate on one year § 570.600 General. Treasury obligations at constant matu- (a) This subpart K enumerates laws rity. that the Secretary will treat as appli- (ii) In addition to the payment of in- cable to grants made under section 106 terest, at least one of the following of the Act, other than grants to states benefits must be provided by the finan- made pursuant to section 106(d) of the cial institution: Act, for purposes of the Secretary’s de- (A) Leverage of the deposited funds terminations under section 104(e)(1) of so that the financial institution com- the Act, including statutes expressly mits private funds for loans in the re- made applicable by the Act and certain habilitation program in an amount other statutes and Executive Orders for substantially in excess of the amount which the Secretary has enforcement of the lump sum deposit; responsibility. This subpart K applies (B) Commitment of private funds by to grants made under the Insular Areas the financial institution for rehabilita- Program in § 570.405 and § 570.440 with tion loans at below market interest the exception of § 570.612. The absence rates, at higher than normal risk, or of mention herein of any other statute with longer than normal repayment pe- for which the Secretary does not have riods; or direct enforcement responsibility is

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not intended to be taken as an indica- within its jurisdiction, taking appro- tion that, in the Secretary’s opinion, priate actions to overcome the effects such statute or Executive Order is not of any impediments identified through applicable to activities assisted under that analysis, and maintaining records the Act. For laws that the Secretary reflecting the analysis and actions in will treat as applicable to grants made this regard. to states under section 106(d) of the Act (b) Executive Order 11063, as amended for purposes of the determination re- by Executive Order 12259 (3 CFR, 1959– quired to be made by the Secretary 1963 Comp., p. 652; 3 CFR, 1980 Comp., p. pursuant to section 104(e)(2) of the Act, 307) (Equal Opportunity in Housing), see § 570.487. and implementing regulations in 24 (b) This subpart also sets forth cer- CFR part 107, also apply. tain additional program requirements [61 FR 11477, Mar. 20, 1996] which the Secretary has determined to be applicable to grants provided under § 570.602 Section 109 of the Act. the Act as a matter of administrative discretion. Section 109 of the Act requires that (c) In addition to grants made pursu- no person in the United States shall on ant to section 106(b) and 106(d)(2)(B) of the grounds of race, color, national ori- the Act (subparts D and F, respec- gin, religion, or sex be excluded from tively), the requirements of this sub- participation in, be denied the benefits part K are applicable to grants made of, or be subjected to discrimination pursuant to sections 107 and 119 of the under any program or activity receiv- Act (subparts E and G, respectively), ing Federal financial assistance made and to loans guaranteed pursuant to available pursuant to the Act. Section subpart M. 109 also directs that the prohibitions against discrimination on the basis of [53 FR 34456, Sept. 6, 1988, as amended at 61 age under the Age Discrimination Act FR 11477, Mar. 20, 1996; 72 FR 12536, Mar. 15, and the prohibitions against discrimi- 2007] nation on the basis of disability under § 570.601 Public Law 88–352 and Public Section 504 shall apply to programs or Law 90–284; affirmatively fur- activities receiving Federal financial thering fair housing; Executive assistance under Title I programs. The Order 11063. policies and procedures necessary to (a) The following requirements apply ensure enforcement of section 109 are according to sections 104(b) and 107 of codified in 24 CFR part 6. the Act: [64 FR 3802, Jan. 25, 1999] (1) Public Law 88–352, which is title VI of the Civil Rights Act of 1964 (42 § 570.603 Labor standards. U.S.C. 2000d et seq.), and implementing (a) Section 110(a) of the Act contains regulations in 24 CFR part 1. labor standards that apply to nonvol- (2) Public Law 90–284, which is the unteer labor financed in whole or in Fair Housing Act (42 U.S.C. 3601–3620). part with assistance received under the In accordance with the Fair Housing Act. In accordance with section 110(a) Act, the Secretary requires that grant- of the Act, the Contract Work Hours ees administer all programs and activi- and Safety Standards Act (40 U.S.C. 327 ties related to housing and community et seq.) also applies. However, these redevelopment in a manner to affirma- quirements apply to the rehabilitation tively further the policies of the Fair of residential property only if such Housing Act. Furthermore, in accord- property contains not less than 8 units. ance with section 104(b)(2) of the Act, (b) The regulations in 24 CFR part 70 for each community receiving a grant apply to the use of volunteers. under subpart D of this part, the certification that the grantee will affirm- [61 FR 11477, Mar. 20, 1996] atively further fair housing shall specifically require the grantee to assume § 570.604 Environmental standards. the responsibility of fair housing plan- For purposes of section 104(g) of the ning by conducting an analysis to iden- Act, the regulations in 24 CFR part 58 tify impediments to fair housing choice specify the other provisions of law

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which further the purposes of the Na- property, permanently and involun- tional Environmental Policy Act of tarily, as a direct result of rehabilita- 1969, and the procedures by which tion, demolition, or acquisition for an grantees must fulfill their environ- activity assisted under this part. A per- mental responsibilities. In certain manent, involuntary move for an as- cases, grantees assume these environ- sisted activity includes a permanent mental review, decisionmaking, and move from real property that is made: action responsibilities by execution of (A) After notice by the grantee (or grant agreements with the Secretary. the state recipient, if applicable) to [61 FR 11477, Mar. 20, 1996] move permanently from the property, if the move occurs after the initial offi- § 570.605 National Flood Insurance cial submission to HUD (or the State, Program. as applicable) for grant, loan, or loan Notwithstanding the date of HUD ap- guarantee funds under this part that proval of the recipient’s application are later provided or granted. (or, in the case of grants made under (B) After notice by the property subpart D of this part or HUD-adminis- owner to move permanently from the tered small cities recipients in Hawaii, property, if the move occurs after the the date of submission of the grantee’s date of the submission of a request for consolidated plan, in accordance with financial assistance by the property 24 CFR part 91), section 202(a) of the owner (or person in control of the site) Flood Disaster Protection Act of 1973 that is later approved for the requested (42 U.S.C. 4106) and the regulations in activity. 44 CFR parts 59 through 79 apply to (C) Before the date described in para- funds provided under this part 570. graph (b)(2)(i)(A) or (B) of this section, if either HUD or the grantee (or State, [61 FR 11477, Mar. 20, 1996] as applicable) determines that the dis- § 570.606 Displacement, relocation, ac- placement directly resulted from acquisition, and replacement of hous- quisition, rehabilitation, or demolition ing. for the requested activity. (a) General policy for minimizing dis- (D) After the ‘‘initiation of negotia- placement. Consistent with the other tions’’ if the person is the tenant-occu- goals and objectives of this part, grant- pant of a dwelling unit and any one of ees (or States or state recipients, as ap- the following three situations occurs: plicable) shall assure that they have (1) The tenant has not been provided taken all reasonable steps to minimize with a reasonable opportunity to lease the displacement of persons (families, and occupy a suitable decent, safe, and individuals, businesses, nonprofit orga- sanitary dwelling in the same building/ nizations, and farms) as a result of ac- complex upon the completion of the tivities assisted under this part. project, including a monthly rent that (b) Relocation assistance for displaced does not exceed the greater of the ten- persons at URA levels. (1) A displaced ant’s monthly rent and estimated aver- person shall be provided with reloca- age utility costs before the initiation tion assistance at the levels described of negotiations or 30 percent of the in, and in accordance with the require- household’s average monthly gross in- ments of 49 CFR part 24, which con- come; or tains the government-wide regulations (2) The tenant is required to relocate implementing the Uniform Relocation temporarily for the activity but the Assistance and Real Property Acquisi- tenant is not offered payment for all tion Policies Act of 1970 (URA) (42 reasonable out-of-pocket expenses in- U.S.C. 4601–4655). curred in connection with the tem- (2) Displaced person. (i) For purposes porary relocation, including the cost of of paragraph (b) of this section, the moving to and from the temporary lo- term ‘‘displaced person’’ means any per- cation and any increased housing costs, son (family, individual, business, non- or other conditions of the temporary profit organization, or farm) that relocation are not reasonable; and the moves from real property, or moves his tenant does not return to the building/ or her personal property from real complex; or

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(3) The tenant is required to move to permit the state recipient to provide, another unit in the building/complex, as applicable) relocation payments and but is not offered reimbursement for other relocation assistance to persons all reasonable out-of-pocket expenses displaced by activities that are not incurred in connection with the move. subject to paragraph (b) or (c) of this (ii) Notwithstanding the provisions of section. The grantee may also provide paragraph (b)(2)(i) of this section, the (or the State may also permit the state term ‘‘displaced person-’’ does not in- recipient to provide, as applicable) re- clude: location assistance to persons receiv- (A) A person who is evicted for cause ing assistance under paragraphs (b) or based upon serious or repeated viola- (c) of this section at levels in excess of tions of material terms of the lease or those required by these paragraphs. occupancy agreement. To exclude a Unless such assistance is provided person on this basis, the grantee (or under State or local law, the grantee State or state recipient, as applicable) (or state recipient, as applicable) shall must determine that the eviction was provide such assistance only upon the not undertaken for the purpose of evad- basis of a written determination that ing the obligation to provide relocation the assistance is appropriate (see, e.g., assistance under this section; 24 CFR 570.201(i), as applicable). The (B) A person who moves into the grantee (or state recipient, as applica- property after the date of the notice ble) must adopt a written policy avail- described in paragraph (b)(2)(i)(A) or able to the public that describes the re- (B) of this section, but who received a location assistance that the grantee (or written notice of the expected displace- state recipient, as applicable) has ment before occupancy. elected to provide and that provides for (C) A person who is not displaced as equal relocation assistance within each described in 49 CFR 24.2(g)(2). class of displaced persons. (D) A person who the grantee (or (e) Acquisition of real property. The ac- State, as applicable) determines is not quisition of real property for an as- displaced as a direct result of the ac- sisted activity is subject to 49 CFR quisition, rehabilitation, or demolition part 24, subpart B. for an assisted activity. To exclude a (f) Appeals. If a person disagrees with person on this basis, HUD must concur the determination of the grantee (or in that determination. the state recipient, as applicable) con- (iii) A grantee (or State or state re- cerning the person’s eligibility for, or cipient, as applicable) may, at any the amount of, a relocation payment time, request HUD to determine wheth- under this section, the person may file er a person is a displaced person under a written appeal of that determination this section. with the grantee (or state recipient, as (3) Initiation of negotiations. For pur- applicable). The appeal procedures to poses of determining the type of re- be followed are described in 49 CFR placement housing assistance to be 24.10. In addition, a low- or moderate- provided under paragraph (b) of this income household that has been dis- section, if the displacement is the di- placed from a dwelling may file a writ- rect result of privately undertaken reten request for review of the grantee’s habilitation, demolition, or acquisition decision to the HUD Field Office. For of real property, the term ‘‘initiation of purposes of the State CDBG program, a negotiations’’ means the execution of low- or moderate-income household the grant or loan agreement between may file a written request for review of the grantee (or State or state recipi- the state recipient’s decision with the ent, as applicable) and the person own- State. ing or controlling the real property. (g) Responsibility of grantee or State. (c) Residential antidisplacement and re- (1) The grantee (or State, if applicable) location assistance plan. The grantee is responsible for ensuring compliance shall comply with the requirements of with the requirements of this section, 24 CFR part 42, subpart B. notwithstanding any third party’s con- (d) Optional relocation assistance. tractual obligation to the grantee to Under section 105(a)(11) of the Act, the comply with the provisions of this sec- grantee may provide (or the State may tion. For purposes of the State CDBG

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program, the State shall require state § 570.609 Use of debarred, suspended recipients to certify that they will or ineligible contractors or sub- comply with the requirements of this recipients. section. The requirements set forth in 24 CFR (2) The cost of assistance required part 5 apply to this program. under this section may be paid from [61 FR 5209, Feb. 9, 1996] local public funds, funds provided under this part, or funds available from § 570.610 Uniform administrative re- other sources. quirements and cost principles. (3) The grantee (or State and state The recipient, its agencies or instru- recipient, as applicable) must maintain mentalities, and subrecipients shall records in sufficient detail to dem- comply with the policies, guidelines, onstrate compliance with the provi- and requirements of 24 CFR part 85 and sions of this section. OMB Circulars A–87, A–110 (implemented at 24 CFR part 84), A–122, A–133 (Approved by the Office of Management and (implemented at 24 CFR part 45), and Budget under OMB control number 2506–0102) A–128 2 (implemented at 24 CFR part [61 FR 11477, Mar. 20, 1996, as amended at 61 44), as applicable, as they relate to the FR 51760, Oct. 3, 1996] acceptance and use of Federal funds under this part. The applicable sections § 570.607 Employment and contracting of 24 CFR parts 84 and 85 are set forth opportunities. at § 570.502. To the extent that they are otherwise [60 FR 56916, Nov. 9, 1995] applicable, grantees shall comply with: (a) Executive Order 11246, as amended § 570.611 Conflict of interest. by Executive Orders 11375, 11478, 12086, (a) Applicability. (1) In the procure- and 12107 (3 CFR 1964–1965 Comp. p. 339; ment of supplies, equipment, construc- 3 CFR, 1966–1970 Comp., p. 684; 3 CFR, tion, and services by recipients and by 1966–1970., p. 803; 3 CFR, 1978 Comp., p. subrecipients, the conflict of interest 230; 3 CFR, 1978 Comp., p. 264 (Equal provisions in 24 CFR 85.36 and 24 CFR Employment Opportunity), and Execu- 84.42, respectively, shall apply. tive Order 13279 (Equal Protection of (2) In all cases not governed by 24 the Laws for Faith-Based and Commu- CFR 85.36 and 84.42, the provisions of nity Organizations), 67 FR 77141, 3 CFR, this section shall apply. Such cases in- 2002 Comp., p. 258; and the imple- clude the acquisition and disposition of real property and the provision of as- menting regulations at 41 CFR chapter sistance by the recipient or by its sub- 60; and recipients to individuals, businesses, (b) Section 3 of the Housing and and other private entities under eligi- Urban Development Act of 1968 (12 ble activities that authorize such as- U.S.C. 1701u) and implementing regula- sistance (e.g., rehabilitation, preserva- tions at 24 CFR part 135. tion, and other improvements of pri- [68 FR 56405, Sept. 30, 2003] vate properties or facilities pursuant to § 570.202; or grants, loans, and other as- § 570.608 Lead-based paint. sistance to businesses, individuals, and other private entities pursuant to The Lead-Based Paint Poisoning Pre- § 570.203, 570.204, 570.455, or 570.703(i)). vention Act (42 U.S.C. 4821–4846), the (b) Conflicts prohibited. The general Residential Lead-Based Paint Hazard rule is that no persons described in Reduction Act of 1992 (42 U.S.C. 4851– paragraph (c) of this section who exer- 4856), and implementing regulations at cise or have exercised any functions or part 35, subparts A, B, J, K, and R of responsibilities with respect to CDBG this part apply to activities under this activities assisted under this part, or program. who are in a position to participate in a decisionmaking process or gain in- [64 FR 50226, Sept. 15, 1999] side information with regard to such

2 See footnote 1 at § 570.200(a)(5).

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activities, may obtain a financial in- account the cumulative effect of the terest or benefit from a CDBG-assisted following factors, as applicable: activity, or have a financial interest in (i) Whether the exception would pro- any contract, subcontract, or agree- vide a significant cost benefit or an es- ment with respect to a CDBG-assisted sential degree of expertise to the pro- activity, or with respect to the program or project that would otherwise ceeds of the CDBG-assisted activity, ei- not be available; ther for themselves or those with (ii) Whether an opportunity was pro- whom they have business or immediate vided for open competitive bidding or family ties, during their tenure or for negotiation; one year thereafter. For the UDAG pro- (iii) Whether the person affected is a gram, the above restrictions shall member of a group or class of low- or apply to all activities that are a part of moderate-income persons intended to the UDAG project, and shall cover any be the beneficiaries of the assisted ac- such financial interest or benefit dur- tivity, and the exception will permit ing, or at any time after, such person’s such person to receive generally the tenure. same interests or benefits as are being (c) Persons covered. The conflict of in- made available or provided to the terest provisions of paragraph (b) of group or class; this section apply to any person who is (iv) Whether the affected person has an employee, agent, consultant, officer, withdrawn from his or her functions or or elected official or appointed official responsibilities, or the decisionmaking of the recipient, or of any designated process with respect to the specific as- public agencies, or of subrecipients sisted activity in question; that are receiving funds under this (v) Whether the interest or benefit part. was present before the affected person (d) Exceptions. Upon the written re- was in a position as described in para- quest of the recipient, HUD may grant graph (b) of this section; an exception to the provisions of para- (vi) Whether undue hardship will re- graph (b) of this section on a case-by- sult either to the recipient or the per- case basis when it has satisfactorily son affected when weighed against the met the threshold requirements of public interest served by avoiding the (d)(1) of this section, taking into ac- prohibited conflict; and count the cumulative effects of para- (vii) Any other relevant consider- graph (d)(2) of this section. ations. (1) Threshold requirements. HUD will [60 FR 56916, Nov. 9, 1995] consider an exception only after the recipient has provided the following doc- § 570.612 Executive Order 12372. umentation: (a) General. Executive Order 12372, (i) A disclosure of the nature of the Intergovernmental Review of Federal conflict, accompanied by an assurance Programs, and the Department’s imple- that there has been public disclosure of menting regulations at 24 CFR part 52, the conflict and a description of how allow each State to establish its own the public disclosure was made; and process for review and comment on (ii) An opinion of the recipient’s at- proposed Federal financial assistance torney that the interest for which the programs. exception is sought would not violate (b) Applicability. Executive Order State or local law. 12372 applies to the CDBG Entitlement (2) Factors to be considered for excep- program and the UDAG program. The tions. In determining whether to grant Executive Order applies to all activi- a requested exception after the recipi- ties proposed to be assisted under ent has satisfactorily met the require- UDAG, but it applies to the Entitle- ments of paragraph (d)(1) of this sec- ment program only where a grantee tion, HUD shall conclude that such an proposes to use funds for the planning exception will serve to further the pur- or construction (reconstruction or in- poses of the Act and the effective and stallation) of water or sewer facilities. efficient administration of the recipi- Such facilities include storm sewers as ent’s program or project, taking into well as all sanitary sewers, but do not

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include water and sewer lines con- ministered under subpart I of part 570 necting a structure to the lines in the of this title until closeout of the unit public right-of-way or easement. It is of general local government’s grant by the responsibility of the grantee to ini- the State. tiate the Executive Order review proc- (4) The Urban Development Action ess if it proposes to use its CDBG or Grants program, administered under UDAG funds for activities subject to subpart G of part 570 of this title until review. closeout of the recipient’s grant.

§ 570.613 Eligibility restrictions for [55 FR 18494, May 2, 1990] certain resident aliens. § 570.614 Architectural Barriers Act (a) Restriction. Certain newly legal- and the Americans with Disabilities ized aliens, as described in 24 CFR part Act. 49, are not eligible to apply for benefits (a) The Architectural Barriers Act of under covered activities funded by the 1968 (42 U.S.C. 4151–4157) requires cer- programs listed in paragraph (e) of this tain Federal and Federally funded section. ‘‘Benefits’’ under this section buildings and other facilities to be de- means financial assistance, public serv- signed, constructed, or altered in ac- ices, jobs and access to new or rehabili- cordance with standards that insure tated housing and other facilities made accessibility to, and use by, physically available under covered activities fund- handicapped people. A building or facil- ed by programs listed in paragraph (e) ity designed, constructed, or altered of this section. ‘‘Benefits’’ do not in- with funds allocated or reallocated clude relocation services and payments under this part after December 11, 1995, to which displacees are entitled by law. and that meets the definition of ‘‘resi- (b) Covered activities. ‘‘Covered activi- dential structure’’ as defined in 24 CFR ties’’ under this section means activi- 40.2 or the definition of ‘‘building’’ as ties meeting the requirements of defined in 41 CFR 101–19.602(a) is sub- § 570.208(a) that either: ject to the requirements of the Archi- (1) Have income eligibility require- tectural Barriers Act of 1968 (42 U.S.C. ments limiting the benefits exclusively 4151–4157) and shall comply with the to low and moderate income persons; Uniform Federal Accessibility Stand- or ards (appendix A to 24 CFR part 40 for (2) Are targeted geographically or residential structures, and appendix A otherwise to primarily benefit low and to 41 CFR part 101–19, subpart 101–19.6, moderate income persons (excluding for general type buildings). activities serving the public at large, (b) The Americans with Disabilities such as sewers, roads, sidewalks, and Act (42 U.S.C. 12131; 47 U.S.C. 155, 201, parks), and that provide benefits to 218 and 225) (ADA) provides comprehen- persons on the basis of an application. sive civil rights to individuals with dis- (c) Limitation on coverage. The restric- abilities in the areas of employment, tions under this section apply only to public accommodations, State and applicants for new benefits not being local government services, and tele- received by covered resident aliens as communications. It further provides of the effective date of this section. that discrimination includes a failure (d) Compliance. Compliance can be ac- to design and construct facilities for complished by obtaining certification first occupancy no later than January as provided in 24 CFR 49.20. 26, 1993, that are readily accessible to (e) Programs affected. (1) The Commu- and usable by individuals with disabil- nity Development Block Grant pro- ities. Further, the ADA requires the re- gram for small cities, administered moval of architectural barriers and under subpart F of part 570 of this title communication barriers that are struc- until closeout of the recipient’s grant. tural in nature in existing facilities, (2) The Community Development where such removal is readily achiev- Block Grant program for entitlement able—that is, easily accomplishable grants, administered under subpart D and able to be carried out without of part 570 of this title. much difficulty or expense. (3) The Community Development Block Grant program for States, ad- [60 FR 56917, Nov. 9, 1995]

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Subpart L [Reserved] and § 570.705(b)(2) or pursuant to § 570.711. Subpart M—Loan Guarantees [59 FR 66604, Dec. 27, 1994, as amended at 61 FR 11481, Mar. 20, 1996; 74 FR 36389, July 22, 2009] SOURCE: 59 FR 66604, Dec. 27, 1994, unless otherwise noted. § 570.702 Eligible applicants. § 570.700 Purpose. The following public entities may apply for loan guarantee assistance This subpart contains requirements under this subpart. governing the guarantee under section (a) Entitlement public entities. 108 of the Act of debt obligations as de- (b) Nonentitlement public entities fined in § 570.701. that are assisted in the submission of applications by States that administer § 570.701 Definitions. the CDBG program (under subpart I of Borrower means the public entity or this part). Such assistance shall con- its designated public agency or the sist, at a minimum, of the certifi- State that issues debt obligations cations required under § 570.704(b)(9) under this subpart. (and actions pursuant thereto). Debt obligation means a promissory (c) Nonentitlement public entities el- note or other obligation issued by a igible to apply for grant assistance public entity or its designated public under subpart F of this part. agency or by a State and guaranteed by HUD under this subpart, or a trust § 570.703 Eligible activities. certificate or other obligation offered Guaranteed loan funds may be used by HUD or by a trust or other offeror for the following activities, provided approved for purposes of this subpart such activities meet the requirements by HUD, which is guaranteed by HUD of § 570.200. However, guaranteed loan under this subpart and is based on and funds may not be used to reimburse the backed by a trust or pool composed of CDBG program account or line of cred- notes or other obligations issued by it for costs incurred by the public enti- public entities or their designated pub- ty or designated public agency and paid lic agencies or by States and guaran- with CDBG grant funds or program in- teed or eligible for guarantee by HUD come. under this subpart. (a) Acquisition of improved or unim- Designated public agency means a pub- proved real property in fee or by long- lic agency designated by a public enti- term lease, including acquisition for ty to issue debt obligations as borrower economic development purposes. under this subpart. (b) Rehabilitation of real property Entitlement public entity means a met- owned or acquired by the public entity ropolitan city or an urban county re- or its designated public agency. ceiving a grant under subpart D of this (c) Payment of interest on obliga- part. tions guaranteed under this subpart. Guaranteed loan funds means the pro- (d) Relocation payments and other ceeds payable to the borrower from the relocation assistance for individuals, issuance of debt obligations under this families, businesses, nonprofit organi- subpart and includes funds received by zations, and farm operations who must a nonentitlement public entity from a relocate permanently or temporarily State under § 570.711. as a result of an activity financed with Nonentitlement public entity means guaranteed loan funds, where the as- any unit of general local government sistance is: in a nonentitlement area. (1) Required under the provisions of Public entity shall have the meaning § 570.606(b) or (c); or provided for the term ‘‘Eligible public (2) Determined by the public entity entity’’ in section 108(o) of the Act. to be appropriate under the provisions State-assisted public entity means a of § 570.606(d). unit of general local government in a (e) Clearance, demolition, and re- nonentitlement area which is assisted moval, including movement of struc- by a State as required in § 570.704(b)(9) tures to other sites and remediation of

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properties with known or suspected en- and remediation of known or suspected vironmental contamination, of build- environmental contamination in con- ings and improvements on real prop- junction with these activities. Remedi- erty acquired or rehabilitated pursuant ation may include project-specific en- to paragraphs (a) and (b) of this sec- vironmental assessment costs not oth- tion. Remediation may include project- erwise eligible under § 570.205. specific environmental assessment (m) In the case of applications by costs not otherwise eligible under public entities which are, or which con- § 570.205. tain, ‘‘colonias’’ as defined in section (f) Site preparation, including con- 916 of the Cranston-Gonzalez National struction, reconstruction, installation Affordable Housing Act (42 U.S.C. 5306 of public and other site improvements, note), as amended by section 810 of the utilities or facilities (other than build- Housing and Community Development ings), or remediation of properties (re- Act of 1992, acquisition, construction, mediation can include project-specific reconstruction, rehabilitation or in- environmental assessment costs not stallation of public works and site or otherwise eligible under § 570.205) with other improvements which serve the known or suspected environmental colonia. contamination, which is: (1) Related to the redevelopment or [59 FR 66604, Dec. 27, 1994, as amended at 61 FR 11481, Mar. 20, 1996; 71 FR 30036, May 24, use of the real property acquired or re- 2006] habilitated pursuant to paragraphs (a) and (b) of this section, or § 570.704 Application requirements. (2) For an economic development purpose. (a) Presubmission and citizen participa- (g) Payment of issuance, under- tion requirements. (1) Before submission writing, servicing, trust administra- of an application for loan guarantee as- tion and other costs associated with sistance to HUD, the public entity private sector financing of debt obliga- must: tions under this subpart. (i) Develop a proposed application (h) Housing rehabilitation eligible that includes the following items: under § 570.202. (A) The community development ob- (i) The following economic develop- jectives the public entity proposes to ment activities: pursue with the guaranteed loan funds. (1) Activities eligible under § 570.203; (B) The activities the public entity and proposes to carry out with the guaran- (2) Community economic develop- teed loan funds. Each activity must be ment projects eligible under § 570.204. described in sufficient detail, including (j) Construction of housing by non- the specific provision of § 570.703 under profit organizations for homeownership which it is eligible and the national ob- under section 17(d) of the United States jective to be met, amount of guaran- Housing Act of 1937 (Housing Develop- teed loan funds expected to be used, ment Grants Program, 24 CFR part 850) and location, to allow citizens to deter- or title VI of the Housing and Commu- mine the degree to which they will be nity Development Act of 1987 (Nehe- affected. The proposed application miah Housing Opportunity Grants Pro- must indicate which activities are ex- gram, 24 CFR part 280). pected to generate program income. (k) A debt service reserve to be used The application must also describe in accordance with requirements speci- where citizens may obtain additional fied in the contract entered into pursu- information about proposed activities. ant to § 570.705(b)(1). (C) A description of the pledge of (l) Acquisition, construction, recon- grants required under § 570.705(b)(2). In struction, rehabilitation or historic the case of applications by State-as- preservation, or installation of public sisted public entities, the description facilities (except for buildings for the shall note that pledges of grants will be general conduct of government) to the made by the State and by the public extent eligible under § 570.201(c), in- entity. cluding public streets, sidewalks, other (ii) Fulfill the applicable require- site improvements and public utilities, ments in its citizen participation plan

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developed in accordance with for the consolidated plan, modified to § 570.704(a)(2). include guaranteed loan funds. The (iii) Publish community-wide its pro- public entity is not required to hold a posed application so as to afford af- separate public hearing for its consoli- fected citizens an opportunity to exam- dated plan and for the guaranteed loan ine the application’s contents and to funds to obtain citizens’ views on com- provide comments on the proposed ap- munity development and housing plication. needs. The plan must set forth the pub- (iv) Prepare its final application. lic entity’s policies and procedures for: Once the public entity has held the (i) Giving citizens timely notice of public hearing and published the pro- local meetings and reasonable and posed application as required by para- timely access to local meetings, infor- graphs (a)(1)(ii) and (iii) of this section, mation, and records relating to the respectively, the public entity must public entity’s proposed and actual use consider any such comments and views of guaranteed loan funds, including, received and, if the public entity deems appropriate, modify the proposed appli- but not limited to: cation. Upon completion, the public en- (A) The amount of guaranteed loan tity must make the final application funds expected to be made available for available to the public. The final appli- the coming year, including program in- cation must describe each activity in come anticipated to be generated by sufficient detail to permit a clear un- the activities carried out with guaran- derstanding of the nature of each activ- teed loan funds; ity, as well as identify the specific pro- (B) The range of activities that may vision of § 570.703 under which it is eli- be undertaken with guaranteed loan gible, the national objective to be met, funds; and the amount of guaranteed loan (C) The estimated amount of guaran- funds to be used. The final application teed loan funds (including program in- must also indicate which activities are come derived therefrom) proposed to be expected to generate program income. used for activities that will benefit low (v) If an application for loan guar- and moderate income persons; antee assistance is to be submitted by (D) The proposed activities likely to an entitlement or nonentitlement pub- result in displacement and the public lic entity simultaneously with the pub- entity’s plans, consistent with the poli- lic entity’s submission for its grant, cies developed under § 570.606 for mini- the public entity shall include and mizing displacement of persons as a re- identify in its proposed and final consult of its proposed activities. solidated plan the activities to be un- (ii) Providing technical assistance to dertaken with the guaranteed loan groups representative of persons of low funds, the national objective to be met and moderate income that request as- by each of these activities, the amount of any program income expected to be sistance in developing proposals. The received during the program year, and level and type of assistance to be pro- the amount of guaranteed loan funds to vided is at the discretion of the public be used. The public entity shall also in- entity. Such assistance need not include in the consolidated plan a de- clude the provision of funds to such scription of the pledge of grants, as re- groups. quired under § 570.705(b)(2). In such (iii) Holding a minimum of two pub- cases the proposed and final applica- lic hearings, each at a different stage tion requirements of paragraphs of the public entity’s program, for the (a)(1)(i), (iii), and (iv) of this section purpose of obtaining the views of citi- will be deemed to have been met. zens and formulating or responding to (2) Citizen participation plan. The pub- proposals and questions. Together the lic entity must develop and follow a de- hearings must address community detailed citizen participation plan and velopment and housing needs, develop- make the plan public. The plan must be ment of proposed activities and review completed and available before the ap- of program performance. At least one plication is submitted to HUD. The of these hearings must be held before plan may be the citizen plan required submission of the application to obtain

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the views of citizens on community de- identifying the entity that will act as velopment and housing needs. Reason- borrower and issue the debt obliga- able notice of the hearing must be pro- tions. vided and the hearing must be held at (3) A certification providing assur- times and locations convenient to po- ance that the public entity possesses tential or actual beneficiaries, with ac- the legal authority to make the pledge commodation for the handicapped. The of grants required under § 570.705(b)(2). public entity must specify in its plan (4) A certification providing assur- how it will meet the requirement for a ance that the public entity has made hearing at times and locations conven- efforts to obtain financing for activi- ient to potential or actual bene- ties described in the application with- ficiaries. out the use of the loan guarantee, the (iv) Meeting the needs of non-English public entity will maintain documenta- speaking residents in the case of public tion of such efforts for the term of the hearings where a significant number of loan guarantee, and the public entity non-English speaking residents can cannot complete such financing con- reasonably be expected to participate. sistent with the timely execution of (v) Providing affected citizens with the program plans without such guar- reasonable advance notice of, and op- antee. portunity to comment on, proposed ac- (5)–(6) [Reserved] tivities not previously included in an (7) The anti-lobbying statement re- application and activities which are quired under 24 CFR part 87 (appendix proposed to be deleted or substantially A). changed in terms of purpose, scope, location, or beneficiaries. The criteria (8) Certifications by the public entity the public entity will use to determine that: what constitutes a substantial change (i) It possesses the legal authority to for this purpose must be described in submit the application for assistance the citizen participation plan. under this subpart and to use the guar- (vi) Responding to citizens’ com- anteed loan funds in accordance with plaints and grievances, including the the requirements of this subpart. procedures that citizens must follow (ii) Its governing body has duly when submitting complaints and griev- adopted or passed as an official act a ances. The public entity’s policies and resolution, motion or similar official procedures must provide for timely action: written answers to written complaints (A) Authorizing the person identified and grievances within 15 working days as the official representative of the of the receipt of the complaint, where public entity to submit the application practicable. and amendments thereto and all under- (vii) Encouraging citizen participa- standings and assurances contained tion, particularly by low and moderate therein, and directing and authorizing income persons who reside in slum or the person identified as the official rep- blighted areas, and other areas in resentative of the public entity to act which guaranteed loan funds are pro- in connection with the application to posed to be used. provide such additional information as (b) Submission requirements. An appli- may be required; and cation for loan guarantee assistance (B) Authorizing such official rep- may be submitted at any time. The ap- resentative to execute such documents plication (or consolidated plan) shall as may be required in order to imple- be submitted to the appropriate HUD ment the application and issue debt ob- Office and shall be accompanied by the ligations pursuant thereto (provided following: that the authorization required by this (1) A description of how each of the paragraph (B) may be given by the activities to be carried out with the local governing body after submission guaranteed loan funds meets one of the of the application but prior to execu- criteria in § 570.208. tion of the contract required by (2) A schedule for repayment of the § 570.705(b); loan which identifies the sources of re- (iii) Before submission of its applica- payment, together with a statement tion to HUD, the public entity has:

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(A) Furnished citizens with informa- ing such assessments in their behalf tion required by § 570.704(a)(2)(i); from guaranteed loan funds. (B) Held at least one public hearing (x) It will comply with the other pro- to obtain the views of citizens on com- visions of the Act and with other appli- munity development and housing cable laws. needs; and (9) In the case of an application sub- (C) Prepared its application in ac- mitted by a State-assisted public enti- cordance with § 570.704(a)(1)(iv) and ty, certifications by the State that: made the application available to the (i) It agrees to make the pledge of public. grants required under § 570.705(b)(2). (iv) It is following a detailed citizen (ii) It possesses the legal authority to participation plan which meets the re- make such pledge. quirements described in § 570.704(a)(2). (iii) At least 70 percent of the aggre- (v) The public entity will affirma- gate use of CDBG grant funds received tively further fair housing, and the by the State, guaranteed loan funds, guaranteed loan funds will be adminis- and program income during the one, tered in compliance with: two, or three consecutive years speci- (A) Title VI of the Civil Rights Act of fied by the State for its CDBG program 1964 (42 U.S.C. 2000d et seq.); and will be for activities that benefit low (B) The Fair Housing Act (42 U.S.C. and moderate income persons. 3601–3619). (iv) It agrees to assume the respon- (vi)(A) (For entitlement public enti- sibilities described in § 570.710. ties only.) In the aggregate, at least 70 (c) HUD review and approval of appli- percent of all CDBG funds, as defined cations. (1) HUD will normally accept at § 570.3, to be expended during the the certifications submitted with the one, two, or three consecutive years application. HUD may, however, con- specified by the public entity for its sider relevant information which chal- CDBG program will be for activities lenges the certifications and require which benefit low and moderate in- additional information or assurances come persons, as described in criteria from the public entity or State as war- at § 570.208(a). ranted by such information. (B) (For nonentitlement public enti- (2) The HUD Office shall review the ties eligible under subpart F of this application for compliance with re- part only.) It will comply with primary quirements specified in this subpart and national objectives requirements, and forward the application together as applicable under subpart F of this with its recommendation for approval part. or disapproval of the requested loan (vii) It will comply with the require- guarantee to HUD Headquarters. ments governing displacement, reloca- (3) HUD may disapprove an application, real property acquisition, and the tion, or may approve loan guarantee replacement of low and moderate in- assistance for an amount less than re- come housing described in § 570.606. quested, for any of the following rea- (viii) It will comply with the require- sons: ments of § 570.200(c)(2) with regard to (i) HUD determines that the guar- the use of special assessments to re- antee constitutes an unacceptable fi- cover the capital costs of activities as- nancial risk. Factors that will be consisted with guaranteed loan funds. sidered in assessing financial risk shall (ix) (Where applicable, the public en- include, but not be limited to, the fol- tity may also include the following ad- lowing: ditional certification.) It lacks suffi- (A) The length of the proposed repay- cient resources from funds provided ment period; under this subpart or program income (B) The ratio of expected annual debt to allow it to comply with the provi- service requirements to expected an- sions of § 570.200(c)(2), and it must nual grant amount; therefore assess properties owned and (C) The likelihood that the public en- occupied by moderate income persons, tity or State will continue to receive to recover the guaranteed loan funded grant assistance under this part during portion of the capital cost without pay- the proposed repayment period;

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(D) The public entity’s or State’s (d) Environmental review. The public ability to furnish adequate security entity shall comply with HUD environ- pursuant to § 570.705(b), and mental review procedures (24 CFR part (E) The amount of program income 58) for the release of funds for each the proposed activities are reasonably project carried out with loan guarantee estimated to contribute toward repay- assistance. These procedures set forth ment of the guaranteed loan. the regulations, policies, responsibil- (ii) The requested loan amount ex- ities and procedures governing the car- ceeds any of the limitations specified rying out of environmental review re- under § 570.705(a). sponsibilities of public entities. All (iii) Funds are not available in the public entities, including nonentitle- amount requested. ment public entities, shall submit the (iv) The performance of the public request for release of funds and related entity, its designated public agency or certification for each project to be as- State under this part is unacceptable. sisted with guaranteed loan funds to (v) Activities to be undertaken with the appropriate HUD Field Office. the guaranteed loan funds are not eligi- (e) Displacement, relocation, acquisi- ble under § 570.703. tion, and replacement of housing. The (vi) Activities to be undertaken with public entity (or the designated public the guaranteed loan funds do not meet agency) shall comply with the displace- the criteria in § 570.208 for compliance ment, relocation, acquisition, and re- with one of the national objectives of placement of low/moderate-income the Act. housing requirements in § 570.606 in (4) HUD will notify the public entity connection with any activity financed or State in writing that the loan guar- in whole or in part with guaranteed antee request has either been approved, loan funds. reduced, or disapproved. If the request [59 FR 66604, Dec. 27, 1994, as amended at 60 is reduced or disapproved, the public FR 1917, Jan. 5, 1995; 61 FR 11481, Mar. 20, entity or State shall be informed of the 1996; 69 FR 32781, June 10, 2004; 72 FR 73496, specific reasons for reduction or dis- Dec. 27, 2008; 74 FR 36389, July 22, 2009] approval. If the request is reduced or disapproved, the public entity shall be § 570.705 Loan requirements. informed of the specific reasons for re- (a) Limitations on commitments. (1) If duction or disapproval. If the request is loan guarantee commitments have approved, HUD shall issue an offer of been issued in any fiscal year in an ag- commitment to guarantee debt obliga- gregate amount equal to 50 percent of tions of the borrower identified in the the amount approved in an appropria- application subject to compliance with tion act for that fiscal year, HUD may this part, including the requirements limit the amount of commitments any under § 570.705(b), (d), (g) and (h) for se- one public entity may receive during curing and issuing debt obligations, the such fiscal year as follows (except that conditions for release of funds de- HUD will not decrease commitments scribed in paragraph (d) of this section, and such other conditions as HUD may already issued): specify in the commitment documents (i) The amount any one entitlement in a particular case. public entity may receive may be lim- (5) Amendments. If the public entity ited to $35,000,000. or State wishes to carry out or assist (ii) The amount any one nonentitle- in an activity not previously described ment public entity may receive may be in its application or to substantially limited to $7,000,000. change the purpose, scope, location, or (iii) The amount any one public enti- beneficiaries of an activity, the amend- ty may receive may be limited to such ment must be approved by HUD. amount as is necessary to allow HUD Amendments by State-assisted public to give priority to applications con- entities must also be approved by the taining activities to be carried out in State. The public entity shall follow areas designated as empowerment the citizen participation requirements zones/enterprise communities by the for amendments in § 570.704(a)(2). Federal Government or by any State.

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(2) In addition to the limitations (g) of this section and as a condition specified in paragraph (a)(1) of this sec- for receiving loan guarantee assist- tion, the following limitations shall ance, the public entity (and State and apply. designated public agency, as applica- (i) Entitlement public entities. No com- ble) shall: mitment to guarantee shall be made if (1) Enter into a contract for loan the total unpaid balance of debt obliga- guarantee assistance with HUD, in a tions guaranteed under this subpart form acceptable to HUD, including pro- (excluding any amount defeased under visions for repayment of debt obliga- the contract entered into under tions guaranteed hereunder; § 570.705(b)(1)) on behalf of the public (2) Pledge all grants made or for entity would thereby exceed an amount which the public entity or State may equal to five times the amount of the become eligible under this part; and most recent grant made pursuant to (3) Furnish, at the discretion of HUD, § 570.304 to the public entity. such other security as may be deemed (ii) States and State-assisted public en- appropriate by HUD in making such tities. No commitment to guarantee guarantees. Other security shall be re- shall be made if the total unpaid bal- quired for all loans with repayment pe- ance of debt obligations guaranteed riods of ten years or longer. Such other under this subpart (excluding any security shall be specified in the con- amount defeased under the contract tract entered into pursuant to entered into under § 570.705(b)(1)) on be- § 570.705(b)(1). Examples of other secu- half of the State and all State-assisted rity HUD may require are: public entities in the State would (i) Program income as defined in thereby exceed an amount equal to five § 570.500(a); times the amount of the most recent (ii) Liens on real and personal prop- grant received by such State under erty; subpart I. (iii) Debt service reserves; and (iii) Nonentitlement public entities eligi- (iv) Increments in local tax receipts ble under subpart F of this part. No com- generated by activities carried out mitment to guarantee shall be made with the guaranteed loan funds. with respect to a nonentitlement pub- (c) Use of grants for loan repayment. lic entity in an insular area or the Notwithstanding any other provision of State of Hawaii if the total unpaid bal- this part: ance of debt obligations guaranteed (1) Community Development Block under this subpart (excluding any Grants allocated pursuant to section amount defeased under the contract 106 of the Act (including program in- entered into under § 570.705(b)(1)) on become derived therefrom) may be used half of the public entity would thereby for: exceed an amount equal to five times (i) Paying principal and interest due the amount of the most recent grant (including such issuance, servicing, un- made pursuant to § 570.429 or § 570.440 derwriting, or other costs as may be in- (as applicable) to the public entity. curred under paragraph (g) of this sec- (A) The most recent grant approved tion) on the debt obligations guaran- for the public entity pursuant to sub- teed under this subpart; part F of this part, (ii) Defeasing such debt obligations; (B) The average of the most recent and three grants approved for the public (iii) Establishing debt service re- entity pursuant to subpart F of this serves as additional security pursuant part, excluding any grant in the same to paragraph (b)(3) of this section. fiscal year as the commitment, or (2) HUD may apply grants pledged (C) The average amount of grants pursuant to paragraph (b)(2) of this sec- made under subpart F of this part to tion to any amounts due under the debt units of general local government in obligations, the payment of costs in- New York State in the previous fiscal curred under paragraph (g) of this sec- year. tion, or to the purchase or defeasance (b) Security requirements. To assure of such debt obligations, in accordance the repayment of debt obligations and with the terms of the contract required the charges incurred under paragraph by paragraph (b)(l) of this section.

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(d) Debt obligations. Debt obligations § 570.706 Federal guarantee; subroga- guaranteed under this subpart shall be tion. in the form and denominations pre- Section 108(f) of the Act provides for scribed by HUD. Such debt obligations the incontestability of guarantees by may be issued and sold only under such HUD under subpart M of this part in terms and conditions as may be pre- the hands of a holder of such guaran- scribed by HUD. HUD may prescribe teed obligations. If HUD pays a claim the terms and conditions of debt obli- under a guarantee made under section gations, or of their issuance and sale, 108 of the Act, HUD shall be fully sub- by regulation or by contractual ar- rogated for all the rights of the holder rangements authorized by section of the guaranteed debt obligation with 108(r)(4) of the Act and paragraph (h) of respect to such obligation. this section. Unless specifically provided otherwise in the contract for [61 FR 11481, Mar. 20, 1996] loan guarantee assistance required under paragraph (b) of this section, § 570.707 Applicability of rules and debt obligations shall not constitute regulations. general obligations of any public entity (a) Entitlement public entities. The pro- or State secured by its full faith and visions of subparts A, C, J, K and O of credit. this part applicable to entitlement (e) Taxable obligations. Interest grants shall apply equally to guaran- earned on debt obligations under this teed loan funds and other CDBG funds, subpart shall be subject to Federal tax- except to the extent they are specifi- ation as provided in section 108(j) of cally modified or augmented by the the Act. provisions of this subpart. (f) Loan repayment period. The term of (b) State-assisted public entities. The debt obligations under this subpart provisions of subpart I of this part, and shall not exceed twenty years. the requirements the State imposes on (g) Issuance, underwriting, servicing, units of general local government re- and other costs. Each public entity or ceiving Community Development its designated public agency and each Block Grants or program income to the State issuing debt obligations under extent applicable, shall apply equally this subpart must pay the issuance, un- to guaranteed loan funds and Commu- derwriting, servicing, trust administra- nity Development Block Grants (in- tion, and other costs associated with cluding program income derived there- the private sector financing of the debt from) administered by the State under obligations. Such costs are payable out the CDBG program, except to the ex- of the guaranteed loan funds and shall tent they are specifically modified or be secured under paragraph (b) of this augmented by the provisions of this section. subpart. (h) Contracting with respect to issuance (c) Nonentitlement public entities eligi- and sale of debt obligations; effect of ble under subpart F of this part. The pro- other laws. No State or local law, and visions of subpart F of this part shall no Federal law, shall preclude or limit apply equally to guaranteed loan funds HUD’s exercise of: and other CDBG funds, except to the (1) The power to contract with re- extent they are specifically modified or spect to public offerings and other augmented by the provisions of this sales of debt obligations under this subpart. subpart upon such terms and conditions as HUD deems appropriate; § 570.708 Sanctions. (2) The right to enforce any such con- (a) Non-State assisted public entities. tract by any means deemed appropriate The performance review procedures de- by HUD; scribed in subpart O of this part apply (3) Any ownership rights of HUD, as to all public entities receiving guaran- applicable, in debt obligations under teed loan funds other than State-as- this subpart. sisted public entities. Performance de- [59 FR 66604, Dec. 27, 1994, as amended at 69 ficiencies in the use of guaranteed loan FR 32782, June 10, 2004; 74 FR 36389, July 22, funds made available to such public en- 2009] tities (or program income derived

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therefrom) or violations of the con- an application from a State or a State- tract entered into pursuant to assisted public entity, the State will be § 570.705(b)(1) may result in the imposi- principally responsible, subject to HUD tion of a sanction authorized pursuant oversight under subpart I of this part, to § 570.900(b)(7) against pledged CDBG for ensuring compliance with all appli- grants. In addition, upon a finding by cable requirements governing the use HUD that the public entity has failed of the guaranteed loan funds. Notwith- to comply substantially with any pro- standing the State’s responsibilities vision of the Act with respect to either described in this section, HUD may the pledged grants or the guaranteed take any action necessary for ensuring loan funds or program income, HUD compliance with requirements affect- may take action against the pledged ing the security interests of HUD with grants as provided in § 570.913 and/or respect to the guaranteed loan. may take action as provided in the [59 FR 66604, Dec. 27, 1994, as amended at 74 contract for loan guarantee assistance. FR 36389, July 22, 2009] (b) State-assisted public entities. Per- formance deficiencies in the use of § 570.711 State borrowers; additional guaranteed loan funds (or program in- requirements and application pro- come derived therefrom) or violations cedures. of the contract entered into pursuant This section contains additional re- to § 570.705(b)(1) may result in an action quirements and alternative application authorized pursuant to § 570.495 or procedures for guarantees of debt obli- § 570.496. In addition, upon a finding by gations under section 108 of the Act HUD that the State or public entity pursuant to the additional authority has failed to comply substantially with provided in paragraph (a) of section 222 any provision of the Act with respect of the Transportation, Housing and to the pledged CDBG nonentitlement Urban Development, and Related Agen- funds, the guaranteed loan funds, or cies Appropriations Act, 2009, Public program income, HUD may take action Law 111–8; 123 Stat. 524 at 976 (Division against the pledged funds as provided I of the Omnibus Appropriations Act, in § 570.496 and/or may take action as 2009) (‘‘section 222’’ and the ‘‘2009 Ap- provided in the contract. propriations Act’’). If any other federal § 570.709 Allocation of loan guarantee law or laws are enacted after March 11, assistance. 2009, the effect of which with respect to loan guarantee authority provided in Of the amount approved in any ap- an appropriations act is equivalent to propriation act for guarantees under the effect of section 222 with respect to this subpart in any fiscal year, 70 per- the loan guarantee authority provided cent shall be allocated for entitlement in the 2009 Appropriations Act, the ad- public entities and 30 percent shall be ditional requirements and alternative allocated for States and nonentitle- application procedures in this section ment public entities. HUD need not shall also apply to guarantees of debt comply with these percentage require- obligations under section 108 of the act, ments in any fiscal year to the extent pursuant to the additional authority that there is an absence of applications provided in such other federal law or approvable under this subpart from en- laws. titlement public entities or from (a) Applications by States. Notwith- States and nonentitlement public enti- standing § 570.702 and § 570.704, states ties. that administer the CDBG program [74 FR 36389, July 22, 2009] (under subpart I of this part) may apply for loan guarantee assistance § 570.710 State responsibilities. under this subpart, and such applica- The State is responsible for choosing tion shall consist of the following: public entities that it will assist under (1) A copy of the State’s CDBG meth- this subpart. States are free to develop od of distribution in the action plan procedures and requirements for deter- most recently submitted or amended mining which activities will be as- pursuant to 24 CFR part 91. In addition sisted, subject to the requirements of to the requirements of 24 CFR part 91, this subpart. Upon approval by HUD of such method of distribution must note

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the approximate amount of section 108 such public entity conforming to guaranteed obligations issued by the § 570.704(b)(4). State and all nonentitlement public (d) Local government citizen participa- entities that are outstanding at the tion requirements. The presubmission time of such submission or amend- and citizen participation requirements ment, identify the maximum amount in § 570.704(a) and the third sentence of of guaranteed loan funds for which the § 570.704(c)(5) shall not apply with re- State will apply during the period cov- spect to nonentitlement public enti- ered by the action plan, describe the ties’ applications to a State for assist- pledge of grants required under ance under this section. Nonentitle- § 570.705(b)(2), and identify the non- ment public entities shall comply with entitlement public entities in the the provisions of § 570.486(a) with re- State that may be assisted with such spect to such applications and such as- guaranteed loan funds (to satisfy this sistance. requirement, the method of distribu- (e) Environmental review; displacement, tion may identify one or more specific relocation, acquisition, and replacement nonentitlement public entities that of housing. Nonentitlement public enti- may be assisted, or may indicate that ties assisted by a State under this sec- all or a specified subset of the non- tion shall comply with § 570.704(d) and entitlement public entities in the (e). State may be assisted and describe how applications will be selected for assist- [74 FR 36389, July 22, 2009] ance). (2) Either: Subpart N—Urban Renewal (i) A description of each activity to Provisions be carried out with the guaranteed loan funds, including the specific provision of § 570.703 under which the activ- SOURCE: 41 FR 20524, May 18, 1976, unless otherwise noted. ity is eligible and how the activity meets one of the criteria in § 570.208; or § 570.800 Urban renewal regulations. (ii) An indication of the type or types of activities to be assisted, the provi- The regulations governing urban re- sions of § 570.703 under which such ac- newal projects and neighborhood devel- tivities are eligible, and the criteria in opment programs in subpart N of this § 570.208 intended to be met, in which part, that were effective immediately case HUD shall require that the de- before April 19, 1996, will continue to scription referred to in paragraph govern the rights and obligations of re- (a)(2)(i) of this section be submitted to cipients and HUD with respect to such and approved by HUD before the State projects and programs. disburses guaranteed loan funds to a [61 FR 11481, Mar. 20, 1996] public entity for the activity. (3) A schedule for repayment of the loan which identifies the sources of re- Subpart O—Performance Reviews payment. (b) Distribution to Local Governments. SOURCE: 53 FR 34466, Sept. 6, 1988, unless Proceeds payable to a State from the otherwise noted. issuance of debt obligations under this subpart may be used only for: § 570.900 General. (1) Loans and grants to the non- (a) Performance review authorities—(1) entitlement public entities identified Entitlement, Insular Areas, and HUD-ad- in the State’s approved application for ministered Small Cities performance re- activities eligible under § 570.703; and views. Section 104(e)(1) of the Act re- (2) The uses specified in paragraphs quires that the Secretary shall, at (c), (g), and (k) of § 570.703. least on an annual basis, make such re- (c) Certification of need. Prior to ap- views and audits as may be necessary proving a nonentitlement public enti- or appropriate to determine whether ty’s application for assistance, the the recipient has carried out its activi- State shall obtain a certification from ties in a timely manner, whether the

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recipient has carried out those activi- and surveys conducted by the HUD In- ties and its certifications in accord- spector General, and financial data re- ance with the requirements and the garding the amount of funds remaining primary objectives of the Act and with in the line of credit plus program in- other applicable laws, and whether the come. HUD may also consider relevant recipient has a continuing capacity to information pertaining to a recipient’s carry out those activities in a timely performance gained from other sources, manner. including litigation, citizen comments, (2) Urban Development Action Grant and other information provided by or (UDAG) performance reviews. Section concerning the recipient. A recipient’s 119(g) of the Act requires the Sec- failure to maintain records in the pre- retary, at least on an annual basis, to scribed manner may result in a finding make such reviews and audits of recipi- that the recipient has failed to meet ents of Urban Development Action the applicable requirement to which Grants as necessary to determine the record pertains. whether the recipient’s progress in car- (4) If HUD determines that a recipi- rying out the approved activities is ent has not met a civil rights review substantially in accordance with the criterion in § 570.904, the recipient will recipient’s approved plans and time- be provided an opportunity to dem- tables. onstrate that it has nonetheless met (b) Performance review procedures. the applicable civil rights requirement. This paragraph describes the review (5) If HUD finds that a recipient has procedures the Department will use in failed to comply with a program re- conducting the performance reviews requirement or has failed to meet a per- quired by sections 104(e) and 119(g) of formance criterion in § 570.902 or the Act: § 570.903, HUD will give the recipient an (1) The Department will determine opportunity to provide additional in- the performance of each entitlement, formation concerning the finding. Insular Areas, and HUD-administered (6) If, after considering any addi- small cities recipient in accordance tional information submitted by a re- with section 104(e)(1) of the Act by recipient, HUD determines to uphold the viewing for compliance with the re- finding, HUD may advise the recipient quirements described in § 570.901 and by to undertake appropriate corrective or applying the performance criteria de- remedial actions as specified in scribed in §§ 570.902 and 570.903 relative § 570.910. HUD will consider the recipi- to carrying out activities in a timely ent’s capacity as described in § 570.905 manner. The review criteria in § 570.904 prior to selecting the corrective or re- will be used to assist in determining if medial actions. the recipient’s program is being carried out in compliance with civil rights re- (7) If the recipient fails to undertake quirements. appropriate corrective or remedial ac- (2) The Department will review tions which resolve the deficiency to UDAG projects and activities to deter- the satisfaction of the Secretary, the mine whether such projects and activi- Secretary may impose a sanction pur- ties are being carried out substantially suant to § 570.911, 570,912, or 570.913, as in accordance with the recipient’s ap- applicable. proved plans and schedules. The De- [53 FR 34466, Sept. 6, 1988, as amended at 60 partment will also review to determine FR 56917, Nov. 9, 1995; 72 FR 12536, Mar. 15, if the recipient has carried out its 2007] UDAG program in accordance with all other requirements of the Grant Agree- § 570.901 Review for compliance with ment and with all applicable require- the primary and national objectives ments of this part. and other program requirements. (3) In conducting performance re- HUD will review each entitlement, views, HUD will primarily rely on in- Insular Areas, and HUD-administered formation obtained from the recipi- small cities recipient’s program to de- ent’s performance report, records termine if the recipient has carried out maintained, findings from monitoring, its activities and certifications in com- grantee and subrecipient audits, audits pliance with:

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(a) The requirement described at (a) Entitlement recipients and Non-enti- § 570.200(a)(3) that, consistent with the tlement CDBG grantees in Hawaii. (1) Be- primary objective of the Act, not less fore the funding of the next annual than 70 percent of the aggregate grant and absent contrary evidence amount of CDBG funds received by the satisfactory to HUD, HUD will consider recipient shall be used over the period an entitlement recipient or a non-enti- specified in its certification for activi- tlement CDBG grantee in Hawaii to be ties that benefit low and moderate in- failing to carry out its CDBG activities come persons; in a timely manner if: (b) The requirement described at (i) Sixty days prior to the end of the § 570.200(a)(2) that each CDBG assisted grantee’s current program year, the activity meets the criteria for one or amount of entitlement grant funds more of the national objectives de- available to the recipient under grant scribed at § 570.208; agreements but undisbursed by the (c) All other activity eligibility re- U.S. Treasury is more than 1.5 times quirements defined in subpart C of this the entitlement grant amount for its part; current program year; and (d) For entitlement grants and non- (ii) The grantee fails to demonstrate entitlement CDBG grants in Hawaii, to HUD’s satisfaction that the lack of the submission requirements of 24 CFR timeliness has resulted from factors part 91 and the displacement policy re- beyond the grantee’s reasonable con- quirements at § 570.606; trol. (e) For HUD-administered Small Cit- (2) Notwithstanding that the amount ies grants in New York, the citizen par- of funds in the line of credit indicates ticipation requirements at § 570.431, the that the recipient is carrying out its amendment requirements at § 570.427, activities in a timely manner pursuant and the displacement policy require- to paragraph (a)(1) of this section, HUD ments of § 570.606; may determine that the recipient is not carrying out its activities in a (f) For Insular Areas Program grants timely manner if: only, the application and amendment (i) The amount of CDBG program in- requirements at § 570.440, the citizen come the recipient has on hand 60 days participation requirements at § 570.441, prior to the end of its current program the displacement policy requirements year, together with the amount of of § 570.606, and the lead-based paint re- funds in its CDBG line of credit, ex- quirements of 24 CFR 35.940; ceeds 1.5 times the entitlement grant (g) The grant administration require- amount for its current program year; ments described in subpart J; and (h) Other applicable laws and pro- (ii) The grantee fails to demonstrate gram requirements described in sub- to HUD’s satisfaction that the lack of part K; and timeliness has resulted from factors (i) Where applicable, the require- beyond the grantee’s reasonable con- ments pertaining to loan guarantees trol. (subpart M) and urban renewal comple- (3) In determining the appropriate tions (subpart N). corrective action to take with respect [53 FR 34466, Sept. 6, 1988, as amended at 60 to a HUD determination that a recipi- FR 1917, Jan. 5, 1995; 60 FR 56917, Nov. 9, 1995; ent is not carrying out its activities in 72 FR 12536, Mar. 15, 2007; 72 FR 46371, Aug. a timely manner pursuant to para- 17, 2007] graphs (a)(1) or (a)(2) of this section, HUD will consider the likelihood that § 570.902 Review to determine if the recipient will expend a sufficient CDBG-funded activities are being amount of funds over the next program carried out in a timely manner. year to reduce the amount of unex- HUD will review the performance of pended funds to a level that will fall each entitlement, HUD-administered within the standard described in para- small cities, and Insular Areas recipi- graph (a)(1) of this section when HUD ent to determine whether each recipi- next measures the grantee’s timeliness ent is carrying out its CDBG-assisted performance. For these purposes, HUD activities in a timely manner. will take into account the extent to

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which funds on hand have been obli- to a HUD determination that a recipi- gated by the recipient and its sub- ent is not carrying out its activities in recipients for specific activities at the a timely manner pursuant to para- time the finding is made and other rel- graphs (c)(1) or (c)(2) of this section, evant information. HUD will consider the likelihood that (b) HUD-administered Small Cities pro- the recipient will expend a sufficient gram in New York. The Department amount of funds over the next program will, absent substantial evidence to the year to reduce the amount of unex- contrary, deem a HUD-administered pended funds to a level that will fall Small Cities recipient in New York to within the standards described in para- be carrying out its CDBG-funded ac- graphs (c)(1) and (2) of this section tivities in a timely manner if the when HUD next measures the grantee’s schedule for carrying out its activities, timeliness performance. For these pur- as contained in the approved applica- poses, HUD will take into account the tion (including any subsequent amend- extent to which funds on hand have ment(s)), is being substantially met. been obligated by the recipient and its (c) Insular Areas recipients. (1) Before sub-recipients for specific activities at the funding of the next annual grant the time the finding is made and other and absent contrary evidence satisfac- relevant information. tory to HUD, HUD will consider an In- (4) If a recipient is determined to be sular Areas recipient to be failing to untimely pursuant to paragraphs (c)(1) carry out its CDBG activities in a or (c)(2) of this section in one year, and timely manner if: the recipient is again determined to be (i) Sixty days prior to the end of the untimely in the following year, HUD grantee’s current program year, the may reduce the recipient’s next grant amount of Insular Area grant funds by 100 percent of the amount in excess available to the recipient under grant of twice the Insular Area’s most recent agreements but undisbursed by the CDBG grant, unless HUD determines U.S. Treasury is more than 2.0 times that the untimeliness resulted from the Insular Area’s grant amount for its factors outside of the grantee’s reason- current program year; and able control. (ii) The grantee fails to demonstrate (5) The first review under paragraphs to HUD’s satisfaction that the lack of (c)(1) and (c)(2) of this section will take timeliness has resulted from factors place 60 days prior to the conclusion of beyond the grantee’s reasonable con- the Fiscal Year 2006 program year. trol. [53 FR 34466, Sept. 6, 1988, as amended at 60 (2) Notwithstanding that the amount FR 56917, Nov. 9, 1995; 72 FR 12536, Mar. 15, of funds in the line of credit indicates 2007; 72 FR 46371, Aug. 17, 2007] that the Insular Area recipient is carrying out its activities in a timely § 570.903 Review to determine if the manner pursuant to paragraph (c)(1) of recipient is meeting its consoli- this section, HUD may determine that dated plan responsibilities. the recipient is not carrying out its ac- The consolidated plan, action plan, tivities in a timely manner if: and amendment submission require- (i) The amount of CDBG program in- ments referred to in this section are in come the recipient has on hand 60 days 24 CFR part 91. For the purpose of this prior to the end of its current program section, the term consolidated plan in- year, together with the amount of cludes an abbreviated consolidated funds in its CDBG line of credit, ex- plan that is submitted pursuant to 24 ceeds 2.0 times the Insular Area’s grant CFR 91.235. amount for its current program year; (a) Review timing and purpose. HUD and will review the consolidated plan per- (ii) The grantee fails to demonstrate formance of each entitlement, Insular to HUD’s satisfaction that the lack of Areas, and Hawaii HUD-administered timeliness has resulted from factors Small Cities grant recipient prior to beyond the grantee’s reasonable con- acceptance of a grant recipient’s an- trol. nual certification under 24 CFR (3) In determining the appropriate 91.225(b)(3) to determine whether the corrective action to take with respect recipient followed its HUD-approved

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consolidated plan for the most recently grantees shall follow the provisions of completed program year, and whether paragraph (b) of this section for their activities assisted with CDBG funds abbreviated or full consolidated plan to during that period were consistent the extent that the provisions of para- with that consolidated plan, except graph (b) of this section are applicable. that grantees are not bound by the con- If the grantee does not comply with the solidated plan with respect to the use requirements of paragraph (b) of this or distribution of CDBG funds to meet section, and does not provide HUD with non-housing community development an acceptable explanation, HUD may needs. decide, in accordance with the require- (b) Following a consolidated plan. The ments of the notice of fund avail- recipient will be considered to be fol- ability, that the grantee does not meet lowing its consolidated plan if it has threshold requirements to apply for a taken all of the planned actions de- new small cities grant. scribed in its action plan. This in- [60 FR 56918, Nov. 9, 1995, as amended at 72 cludes, but is not limited to: FR 12537, Mar. 15, 2007] (1) Pursuing all resources that the grantee indicated it would pursue; § 570.904 Equal opportunity and fair (2) Providing certifications of con- housing review criteria. sistency, when requested to do so by (a) General. (1) Where the criteria in applicants for HUD programs for which this section are met, the Department the grantee indicated that it would will presume that the recipient has support application by other entities, carried out its CDBG-funded program in a fair and impartial manner; and in accordance with civil rights certifi- (3) Not hindering implementation of cations and civil rights requirements of the consolidated plan by action or will- the Act relating to equal employment ful inaction. opportunity, equal opportunity in serv- (c) Disapproval. If HUD determines ices, benefits and participation, and is that a recipient has not met the cri- affirmatively furthering fair housing teria outlined in paragraph (b) of this unless: section, HUD will notify the recipient (i) There is evidence which shows, or and provide the recipient up to 45 days from which it is reasonable to infer, to demonstrate to the satisfaction of that the recipient, motivated by con- the Secretary that it has followed its siderations of race, color, religion consolidated plan. HUD will consider where applicable, sex, national origin, all relevant circumstances and the re- age or handicap, has treated some per- cipient’s actions and lack of actions af- sons less favorably than others, or fecting the provision of assistance cov- (ii) There is evidence that a policy, ered by the consolidated plan within practice, standard or method of admin- its jurisdiction. Failure to so dem- istration, although neutral on its face, onstrate in a timely manner will be operates to deny or affect adversely in cause for HUD to find that the recipi- a significantly disparate way the provi- ent has failed to meet its certification. sion of employment or services, bene- A complete and specific response by fits or participation to persons of a the recipient shall describe: particular race, color, religion where (1) Any factors beyond the control of applicable, sex, national origin, age or the recipient that prevented it from handicap, or fair housing to persons of following its consolidated plan, and a particular race, color, religion, sex, any actions the recipient has taken or or national origin, or plans to take to alleviate such factors; (iii) Where the Secretary required a and further assurance pursuant to § 570.304 (2) Actions taken by the recipient, if in order to accept the recipient’s prior any, beyond those described in the con- civil rights certification, the recipient solidated plan performance report to has failed to meet any such assurance. facilitate following the consolidated (2) In such instances, or where the re- plan, including the effects of such ac- view criteria in this section are not tions. met, the recipient will be afforded an (d) New York HUD-administered Small opportunity to present evidence that it Cities. New York HUD-administered has not failed to carry out the civil

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rights certifications and fair housing together with complaints, performance requirements of the Act. The Sec- reviews, and other information. retary’s determination of whether (c) Fair housing review criteria. See there has been compliance with the ap- the requirements in the Fair Housing plicable requirements will be made Act (42 U.S.C. 3601–20), as well as based on a review of the recipient’s per- § 570.601(a), which sets forth the grant- formance, evidence submitted by the ee’s responsibility to certify that it recipient, and all other available evi- will affirmatively further fair housing. dence. The Department may also ini- (d) Actions to use minority and women’s tiate separate compliance reviews business firms. The Department will re- under title VI of the Civil Rights Act of view a recipient’s performance to de- 1964 or section 109 of the Act. termine if it has administered its ac- (b) Review for equal opportunity. Title tivities funded with assistance under VI of the Civil Rights Act of 1964 (42 this part in a manner to encourage use U.S.C. 2000d et seq.), and implementing of minority and women’s business en- regulations in 24 CFR part 1, together terprises described in Executive Orders with section 109 of the Act (see 11625, 12432 and 12138, and 24 CFR § 570.602), prohibit discrimination in 85.36(e). In making this review, the De- any program or activity funded in partment will determine if the grantee whole or in part with funds made avail- has taken actions required under able under this part. § 85.36(e) of this chapter, and will re- (1) Review for equal employment oppor- view the effectiveness of those actions tunity. The Department will presume in accomplishing the objectives of that a recipient’s hiring and employment practices have been carried out in § 85.36(e) of this chapter and the Execu- compliance with its equal opportunity tive Orders. No recipient is required by certifications and requirements of the this part to attain or maintain any Act. This presumption may be rebutted particular statistical level of participa- where, based on the totality of cir- tion in its contracting activities by cumstances, there has been a depriva- race, ethnicity, or gender of the con- tion of employment, promotion, or tractor’s owners or managers. training opportunities by a recipient to [53 FR 34466, Sept. 6, 1988; 53 FR 41330, Oct. 21, any person within the meaning of sec- 1988, as amended at 54 FR 37411, Sept. 9, 1989; tion 109. The extent to which persons of 60 FR 1917, Jan. 5, 1995; 61 FR 11482, Mar. 20, a particular race, gender, or ethnic 1996] background are represented in the workforce may in certain cir- § 570.905 Review of continuing capac- cumstances be considered, together ity to carry out CDBG funded ac- with complaints, performance reviews, tivities in a timely manner. and other information. If HUD determines that the recipient (2) Review of equal opportunity in serv- has not carried out its CDBG activities ices, benefits and participation. The De- and certifications in accordance with partment will presume a recipient is the requirements and criteria described carrying out its programs and activi- in § 570.901 or 570.902, HUD will under- ties in accordance with the civil rights take a further review to determine certifications and requirements of the whether or not the recipient has the Act. This presumption may be rebutted continuing capacity to carry out its ac- where, based on the totality of cir- tivities in a timely manner. In making cumstances, there has been a depriva- the determination, the Department tion of services, benefits, or participa- will consider the nature and extent of tion in any program or activity funded the recipient’s performance defi- in whole or in part with block grant ciencies, types of corrective actions funds by a recipient to any person the recipient has undertaken and the within the meaning of section 109. The success or likely success of such ac- extent to which persons of a particular tions. race, gender, or ethnic background participate in a program or activity may in certain circumstances be considered,

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§ 570.906 Review of urban counties. necessary to implement the affected CDBG activities; In reviewing the performance of an urban county, HUD will hold the coun- (ii) Establishing and following a ty accountable for the actions or fail- management plan which assigns re- ures to act of any of the units of gen- sponsibilities for carrying out the ac- eral local government participating in tions identified in paragraph (b)(2)(i) of the urban county. Where the Depart- this section; ment finds that a participating unit of (iii) For entitlement and Insular government has failed to cooperate Areas recipients, canceling or revising with the county to undertake or assist affected activities that are no longer in undertaking an essential community feasible to implement due to the defi- development or assisted housing activ- ciency and re-programming funds from ity and that such failure results, or is such affected activities to other eligi- likely to result, in a failure of the ble activities (pursuant to the citizen urban county to meet any requirement participation requirements in 24 CFR of the program or other applicable part 91); or laws, the Department may prohibit the (iv) Other actions which will serve to county’s use of funds made available prevent a continuation of the defi- under this part for that unit of govern- ciency, mitigate (to the extent pos- ment. HUD will also consider any such sible) the adverse effects or con- failure to cooperate in its review of a sequences of the deficiency, and pre- future cooperation agreement between vent a recurrence of the deficiency; the county and such included unit of (3) Advise the recipient that a certifi- government described at § 570.307(b)(2). cation will no longer be acceptable and §§ 570.907–570.909 [Reserved] that additional assurances will be required; § 570.910 Corrective and remedial ac- (4) Advise the recipient to suspend tions. disbursement of funds for the deficient (a) General. Consistent with the pro- activity; cedures described in § 570.900(b), the (5) Advise the recipient to reimburse Secretary may take one or more of the its program account or letter of credit actions described in paragraph (b) of in any amounts improperly expended this section. Such actions shall be de- and reprogram the use of the funds in signed to prevent a continuation of the accordance with applicable require- performance deficiency; mitigate, to ments; the extent possible, the adverse effects (6) Change the method of payment to or consequences of the deficiency; and the recipient from a letter of credit prevent a recurrence of the deficiency. basis to a reimbursement basis; (b) Actions authorized. The following (7) In the case of claims payable to lists the actions that HUD may take in HUD or the U.S. Treasury, institute response to a deficiency identified dur- collection procedures pursuant to sub- ing the review of a recipient’s perform- part B of 24 CFR part 17; and ance: (8) In the case of an entitlement or (1) Issue a letter of warning advising Insular Areas recipient, condition the the recipient of the deficiency and put- use of funds from a succeeding fiscal ting the recipient on notice that additional action will be taken if the defi- year’s allocation upon appropriate cor- ciency is not corrected or is repeated; rective action by the recipient. The failure of the recipient to undertake (2) Recommend, or request the recipient to submit, proposals for corrective the actions specified in the condition actions, including the correction or re- may result in a reduction, pursuant to moval of the causes of the deficiency, § 570.911, of the entitlement or Insular through such actions as: Areas recipient’s annual grant by up to (i) Preparing and following a sched- the amount conditionally granted. ule of actions for carrying out the af- [53 FR 34466, Sept. 6, 1988, as amended at 60 fected CDBG activities, consisting of FR 1917, Jan. 5, 1995; 72 FR 12537, Mar. 15, schedules, timetables and milestones 2007]

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§ 570.911 Reduction, withdrawal, or compliance and shall request the gov- adjustment of a grant or other ap- ernor or the chief executive officer to propriate action. secure compliance. If within a reason- (a) Opportunity for an informal con- able period of time, not to exceed sixty sultation. Prior to a reduction, with- days, the governor or chief executive drawal, or adjustment of a grant or officer fails or refuses to secure compli- other appropriate action, taken pursu- ance, the Secretary is authorized to: ant to paragraph (b), (c), or (d) of this (1) Refer the matter to the Attorney section, the recipient shall be notified General with a recommendation that of such proposed action and given an an appropriate civil action be insti- opportunity within a prescribed time tuted; period for an informal consultation. (2) Exercise the powers and functions (b) Entitlement grants, Non-entitlement provided by title VI of the Civil Rights CDBG grants in Hawaii, and Insular Act of 1964 (42 U.S.C. 2000d); Areas grants. Consistent with the proce- (3) Exercise the powers and functions dures described in § 570.900(b), the Sec- provided for in § 570.913; or retary may make a reduction in the en- (4) Take such other action as may be titlement, non-entitlement CDBG provided by law. grants in Hawaii, or Insular Areas (b) When a matter is referred to the grant amount either for the succeeding Attorney General pursuant to para- program year or, if the grant had been graph (a)(1) of this section, or whenever conditioned, up to the amount that had the Secretary has reason to believe been conditioned. The amount of the that a State or a unit of general local reduction shall be based on the sever- government is engaged in a pattern or ity of the deficiency and may be for the practice in violation of the provisions entire grant amount. (c) HUD-administered small cities of § 570.602, the Attorney General may grants. Consistent with the procedures bring a civil action in any appropriate described in § 570.900(b), the Secretary United States district court for such may adjust, reduce or withdraw the relief as may be appropriate, including grant or take other actions as appro- injunctive relief. priate, except that funds already ex- § 570.913 Other remedies for non- pended on eligible approved activities compliance. shall not be recaptured or deducted from future grants. (a) Action to enforce compliance. When (d) Urban Development Action Grants. the Secretary acts to enforce the civil Consistent with the procedures de- rights provisions of Section 109, as described in § 570.900(b), the Secretary scribed in § 570.602 and 24 CFR part 6, may adjust, reduce or withdraw the the procedures described in 24 CFR grant or take other actions as appro- parts 6 and 180 apply. If the Secretary priate, except that funds already ex- finds, after reasonable notice and op- pended on eligible approved activities portunity for hearing, that a recipient shall not be recaptured or deducted has failed to comply substantially with from future grants made to the recipi- any other provisions of this part, the ent. provisions of this section apply. The Secretary, until he/she is satisfied that [61 FR 11481, Mar. 20, 1996, as amended at 72 there is no longer any such failure to FR 12537, Mar. 15, 2007; 72 FR 46371, Aug. 17, 2007] comply, shall: (1) Terminate payments to the recipi- § 570.912 Nondiscrimination compli- ent; ance. (2) Reduce payments to the recipient (a) Whenever the Secretary deter- by an amount equal to the amount of mines that a unit of general local gov- such payments which were not ex- ernment which is a recipient of assist- pended in accordance with this part; or ance under this part has failed to com- (3) Limit the availability of pay- ply with § 570.602, the Secretary shall ments to programs or activities not af- notify the governor of such State or fected by such failure to comply. chief executive officer of such unit of Provided, however, that the Secretary general local government of the non- may on due notice suspend payments

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at any time after the issuance of a no- (v) State that if the respondent fails tice of opportunity for hearing pursu- to request a hearing within the time ant to paragraph (c)(1) of this section, specified a decision by default will be pending such hearing and a final deci- rendered against the respondent; and sion, to the extent the Secretary deter- (vi) Be sent to the respondent by cer- mines such action necessary to pre- tified mail, return receipt requested. clude the further expenditure of funds (2) Initiation of hearing. The respond- for activities affected by such failure ent shall be allowed at least 10 days to comply. from receipt of the notice within which (b) In lieu of, or in addition to, any to notify HUD of its request for a hear- action authorized by paragraph (a) of ing. If no request is received within the this section, the Secretary may, if he/ time specified, the Secretary may pro- she has reason to believe that a recipi- ceed to make a finding on the issue of ent has failed to comply substantially compliance with this part and to take with any provision of this part; the proposed action. (1) Refer the matter to the Attorney (3) Administrative Law Judge. Pro- General of the United States with a ceedings conducted under these rules recommendation that an appropriate shall be presided over by an Adminis- civil action be instituted; and trative Law Judge (ALJ), appointed as (2) Upon such a referral, the Attorney provided by section 11 of the Adminis- trative Procedures Act (5 U.S.C. 3105). General may bring a civil action in any The case shall be referred to the ALJ United States district court having by the Secretary at the time a hearing venue thereof for such relief as may be is requested. The ALJ shall promptly appropriate, including an action to re- notify the parties of the time and place cover the amount of the assistance fur- at which the hearing will be held. The nished under this part which was not ALJ shall conduct a fair and impartial expended in accordance with it, or for hearing and take all action necessary mandatory or injunctive relief; to avoid delay in the disposition of pro- (c) When the Secretary Proceedings. ceedings and to maintain order. The proposes to take action pursuant to ALJ shall have all powers necessary to this section, the respondent is the unit those ends, including but not limited of general local government or State to the power to: receiving assistance under this part. (i) Administer oaths and affirma- These procedures are to be followed tions; prior to imposition of a sanction de- (ii) Issue subpoenas as authorized by scribed in paragraph (a) of this section: law; (1) Notice of opportunity for hearing: (iii) Rule upon offers of proof and re- The Secretary shall notify the respond- ceive relevant evidence; ent in writing of the proposed action (iv) Order or limit discovery prior to and of the opportunity for a hearing. the hearing as the interests of justice The notice shall: may require; (i) Specify, in a manner which is ade- (v) Regulate the course of the hear- quate to allow the respondent to pre- ing and the conduct of the parties and pare its response, allegations with re- their counsel; spect to a failure to comply substan- (vi) Hold conferences for the settle- tially with a provision of this part; ment or simplification of the issues by (ii) State that the hearing procedures consent of the parties; are governed by these rules; (vii) Consider and rule upon all proce- (iii) State that a hearing may be re- dural and other motions appropriate in quested within 10 days from receipt of adjudicative proceedings; and the notice and the name, address and (viii) Make and file initial determina- telephone number of the person to tions. whom any request for hearing is to be (4) Ex parte communications. An ex addressed: parte communication is any commu- (iv) Specify the action which the Sec- nication with an ALJ, direct or indi- retary proposes to take and that the rect, oral or written, concerning the authority for this action is section merits or procedures of any pending 111(a) of the Act; proceeding which is made by a party in

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the absence of any other party. Ex the material issues of fact, law or dis- parte communications are prohibited cretion presented on the record and the except where the purpose and content appropriate sanction or denial thereof. of the communication have been dis- The decision shall be based on consid- closed in advance or simultaneously to eration of the whole record or those all parties, or the communication is a parts thereof cited by a party and sup- request for information concerning the ported by and in accordance with the status of the case. Any ALJ who re- reliable, probative, and substantial evi- ceives an ex parte communication dence. A copy of the decision shall be which the ALJ knows or has reason to furnished to the parties immediately believe is unauthorized shall promptly by certified mail, return receipt replace the communication, or its sub- quested, and shall include a notice that stance, in all files and shall furnish any requests for review by the Sec- copies to all parties. Unauthorized ex parte communications shall not be retary must be made in writing to the taken into consideration in deciding Secretary within 30 days of the receipt any matter in issue. of the decision. (5) The hearing. All parties shall have (8) The record. The transcript of testi- the right to be represented at the hear- mony and exhibits, together with the ing by counsel. The ALJ shall conduct decision of the ALJ and all papers and the proceedings in an expeditious man- requests filed in the proceeding, con- ner while allowing the parties to stitutes the exclusive record for deci- present all oral and written evidence sion and, on payment of its reasonable which tends to support their respective cost, shall be made available to the positions, but the ALJ shall exclude ir- parties. After reaching his/her initial relevant, immaterial or unduly repeti- decision, the ALJ shall certify to the tious evidence. The Department has complete record and forward the record the burden of proof in showing by a to the Secretary. preponderance of the evidence that the (9) Review by the Secretary. The deci- respondent failed to comply substan- sion by the ALJ shall constitute the tially with a provision of this part. final decision of the Secretary unless, Each party shall be allowed to cross- within 30 days after the receipt of the examine adverse witnesses and to rebut decision, either the respondent or the and comment upon evidence presented Assistant Secretary for Community by the other party. Hearings shall be Planning and Development files an ex- open to the public. So far as the orderly conduct of the hearing permits, ception and request for review by the interested persons other than the par- Secretary. The excepting party must ties may appear and participate in the transmit simultaneously to the Sec- hearing. retary and the other party the request (6) Transcripts. Hearing shall be re- for review and the basis of the party’s corded and transcribed only by a re- exceptions to the findings of the ALJ. porter under the supervision of the The other party shall be allowed 30 ALJ. The orginal transcript shall be a days from receipt of the exception to part of the record and shall constitute provide the Secretary and the except- the sole official transcript. Respond- ing party with a written reply. The ents and the public, at their own ex- Secretary shall then review the record pense, may obtain copies of the tran- of the case, including the exceptions script. and the reply. On the basis of such re- (7) The ALJ’s decision. At the conclu- view, the Secretary shall issue a writ- sion of the hearing, the ALJ shall give ten determination, including a state- the parties a reasonable opportunity to ment of the reasons or basis therefor, submit proposed findings and conclu- affirming, modifying or revoking the sions and supporting reasons therefor. decision of the ALJ. The Secretary’s Within 25 days after the conclusion of decision shall be made and transmitted the hearing, the ALJ shall prepare a to the parties within 80 days after the written decision which includes a decision of the ALJ was furnished to statement of findings and conclusions, the parties. and the reasons or basis therefor, on all

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(10) Judicial review. The respondent (4) that the project is financially feasible; may seek judicial review of the Sec- (5) that to the extent practicable, the re- retary’s decision pursuant to section turn on the owner’s equity investment will 111(c) of the Act. not be unreasonably high; and (6) that to the extent practicable, CDBG [53 FR 34466, Sept. 6, 1988, as amended at 64 funds are disbursed on a pro rata basis with FR 3802, Jan. 25, 1999] other finances provided to the project. i. Project costs are reasonable. i. Reviewing APPENDIX A TO PART 570—GUIDELINES costs for reasonableness is important. It will AND OBJECTIVES FOR EVALUATING help the recipient avoid providing either too much or too little CDBG assistance for the PROJECT COSTS AND FINANCIAL RE- proposed project. Therefore, it is suggested QUIREMENTS that the grantee obtain a breakdown of all I. Guidelines and Objectives for Evaluating project costs and that each cost element Project Costs and Financial Requirements. HUD making up the project be reviewed for rea- has developed the following guidelines that sonableness. The amount of time and re- are designed to provide the recipient with a sources the recipient expends evaluating the framework for financially underwriting and reasonableness of a cost element should be selecting CDBG-assisted economic develop- commensurate with its cost. For example, it ment projects which are financially viable would be appropriate for an experienced re- and will make the most effective use of the viewer looking at a cost element of less than CDBG funds. The use of these underwriting $10,000 to judge the reasonableness of that guidelines as published by HUD is not manda- cost based upon his or her knowledge and tory. However, grantees electing not to use common sense. For a cost element in excess these underwriting guidelines would be ex- of $10,000, it would be more appropriate for pected to conduct basic financial under- the reviewer to compare the cost element writing prior to the provision of CDBG finan- with a third-party, fair-market price cial assistance to a for-profit business. quotation for that cost element. Third-party States electing not to use these underwriting price quotations may also be used by a re- guidelines would be expected to ensure that viewer to help determine the reasonableness the state or units of general local govern- of cost elements below $10,000 when the re- ment conduct basic financial underwriting viewer evaluates projects infrequently or if prior to the provision of CDBG financial as- the reviewer is less experienced in cost esti- sistance to a for-profit business. mations. If a recipient does not use third- II. Where appropriate, HUD’s underwriting party price quotations to verify cost ele- guidelines recognize that different levels of ments, then the recipient would need to con- review are appropriate to take into account duct its own cost analysis using appropriate differences in the size and scope of a pro- cost estimating manuals or services. posed project, and in the case of a microen- ii. The recipient should pay particular at- terprise or other small business to take into tention to any cost element of the project account the differences in the capacity and that will be carried out through a non-arms- level of sophistication among businesses of length transaction. A non-arms-length trans- differing sizes. action occurs when the entity implementing III. Recipients are encouraged, when they the CDBG assisted activity procures goods or develop their own programs and under- services from itself or from another party writing criteria, to also take these factors with whom there is a financial interest or into account. For example, a recipient ad- family relationship. If abused, non-arms- ministering a program providing only tech- length transactions misrepresent the true nical assistance to small businesses might cost of the project. choose to apply underwriting guidelines to 2. Commitment of all project sources of financ- the technical assistance program as a whole, ing. The recipient should review all projected rather than to each instance of assistance to sources of financing necessary to carry out a business. Given the nature and dollar value the economic development project. This is to of such a program, a recipient might choose ensure that time and effort is not wasted on to limit its evaluation to factors such as the assessing a proposal that is not able to pro- extent of need for this type of assistance by ceed. To the extent practicable, prior to the the target group of businesses and the extent commitment of CDBG funds to the project, to which this type of assistance is already the recipient should verify that: sufficient available. sources of funds have been identified to fi- IV. The objectives of the underwriting nance the project; all participating parties guidelines are to ensure: providing those funds have affirmed their in- (1) that project costs are reasonable; tention to make the funds available; and the (2) that all sources of project financing are participating parties have the financial ca- committed; pacity to provide the funds. (3) that to the extent practicable, CDBG 3. Avoid substitution of CDBG funds for non- funds are not substituted for non-Federal fi- Federal financial support. i. The recipient nancial support; should review the economic development

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project to ensure that, to the extent prac- cluding repayment of the CDBG assistance if ticable, CDBG funds will not be used to sub- appropriate) were determined to be realistic stantially reduce the amount of non-Federal and met the project’s break-even point financial support for the activity. This will (which is generally the point at which all help the recipient to make the most efficient revenues are equal to all expenses). Gen- use of its CDBG funds for economic develop- erally speaking, an economic development ment. To reach this determination, the re- project that does not reach this break-even cipient’s reviewer would conduct a financial point over time is not financially feasible. underwriting analysis of the project, includ- The following should be noted in this regard: ing reviews of appropriate projections of rev- A. some projects make provisions for a enues, expenses, debt service and returns on negative cash flow in the early years of the equity investments in the project. The ex- project while space is being leased up or tent of this review should be appropriate for sales volume built up, but the project’s pro- the size and complexity of the project and jections should take these factors into ac- should use industry standards for similar count and provide sources of financing for projects, taking into account the unique fac- such negative cash flow; and tors of the project such as risk and location. B. it is expected that a financially viable ii. Because of the high cost of underwriting project will also project sufficient revenues and processing loans, many private financial to provide a reasonable return on equity in- lenders do not finance commercial projects vestment. The recipient should carefully ex- that are less than $100,000. A recipient should amine any project that is not economically familiarize itself with the lending practices able to provide a reasonable return on equity of the financial institutions in its commu- investment. Under such circumstances, a nity. If the project’s total cost is one that business may be overstating its real equity would normally fall within the range that fi- investment (actual costs of the project may nancial institutions participate, then the re- be overstated as well), or it may be over- cipient should normally determine the fol- stating some of the project’s operating ex- lowing: penses in the expectation that the difference A. Private debt financing—whether or not will be taken out as profits, or the business the participating private, for-profit business may be overly pessimistic in its market (or other entity having an equity interest) share and revenue projections and has has applied for private debt financing from a downplayed its profits. commercial lending institution and whether ii. In addition to the financial under- that institution has completed all of its fi- writing reviews carried out earlier, the re- nancial underwriting and loan approval ac- cipient should evaluate the experience and tions resulting in either a firm commitment capacity of the assisted business owners to of its funds or a decision not to participate manage an assisted business to achieve the in the project; and projections. Based upon its analysis of these B. Equity participation—whether or not the factors, the recipient should identify those degree of equity participation is reasonable elements, if any, that pose the greatest risks given general industry standards for rates of contributing to the project’s lack of finan- return on equity for similar projects with cial feasibility. similar risks and given the financial capac- 5. Return on equity investment. To the ex- ity of the entrepreneur(s) to make additional tent practicable, the CDBG assisted activity financial investments. should provide not more than a reasonable iii. If the recipient is assisting a microen- return on investment to the owner of the as- terprise owned by a low- or moderate-income sisted activity. This will help ensure that person(s), in conducting its review under this the grantee is able to maximize the use of its paragraph, the recipient might only need to CDBG funds for its economic development determine that non-Federal sources of fi- objectives. However, care should also be nancing are not available (at terms appro- taken to avoid the situation where the owner priate for such financing) in the community is likely to receive too small a return on his/ to serve the low- or moderate-income entre- her investment, so that his/her motivation preneur. remains high to pursue the business with 4. Financial feasibility of the project. i. The vigor. The amount, type and terms of the public benefit a grantee expects to derive CDBG assistance should be adjusted to allow from the CDBG assisted project (the subject the owner a reasonable return on his/her in- of separate regulatory standards) will not vestment given industry rates of return for materialize if the project is not financially that investment, local conditions and the feasible. To determine if there is a reason- risk of the project. able chance for the project’s success, the re- 6. Disbursement of CDBG funds on a pro rata cipient should evaluate the financial viabil- basis. To the extent practicable, CDBG funds ity of the project. A project would be consid- used to finance economic development ac- ered financially viable if all of the assump- tivities should be disbursed on a pro rata tions about the project’s market share, sales basis with other funding sources. Recipients levels, growth potential, projections of rev- should be guided by the principle of not plac- enue, project expenses and debt service (in- ing CDBG funds at significantly greater risk

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than non-CDBG funds. This will help avoid 572.235 Amendments. the situation where it is learned that a problem has developed that will block the com- Subpart D—Selection Process pletion of the project, even though all or most of the CDBG funds going in to the 572.300 Notices of funding availability project have already been expended. When (NOFAs); grant applications. this happens, a recipient may be put in a po- 572.315 Rating criteria for planning grants. sition of having to provide additional financing to complete the project or watch the po- Subpart E—Other Federal Requirements tential loss of its funds if the project is not able to be completed. When the recipient de- 572.400 Consolidated plan. termines that it is not practicable to dis- 572.405 Nondiscrimination and equal oppor- burse CDBG funds on a pro rata basis, the re- tunity requirements. cipient should consider taking other steps to 572.410 Environmental procedures and safeguard CDBG funds in the event of a de- standards. fault, such as insisting on securitizing assets 572.415 Conflict of interest. of the project. 572.420 Miscellaneous requirements. [60 FR 1953, Jan. 5, 1995] 572.425 Recordkeeping and reports; audit of recipients. PART 572—HOPE FOR HOMEOWN- AUTHORITY: 42 U.S.C. 3535(d) and 12891. ERSHIP OF SINGLE FAMILY SOURCE: 58 FR 36526, July 7, 1993, unless HOMES PROGRAM (HOPE 3) otherwise noted. Subpart A—General Subpart A—General Sec. 572.1 Overview of HOPE 3. § 572.1 Overview of HOPE 3. 572.5 Definitions. The purpose of the HOPE for Home- 572.10 Section 8 assistance. ownership of Single Family Homes program (HOPE 3) is to provide homeown- Subpart B—Homeownership Program ership opportunities for eligible fami- Requirements—Implementation Grants lies to purchase Federal, State, and 572.100 Acquisition and rehabilitation of eli- local government-owned single family gible properties; rehabilitation stand- properties. HOPE 3 provides grants to ards. eligible applicants to plan and imple- 572.105 Financing the purchase of properties ment homeownership programs de- by eligible families. 572.110 Identifying and selecting eligible signed to meet the needs of low-income families for homeownership. first-time homebuyers. 572.115 Transfer of homeownership inter- [58 FR 36526, July 7, 1993, as amended at 61 ests. FR 48797, Sept. 16, 1996] 572.120 Affordability standards. 572.125 Replacement reserves. 572.130 Restrictions on resale by initial § 572.5 Definitions. homeowners. The terms HUD, Indian Housing Au- 572.135 Use of proceeds from sales to eligible thority (IHA), NAHA, 1937 Act, NOFA, families, resale proceeds, and program and Public Housing Agency (PHA) are income. defined in 24 CFR part 5. 572.140 Third party rights. 572.145 Displacement prohibited; protection Administrative costs means reasonable of nonpurchasing residents. and necessary costs, as described and valued in accordance with OMB Cir- Subpart C—Grants cular No. A–87 or A–122 1 as applicable, incurred by a recipient in carrying out 572.200 Planning grants. 572.205 Planning grants—eligible activities. a homeownership program under this 572.210 Implementation grants. part. For purposes of complying with 572.215 Implementation grants—eligible ac- the 15 percent limitation in § 572.215(o), tivities. administrative costs do not include the 572.220 Implementation grants—matching costs of activities that are separately requirements. eligible under § 572.215. 572.225 Grant agreements; corrective and remedial actions. 572.230 Cash and Management Information 1 See § 572.420(a) concerning the availability (C/MI) System. of OMB Circulars.

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