[Federal Register Volume 59, Number 45 (Tuesday, March 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5146]


[[Page Unknown]]

[Federal Register: March 8, 1994]


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Part III





Department of Housing and Urban Development





_______________________________________________________________________



Office of Assistant Secretary



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24 CFR Parts 905 and 968




Public and Indian Housing Amendments to the Comprehensive Grant 
Program; Proposed Rule
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Public and Indian Housing

24 CFR Parts 905 and 968

[Docket No. R-94-1700; FR-3517-P-01]
RIN 2577-AB32

 
Public and Indian Housing Amendments to the Comprehensive Grant 
Program

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

ACTION: Proposed rule.

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SUMMARY: This rule proposes amendments to existing regulations to 
simplify and expedite the Comprehensive Grant Program (CGP) planning 
and funding process for public housing agencies (PHAs) and Indian 
housing authorities (IHAs) that own or operate 250 or more public or 
Indian housing units.

DATES: Comments due date: April 22, 1994.

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

FOR FURTHER INFORMATION CONTACT: For questions concerning public 
housing agencies contact Janice D. Rattley, Director, Office of 
Construction, Rehabilitation and Maintenance, Public and Indian 
Housing, room 4138, telephone (202) 708-1800, or (202) 708-0850 (voice/
TDD).
    For questions concerning Indian housing authorities contact Dominic 
Nessi, Director, Office of Native American Programs, Public and Indian 
Housing, room 4140, telephone (202) 708-1015, or (202) 708-0850.
    The address for all the above-listed persons is: Department of 
Housing and Urban Development, 451 Seventh Street SW., Washington, DC 
20410. (The telephone numbers listed above are not toll-free.)

SUPPLEMENTARY INFORMATION:

I. Paperwork Burden

    The information collection requirements contained in this proposed 
rule have been approved by the Office of Management and Budget, under 
the Paperwork Reduction Act of 1980 (44 U.S.C. 3501-3520), and assigned 
OMB control number 2577-0157.

II. Background

    Section 14 of the United States Housing Act of 1937 (42 U.S.C. 
14371) (``the Act''), as amended by section 119 of the Housing and 
Community Development Act of 1987 (the ``1987 Act'') and Cranston-
Gonzalez National Affordable Housing Act of 1990 (``NAHA''), 
established the Comprehensive Grant Program (CGP), which was designed 
to govern the modernization needs of PHAs and IHAs that own and operate 
250 or more public or Indian housing units. PHAs and IHAs that own and 
operate fewer than 250 public or Indian housing units are governed by 
the Comprehensive Improvement Assistance Program (CIAP).
    (The reader should note that, hereafter, for ease of discussion, 
the preamble to this proposed rule uses the terms ``public housing'' to 
refer to both public and Indian housing, and ``HAs'' or ``housing 
agency,'' to refer to both PHAs and IHAs, unless otherwise stated. In 
addition, the term ``development'' is used to refer to ``low-income 
projects,'' as defined at section 3(b)(1) of the Act.)
    The Department promulgated regulations for the CGP and CIAP at 24 
CFR parts 905 and 968, and these regulations have governed the 
modernization of public and Indian housing assisted under the Act. On 
February 14, 1992, the Department published the final rule for the CGP 
at 57 FR 5514. The February 14, 1992 rule amended the CIAP at 24 CFR 
part 968, subpart B, to limit its applicability to HAs that own or 
operate fewer than 500 public housing units (fewer than 250 units 
beginning in Federal Fiscal Year (FFY) 1993); added a new subpart C to 
part 968, which sets forth the new CGP for HAs that own or operate a 
total of 500 or more public housing units (250 or more units beginning 
in FFY 1993); and revised both the CIAP and CGP programs for purposes 
of implementing various technical and substantive program amendments 
contained in sections 509 (b) through (f) of the NAHA.
    On March 15, 1993, the Department published an interim rule for 
CIAP at 58 FR 13916 for HAs with less than 250 units in FFY 1993 and 
minor technical corrections for CGP. The CIAP interim rule was 
published in response to public comment requesting both streamlining 
and simplification and was also based on experience gained through 
program review/audit and monitoring.

III. Simplification of CGP

A. Administrative Actions

    The primary goal for CGP is to provide greater discretion and 
responsibility to HAs in carrying out their modernization programs, 
thereby returning it to local control. The published CGP rule and the 
CGP Handbook 7485.3 were designed to meet this objective. Following 
their publication, the Department has explored additional measures to 
simplify the program and to increase the flexibility, responsibility 
and authority at the HA level beyond that provided for in the 
regulation and Handbook. It is the Department's intent that this be an 
on-going process that will result in simplifying the program and 
providing maximum flexibility to HAs. It is expected that this 
increased flexibility to HAs will foster increased accountability by 
the HAs to residents and the local government thereby ensuring local 
control of the program. HAs will then demonstrate this local control 
and involvement with their submission of materials for the partnership 
process.
    Additionally, the Department is concerned about the need to 
accelerate the obligation of CGP funds. In order to contribute to the 
economic recovery of this Nation, the Secretary has established, as an 
initiative, the acceleration of the obligation and expenditure of CGP 
funds.
    Unless there are very substantial reasons to the contrary 
(including but not limited to litigation, strikes, necessity to 
redesign work already bid, and toxic substances), HUD expects that 
CIAP/CGP funds will be obligated within two years of receipt (i.e., 
within two years from the execution of the ACC amendment) and expended 
in three years from the execution of the ACC amendment. Some HAs have 
suggested that the timeframe for tracking an HA's obligation/
expenditure of funds should begin with the date the HA has access to 
LOCCS/VRS (Line of Credit Control System/Voice Response System). HUD 
has made provisions for fast tracking the ACC execution and Field 
Offices are advised to put the required information into LOCCS/VRS as 
soon as the documents are executed.
    HUD has attempted to streamline the ACC amendment process. As noted 
in notice PIH 93-10 (entitled Expediting Fiscal Year (FY) 1993 
Comprehensive Grant Program (CGP) Funding for Public and Indian Housing 
Authorities (HA) that had an Approved Comprehensive Plan in FY 1992), 
issued March 10, 1993, the ACC amendment is prepared by the HUD Field 
Office program staff, reviewed by the HUD Field Counsel and forwarded 
to the HA for signature. Unless required by State or local law or the 
HA by-laws, the Executive Director is permitted to sign and return the 
ACC amendment without a Board Resolution. HAs are encouraged to 
consider amending their by-laws (where permitted under law) so that a 
Board Resolution is not required or, if a Board Meeting is not 
imminent, the HA may consider conducting a telephone Board Meeting to 
authorize the signing of the ACC amendment.
    HAs are also required to execute and file for record a Declaration 
of Trust as provided under the ACC to protect the rights and interests 
of HUD throughout the 20-year period during which HAs are obligated to 
operate its developments in accordance with the ACC, the Act, and HUD 
regulations and requirements. HUD is proposing to eliminate the 
requirement for Declarations of Trust for Mutual Help units. Because of 
the nature of the Mutual Help program (homeownership) and the burden 
which this requirement places on Field Counsel and IHAs (e.g., locating 
legal descriptions or surveys for trust land when the IHA's and HUD's 
interest is only a leasehold), HUD has reviewed and discussed this 
issue with Field Counsel and finds that HUD's interest is sufficiently 
protected without the further requirement of a Declaration of Trust.
    HUD is also aware of several problems which HAs have encountered 
during the first year of operation of LOCCS/VRS and will meet with HAs 
and industry groups to work out any remaining problems with LOCCS/VRS. 
Currently, LOCCS/VRS is not set up to accommodate fungibility between 
budget line items. Modifications will be made to the LOCCS/VRS software 
to allow fungibility.
    The HA estimated time frames (target dates) for obligation and 
expenditures are reflected in its implementation schedule. The 
Department proposes in this rule at 24 CFR 905.669(d) and 24 CFR 
968.315(d) that all formula funding should be obligated within two 
years of allocation unless a longer period is originally approved by 
HUD. HAs may self-execute a time extension because of HUD delay or for 
other reasons outside of the HA's control. The time periods for 
obligation and expenditure of modernization funds are also proposed to 
be taken into account in HUD's determination of an HA's continuing 
capacity and reasonable progress. See Secs. 905.687 and 968.345.
    If the HA fails to obligate funds within this period, they may be 
subject to an alternative management strategy which may involve third-
party oversight of the modernization function. Before HUD would invoke 
this remedy, HUD would provide technical assistance to the HA and work 
with the HA to correct deficiencies. Furthermore, HUD would only 
require such action after a corrective action order had been issued and 
the HA failed to comply with the order. HUD could then issue a 
corrective action order for an alternative management strategy. The HA 
may appeal in writing the corrective action order imposing an 
alternative management strategy within 60 days of that decision. HUD 
Headquarters shall render a written decision on an HA's appeal within 
60 calendar days of the date of its receipt of the HA's appeal.
    HUD's role in expediting the allocation of modernization funds is 
to reduce its time for review and approval of the CGP annual 
submission. This will enable HAs to have funding earlier in the FFY. 
HUD issued its first guidance on expedited review and submission on 
February 4, 1993 in Notice PIH 93-5 which was provided to HAs. The 
notice also indicated that HUD would be developing additional time 
saving measures. The notice provided for accelerated submission by HAs 
in advance of originally established dates and accelerated review and 
approval by HUD of the documents required for FFY 1993 CGP funding. 
Notwithstanding the statutory 75-day review period, HUD would review 
and approve documents as soon as possible. It was anticipated that this 
approach would be continued in FY 1994 as part of HUD's ongoing efforts 
to expedite use of available modernization funds.
    The Department issued additional guidance on expediting FFY 1993 
CGP funding in notice PIH 93-10, issued March 10, 1993. This Notice 
provided that if large HAs (with 500 or more units) meet specified 
criteria, HUD will reduce the time for its review and approval of the 
FFY 1993 Annual Submission from a maximum of 75 days to 14 days 
wherever possible. The expedited review by HUD and subsequent prompt 
signing of the Annual Contribution Contract (ACC) Amendment by the HA 
would result in HAs having access to FFY 1993 CGP funds two to five 
months sooner than anticipated. In turn, these funds would be available 
to HAs to engage in modernization activities that will spur local 
economies and provide needed improvements for low-income developments.
    The basis for the Department's expedited review for large HAs (with 
500 or more units) was the HAs' Comprehensive Plan (including the Five-
Year Action Plan) which was reviewed and approved by HUD in FFY 1992 
and which is the basis of the FFY 1993 Annual Statement.

B. Regulatory Actions

    Based on extensive review of CGP regulations and procedures and 
comments from HAs and their interest groups, it was determined that 
revisions to the CGP regulations were necessary to further simplify and 
improve the CGP process so HAs could more readily expedite CGP funding.
    To expedite the CGP review and approval process, as well as provide 
HAs with additional flexibility in implementing the program, changes 
are needed in the following areas: Fungibility of work-items within the 
Five-Year Action Plan, notification of formula amounts, timing of 
meetings with residents and the annual public hearing, and appeals of 
formula amounts. This section will discuss each of these issues and the 
specific regulatory amendments. The Department requests comments on 
these issues and amendments within 45 days. The Department has 
shortened this time period to ensure that needed changes can be 
effective as soon as possible while providing an opportunity for notice 
and comment before these changes become effective.
    The major change being proposed in this rule is the concept of full 
fungibility of work items identified in an HA's Five-Year Action Plan. 
Full fungibility permits the HA to substitute any work item in the 
approved Five-Year Action Plan using the current FFY funds, without any 
further HUD approval. For example, if an HA has proposed kitchens at 
Development A in the first year of the Plan, and for some reason, the 
HA cannot do that work item, the HA may substitute roofs at Development 
B which appears in year four of the Five-Year Action Plan.
    Under current rules, HAs have rolling Five-Year Action Plans, but 
only spend CGP funds for work items in their one or two year Annual 
Statements. Major changes (i.e., additions, deletions or modifications 
of work items cumulatively totaling 10 percent or more of a HA's annual 
grant allocation, excluding emergencies) require prior HUD approval. 
Any changes with respect to work items cumulatively totaling less than 
10 percent of an HA's annual grant, excluding emergencies, do not 
require prior HUD approval, so long as the work is covered under the 
HA's Five-Year Action Plan. See Secs. 905.102 and 968.305.
    In this proposed rule, HUD intends to continue the rolling base of 
the Five-Year Action Plan, but allow full fungibility of work items 
(i.e., interchangeability) in any of the five years. HUD also intends 
to eliminate the concept of ``major change'' and major change reviews.
    In order to permit full fungibility of work items in the Five-Year 
Action Plan, the level of detail with regard to the work items must be 
consistent. Currently, work items are described as major work 
categories (e.g., kitchens at $100,000) in the out years of the Five-
Year Action Plan and in greater detail in the Annual Statement (e.g., 
kitchen cabinets in 100 units at $75,000 and kitchen floors in 100 
units at $25,000). This proposed rule would eliminate the requirement 
for two separate documents (Annual Statement and Five-Year Action Plan) 
and incorporate the required information in one document, which is a 
modified version of the current Five-Year Action Plan and submitted 
with the Annual Submission. The work to be accomplished in each of the 
five years will be identified on an individual Work Statement for that 
year. The work items will be identified as major work categories, and 
include only quantity and total cost (e.g., 100 kitchens at $100,000). 
This is more detail than currently required for the out years 
(quantity) but less than for the current Annual Statement (no detail on 
individual work items).
    Requiring HAs to only describe a major work category with quantity 
and cost without specifying work items is in keeping with the statutory 
intent of granting more flexibility to HAs and eases the transition to 
full five year fungibility. Additionally, this approach will ease the 
level of effort with regard to the HAs' submissions to HUD, and reduce 
HUD's upfront review of the HAs' proposed activities. However, HAs must 
plan in detail and maintain documentation in their files to support the 
work activities proposed. The level of detail in the Five-Year Action 
Plan for administrative and management improvement costs would have to 
be sufficient enough for HUD to make a determination of eligibility. 
For example, only mentioning ``training'' is insufficient. The HA must 
describe the training and how it relates to physical improvements or 
identified management needs. When the HA completes its Performance and 
Evaluation Report, it will describe the work activities completed in 
more detail (e.g., the Five-Year Action Plan's description of 100 
kitchens totaling $100,000 would be described in the Performance and 
Evaluation Report as kitchen cabinets--$50,000, kitchen floors--$20,000 
and kitchen windows--$30,000). Since the level of detail in the Five-
Year Action Plan is such that HUD will not be able to determine if the 
work that will be performed as a part of the major work category (e.g., 
kitchens) is an eligible item, HAs would have to repay ineligible costs 
discovered during review of the Performance and Evaluation Report.
    These revised procedures result in a minimal level of detail in the 
HAs' submission to HUD. The HA should be cognizant that additional 
detail will be necessary for meaningful local government and resident 
participation. The Department proposes that HAs simply summarize their 
progress and uses of previous year funds for resident review in their 
public notice of advance meeting for residents (no particular format is 
prescribed and HAs are not required to describe by development or work 
item). A greater level of detail should be supplied to residents at the 
advance meetings and public hearings or upon request to enable them to 
understand the HA's plans or progress on past activities.
    It has been suggested by the New York City Housing Authority that 
they could provide greater detail in all years of the Five-Year Action 
Plan so that the information would mirror the Performance and 
Evaluation Report. The Department is concerned that this would be 
administratively burdensome for all HAs. If an HA wants to submit a 
Five-Year Action Plan in a different format, a waiver would be needed. 
Section 14 of the Act does not differentiate between types of 
submissions to be made by HAs participating in the CGP, irrespective of 
their size. Nevertheless, HUD believes that larger HAs will be 
benefitted, along with all other HAs participating in the CGP, as a 
result of the simplified program submission requirements contained in 
this proposed rule.
    It is the Department's intent that HAs use fungibility in a prudent 
manner to make changes where necessary. It is anticipated that HAs will 
plan realistically for a five-year period in consultation with 
residents and the local government. HUD expects HAs to generally 
conform their work to items in the current year's Work Statement and to 
use fungibility only if necessary to substitute items in year one to 
efficiently and effectively expend its funding. However, fungibility of 
the work items (not dollars) in the plan should be used by the HA to 
make necessary changes without further HUD approval so as not to impede 
HA efforts to timely obligate and expend funds. Fungibility of work 
items but not dollars means that HAs may move items from one year to 
another but will receive no increase in funding if they do so. The 
grant amount for a particular FY is set forth in the ACC amendment and 
remains unchanged by shifts in work items.
    Except for emergencies, the HA must consult with residents to the 
extent practicable, on significant changes (such as changes in scope of 
work) or whenever it moves work items within the approved Five-Year 
Action Plan. The HA must retain documentation of that consultation in 
its files. The Department requests comments on the level of 
consultation with residents regarding ``significant changes.'' In this 
proposed rule, the Department has left this matter to the discretion of 
the HA. The Department has eliminated the concept of major change 
wherein the HA must obtain prior HUD approval when changes are made 
above an established threshold. The Department is requesting comment on 
the establishment of a threshold based on dollar amount, percentage of 
grant or type of work involved.
    As a result of allowing full fungibility of work items, the 
following changes have been made:
    (1) Eliminate major change reviews (An HA can expend the funds on 
any work item in the Five-Year Action Plan without HUD approval. If the 
HA plans to expend funds on a work item that is not in the Five-Year 
Action Plan, even though it appears in the Physical or Management Needs 
Assessment, prior HUD approval is required. However, emergency work 
would not require amendment to the Work Statement for year one, but 
must be reflected on the year-end Performance and Evaluation Report.);
    (2) Require HAs to amend annual work statements to reflect changes 
resulting from fungibility;
    (3) Eliminate the optional two-year Annual Statement;
    (4) Require HAs to identify changes in current year Five-Year 
Action Plan from the previous year Five-Year Action Plan when making 
annual submissions; and
    (5) Require the same level of detail for each year of the Five-Year 
Action Plan in order to allow full fungibility with the Work Statement 
for year one of the Five-Year Action Plan (the Work Statement for year 
one is being substituted for what is currently referred to in the CGP 
rule and statute as the Annual Statement).
    The Department is proposing to increase the percentage limitation 
on management improvements from 10 to 20 percent of the annual grant 
for all HAs. The Department believes that HA needs to provide adequate 
security, undertake various resident initiatives activities, and 
sustain completed physical improvements, warrant this increase. 
However, the Department is interested in knowing from commenters what 
other management improvement needs are pressing and whether the 
increased percentage limitation is sufficient or warranted based on HA 
experience. In addition, the Department strongly encourages that HAs 
use at least 5% of their management improvement funds to train 
residents in carrying out activities related to the modernization-
funded physical and management improvements. Other eligible items could 
include coordination of delivery of social services and youth 
apprenticeship programs directly related to carrying out the 
modernization work. HAs will not be permitted without prior HUD 
approval to exceed the 20 percent cost limitation for management 
improvements in any year unless they are high PHA performers or IHAs 
that are determined by the Field Office to be high performing. PHAs 
that have been designated as high performers overall (not only high 
performers in modernization) by the Public Housing Management 
Assessment Program (PHMAP) or IHAs determined by the Field Office to be 
high performing and which have administrative capability under 
Sec. 905.135 may exceed the cost limitation on management improvements 
only, without prior HUD approval. See Secs. 905.666(m) and 968.310(m). 
This provision reflects HUD's intent to provide incentives and relief 
from HUD oversight to HAs that are consistently well-managed. Guidance 
on determining high performing IHAs will be provided in the revised CGP 
Handbook. The Department requests suggestions regarding criteria that 
can be used to determine high performing IHAs.
    The Department has retained the 7% limit on administrative costs, 
but has excluded in-house asbestos testing efforts from the 7% limit. 
The Department suggests that its position on asbestos should be the 
same as that for lead-based paint. The proposed regulation has been 
modified to exclude such in-house testing from the 7% cost limitation. 
Further, it has been clarified that general administrative costs 
associated with the administration of Field Office-approved force 
account work are included in the cost limitations for administrative 
costs (account 1410). The actual force account labor costs including 
direct supervision are charged to the appropriate account for the work 
being performed, e.g., dwelling structures (account 1460). In addition, 
it should be noted that Field Offices continue to have the authority to 
permit administrative costs higher than 7% for justifiable reasons such 
as high administrative costs resulting from a large percentage of force 
account work. The Department requests comments on the advisability of 
higher administrative cost caps and examples of where they would be 
warranted.
    HAs currently delay holding annual advance meetings with residents 
and the public hearing until the presumptive estimate is provided by 
HUD. This has resulted in delaying the submission of documents required 
for access to the funding until later into the FFY. This proposed rule 
would permit the separation of the planning process and the funding 
process. HAs, residents, local government officials and others may work 
on the plan early in the fiscal year, preferably in conjunction with 
other planning related to the operating budget or other activities 
affecting residents. Planning is to be an ongoing process, and not 
necessarily a part of the funding cycle process.
    To expedite the funding process, the Department will offer HAs the 
option to hold the required annual advance meeting for residents and 
the required annual public hearing for the next year's grant using the 
formula amount for the current FFY as the planning level for the coming 
year. See Secs. 905.672 and 968.320. In recognition of the possibility 
that funding levels may change, HAs are encouraged to use the last 
year's level with variations around that level as planning targets 
(e.g., if last year's funding is 10% more or less, some developments 
will be rehabilitated, but others will not). This would allow HAs to 
start the planning process five months earlier (July rather than 
December) and the reservation and use of FFY 1995 funds could be made 
earlier in the FFY. At the resident meeting and public hearing, the HA 
would discuss any changes to the Five-Year Action Plan, including the 
new fifth year and a discussion of HA progress in prior approved 
programs. The draft Performance and Evaluation Report should also be 
discussed at that time if available. HAs would also explain that the 
funding level shown is not the actual amount for the coming year, but 
has been used for planning purposes, and that the Five-Year Action Plan 
will be adjusted when the formula amount is known. Additionally, the HA 
will explain which items or developments will be added or deleted to 
adjust for the next year's formula amount and that any added items will 
come from the Five-Year Action Plan. This will enable HAs to quickly 
make necessary adjustments to the plan when the formula amount is 
known. HAs must also assure that all work items are reflected in the 
Physical Needs Assessments and Management Needs Assessments. HAs not 
pursuing advance planning would be permitted to wait until after 
receipt of their formula amount for FFY 1995, i.e., the beginning of 
the next fiscal year, and then hold the advance meeting and public 
hearing. However, this would delay the annual submission, and as a 
result, the FFY 1995 funds would not be available until much later in 
the FFY.
    The current regulation requires HAs, within 30 calendar days of the 
date of HUD's notice of estimated funding level, to provide written 
notice to each of the democratically elected presidents of resident 
organizations of the developments covered by the comprehensive plan. 
HAs have encountered problems in making distinctions regarding who is 
to be notified (e.g., determining whether presidents of resident 
organizations have been democratically elected and assuring that all 
affected resident organizations have been notified). The Department 
wants to promote full and adequate notice of this funding to all 
interested parties (e.g., residents, duly elected resident 
organizations, local government officials and other interested 
parties). It is proposed that public notice (which would effectively 
include all interested parties, especially duly elected resident 
organizations) should be provided, and the method of notification would 
be determined by the HA.
    The public notice can take various formats based upon local 
circumstances and resources. The CGP Handbook will provide examples of 
ways to provide effective public notice (e.g., newspaper announcements, 
resident cable TV programs, posted notices or written announcements). 
The public notice would provide notice of the advance meeting to be 
held with the residents, notice of the public hearing, and the 
following information: summary of activities of the previous year (uses 
of past funding) and progress update, estimated funding level (i.e., 
current year funding or formula amount whichever the HA elects); a 
summary of the CGP requirements; the estimated time frames for 
completion of the required CGP documents; and the requirement for 
resident participation in the planning, development and monitoring of 
modernization activities under CGP.
    Additionally, HUD will no longer prescribe by regulation that there 
must be three weeks between the advance meeting and the public hearing, 
but will require that the meeting should be sufficiently in advance of 
the public hearing to allow for appropriate feed-back. See 
Secs. 905.672(b)(4) and 968.320(b)(4). The resident partnership process 
provides a vehicle for an on-going dialogue between HAs and residents 
throughout the planning process. HUD has made this change in response 
to concerns that the timing and frequency of these meetings should be 
determined by local conditions and left up to local judgement, rather 
than determined by an arbitrary time limit. Rather than have the 
Department state the number of meetings required before the public 
hearing, HUD believes that in order to achieve maximum resident 
involvement in the process, the number of meetings should be determined 
by the HAs and residents of those authorities.
    In order to reduce the HAs' and HUD's administrative burden and to 
streamline the process, HUD has eliminated the requirement to provide a 
presumptive formula estimate. See existing Secs. 905.669(b) and 
968.315(b). As a result, HAs will not be required to amend the Five-
Year Action Plan and/or Work Statement during a FFY because of 
differences in the presumptive estimate and final formula amount. HUD 
intends to provide only one formula amount in a FFY, and this will 
eliminate burdens for both HAs and HUD. This change would also 
encourage HAs to make Annual Submissions as soon as they receive their 
formula amount for the FFY. See proposed Secs. 905.669 and 968.315.
    A related change to the notification of formula funding is the 
timing of the submission of appeals and the adjustment from successful 
appeals and a change to the appeals based on the formula amount. 
Currently, HAs may appeal the presumptive formula estimates based upon 
unique circumstances or error. Any adjustments to the formula 
allocation resulting from such successful appeals are made from the 
subsequent years' appropriation of funds, except for appeals based upon 
error where there are no issues in dispute (such appeals will result in 
adjustments made from the current year's allocation of funds). 
Currently, HAs may also appeal HUD's determination of final formula 
amounts. Any adjustments resulting from such successful appeals are 
made from the current year's allocation of funds to the greatest extent 
feasible. Currently, mod troubled PHAs may appeal their reduced formula 
allocations and any adjustment resulting from such successful appeals 
are made in the current year's allocation of funds. See Secs. 905.669 
and 968.315.
    Since HUD does not plan to provide a presumptive formula notice, 
there is no need for an appeal based on a presumptive formula amount. 
HAs would not lose any of their current procedural rights to appeal. 
However, for purposes of consistency, all appeals must be submitted 
within 60 days after notification of the formula award. HAs may appeal 
the formula amount on the basis of error or unique circumstances or the 
reduced formula amount (applies to mod troubled PHAs only). Adjustments 
resulting from successful appeals based on error or unique 
circumstances will be made in subsequent FFYs. A mod troubled PHA will 
be advised of its full formula and its reduced formula amount. If it 
successfully appeals the reduced amount, it will get full funding in 
the same FFY. If it does not appeal or its appeal is unsuccessful, the 
difference between its full funding and its reduced funding will be 
redistributed to other HAs in the following FFY. However, such PHAs are 
entitled to credits for this temporary loss of funding.
    Currently, the Executive Summary encompasses four components, each 
a separate document: (1) Summary of Preliminary Estimated Costs; (2) 
Strategy Statement; (3) Statement of Developments with Comprehensive 
Modernization in Progress; and (4) Description of Resident Partnership 
and Summary of General Issues. The Executive Summary is submitted to 
HUD with the original Comprehensive Plan and resubmitted every sixth 
year when the Plan is updated. This rule proposes to eliminate the 
requirement for an Executive Summary with four components. Instead, the 
HA would submit the following: (1) Summary of Preliminary Estimated 
Costs and (2) Description of Resident Partnership and Summary of 
General Issues with each submission of the Comprehensive Plan (initial 
year and every sixth year). The Department suggests that the Strategy 
Statement and the Statement of Developments with Comprehensive 
Modernization in Progress provided information that was essential for 
the initial implementation of the program but will not be needed when 
the Plan is updated in year six. Also, the provision for a Summary of 
General Issues with each annual submission is retained.
    The Department is proposing two incentives for PHAs and IHAs. As 
previously mentioned, PHAs that are high performers under PHMAP and 
IHAs that are determined to be high performing by the Field Office 
would not have a cap on management improvements. The second incentive 
is the elimination of prior HUD approval for force account labor. The 
Department recognizes that the basis for being entitled to the force 
account labor incentive is different for IHAs than for PHAs. IHAs have, 
by necessity, developed significant expertise in the use of force 
account labor, due to the remoteness of some Indian housing units as 
well as the shortage of available contract labor. In acknowledgment of 
IHAs' successful experience with force account labor, the Department is 
proposing that prior HUD approval be required only of PHAs that are not 
high performers under PHMAP and IHAs which are designated high risk 
under Sec. 905.135 or for all HAs where stipulated by a notice of 
deficiency or corrective action order.
    HAs, which are required to obtain prior approval, will continue to 
indicate the use of force account on their annual submission and it may 
be approved as part of the funding process, or HAs may request HUD 
approval for force account labor at any time. HUD will be eliminating 
the Handbook requirement and modifying section 107(d) of the Annual 
Contributions Contract that requires HUD approval of force account work 
for high performers under PHMAP or IHAs that are not designated as 
``high risk''.
    Another concern of many HAs is the use of total development cost 
(TDC) in Sec. 905.672(d)(4) and Sec. 968.320(d)(4). For demolition and 
new construction, TDCs are currently used to assess whether 
modernization is more expensive than new development. Since few HAs are 
performing comprehensive modernization (i.e., total modernization), the 
cost of such modernization will rarely if ever exceed TDC. If it does, 
the HA must justify reasons for desiring to modernize the development. 
In addition, existing regulations require a new evaluation every sixth 
year when the Five-Year Action Plan is updated. This evaluation does 
not capture all past modernization as was done in comprehensive 
modernization, but it is rather a single point in time assessment.
    Rather than imposing an arbitrary measurement of costs (i.e., hard 
costs of 90 percent or less of TDC), the Department proposes to 
eliminate TDC for reasonable cost and replace it with the HA's 
determination of reasonable cost determined on a major work-item basis. 
HAs would be required to keep documentation in its file to support its 
reasonable cost determinations. It is suggested that the HA use a 
National Guideline adjusted to reflect local conditions (or if 
applicable, regional versions of National Guidelines) such as R.S. 
Means Index, the Dodge Report and Marshall and Swift. All work items 
must meet cost reasonableness which will also be accomplished by using 
part 85 procurement procedures and OMB Circular A-87. An HA is also 
allowed to substitute estimates of cost reasonableness based upon 
recent past bidding experience for the National Guidelines mentioned 
above. In its annual review of HA performance, HUD will review the HA's 
cost reasonableness determinations. The Department specifically 
requests comments on this proposal.
    It should also be noted that many IHA's with large numbers of 
homeownership (Mutual Help) units are performing comprehensive 
modernization on a widespread basis. The Department is considering 
retaining the TDC limitations as the basis for establishing reasonable 
costs for IHAs. Comments are specifically requested on applying these 
limits only to IHAs.
    The Department is often asked about the extent to which CGP funds 
may be expended on non-viable units (e.g., units scheduled for 
demolition) to maintain the habitability until residents can be 
relocated. The current regulation provides that where an HA's analysis 
of a development, establishes that completion of the identified 
improvements and replacements will not result in the long-term physical 
and social viability of the development at a reasonable cost, the HA 
shall not expend CGP funds for the development, except for emergencies. 
See Secs. 905.672(d)(4)(ii) and 968.320(d)(4)(ii). This proposed rule 
adds an additional exception for ``essential non-routine maintenance 
necessary to maintain habitability until residents can be relocated.'' 
The HA must specify in its Comprehensive Plan the actions it proposes 
to take with respect to the non-viable development (e.g., demolition or 
disposition under 24 CFR part 970). Any routine maintenance work must 
be performed using operating subsidy. The CGP Handbook will provide 
additional guidance in this area.
    The Department is also proposing to lift its limitation on the $75 
million reserve for emergencies and natural disasters. Currently, the 
Department limits the use of this reserve to HAs participating in the 
CGP (see Secs. 905.601(b), 905.667, 968.103(b) and 968.312). The 
Department proposes to permit smaller HAs (participating in the CIAP) 
(with less than 250 units) to also apply for emergency and natural 
disaster funds from this reserve. HAs under the CIAP may also continue 
to receive assistance for emergencies and disasters in accordance with 
the existing CIAP requirements and procedures. HAs participating in CGP 
must first use their annual formula allocation of CGP funds, any other 
unobligated CIAP or CGP funds, or replacement reserve, for emergencies 
before they can apply for funds from the $75 million reserve. HAs 
participating in CIAP must use all other funds available, including 
residual receipts and unobligated CIAP (and there must be no 
moderization funds available for the remainder of the fiscal year) for 
emergencies before they can apply for funds from the $75 million 
reserve. In addition, HAs participating in CIAP must also have the 
emergency modernization work under contract within 6 months after 
receiving HUD's approval of emergency reserve funds. Although funding 
for repair and replacement needs which arise from natural and other 
disaster is not required to be repaid, HAs are required to repay 
funding for emergencies, from future allocations, where available. The 
provisions for repayment by HAs participating in CGP have not been 
changed. HAs participating in CIAP would also be required to repay 
funding for emergencies, if funds become available; however, they would 
not be required to apply for a future CIAP grant to repay the reserve 
account.

C. Miscellaneous Technical Proposed Changes

    Numerous incorrect regulatory references would be corrected. The 
method for counting new development units (in order to determine the 
HA's program size) would be clarified to reflect actual development 
procedures (i.e., count the increase in units reaching DOFA (date of 
full availability) and under ACC amendment). See Secs. 905.601(k)(2)(i) 
and 968.103(k)(2)(i). The annual submission of activities and 
expenditures would consist of the Five-Year Action Plan with a Work 
Statement for each of the five years, local government statement and 
other miscellaneous documents outlined in Secs. 905.678 and 968.330. 
Annual resident and local government participation would be clarified 
by noting that annual advance meetings with residents and annual public 
hearings are required. See Secs. 905.678(d) (2) and (3) and 968.330(d) 
(2) and (3).

D. Handbook Changes and Clarifications to Existing Procedures

    HUD plans to prepare handbook page changes that will provide 
guidance on the revised procedures and examples of the types of 
documentation that would be acceptable to HUD and provide a revised 
Five-Year Action Plan form (sample completed document will be 
provided). The Handbook will also provide guidance on the required 
interrelationship between management improvements and identified 
management needs. In addition, it will clarify that even HAs that are 
high performers under PHMAP will have management needs.
    The CGP Handbook will also revise the environmental review 
procedures to require that HUD must conduct an environmental review in 
accordance with 24 CFR part 50 of all proposed actions identified in 
the Five-Year Action Plan. This change is required because of the 
proposed full fungibility of work items. In addition, the level of 
detail in the annual work statements must be sufficient for HUD to 
perform environmental reviews, as applicable, with respect to the 
various work items.
    The level of Field Office review will also be discussed in the 
Handbook with an emphasis on ways to improve and reduce unnecessary 
areas for review. Handbook guidance will also include the following:
    (1) Ways to achieve more effective resident participation/
consultation;
    (2) Discussion of limits on modernization after a decision has been 
made that certain buildings should be demolished or disposed of 
(keeping buildings habitable as long as they are occupied);
    (3) How to receive HUD approval for amendments to annual 
submission;
    (4) Examples of valid delays outside HA control which may extend 
the time for performance;
    (5) The exemption from the continuing capacity review for delays 
caused by LOCCS/VRS;
    (6) Ways to enhance fungibility by expending the oldest money first 
and closing out older programs; and
    (7) Discussion of emergency work items.
    Several questions regarding existing requirements would not be 
affected by this proposed rule and have been raised by program 
participants. Although the purpose of this preamble is to discuss 
changes proposed, some of the following issues are significant and may 
interfere with successful program implementation. Many of these issues 
involve procurement. HAs should refer to the new Procurement Handbook 
for Public Housing Agencies and Indian Housing Authorities, 7460.8 REV-
1. HUD has also issued PIH notice 93-50 on expediting procurement and 
contracting in Public and Indian Housing.
    It should be noted that procurement thresholds cannot be imposed 
without appropriate procedure (notice of deficiency and/or correction 
action order). Advance procurement planning is one of the most 
important actions that an HA can take to speed up the procurement 
process. For example, an HA is encouraged to prepare solicitations for 
services prior to ACC execution even though contracts cannot be awarded 
until funds are available. HAs may also solicit for an indefinite 
quantity contract where separate orders are issued to the selected 
architect/engineer firm for each service as the need arises or an HA 
can issue a solicitation for several architect/engineer firms to 
provide services on an as required basis rather than merely one firm. 
HAs may also join in intergovernmental agreements. HAs that possess the 
capability may continue to perform in-house A & E.
    In addition to the sealed bid method, HAs may use the competitive 
proposals method to perform modernization work. This method has been 
successfully used in public housing development (known as ``turnkey'') 
for many years. The competitive proposals method may, particularly for 
larger contracts, speed up the modernization process. This can be 
accomplished by developing a Request for Proposals (RFP) that places a 
substantial amount of the responsibility for modernization work with a 
contractor/developer. Using the turnkey method as a model, the HA would 
execute a fixed price contract in which the developer would be 
responsible for all designs of specific work items identified in the 
RFP, soliciting and contracting (in the developer's name) for 
construction work, contract administration and construction inspection. 
The contract could either provide for progress payments, as in the 
sealed bid method, or a lump sum payment after successful completion of 
all work, as in the turnkey method. The advantages to the two payment 
systems are: (1) With progress payments the developer does not have to 
obtain large amounts of outside financing and the overall costs should, 
therefore, be less; or (2) with the lump sum payment upon completion of 
construction, the developer has a significant incentive (financing 
costs) to complete construction quickly. The HA should hire an 
inspecting architect or engineer to inspect the developer's work to 
ensure that it complies with the contract documents and to otherwise 
protect the HAs interests.

E. Other HUD Initiatives

    Many HAs and Field Office have difficulties with the 2530 Previous 
Participation. This process assures the Department that persons 
debarred, suspended, determined to be ineligible or voluntarily 
excluded are not participating in this program. This process is part of 
a larger system at HUD and Government-wide. See 24 CFR part 24, subpart 
E. The Department is taking steps to improve this system and expedite 
access to the system for all HAs. The Department has also budgeted in 
FY 1994 for the development of an automated system which would allow 
HAs to directly access HUD's 2530 system.
    HUD also plans to work with HA interest groups in updating the 
maximum space guidelines for administrative, maintenance and community 
space.
    Users of LOCCS/VRS have requested that HUD eliminate the percent 
limitation on monthly drawdowns for standard performers. HUD has been 
working with the Comptroller, Inspector General and Treasury on ways to 
improve this system and will consider this and other users' 
recommendations. As a result of this proposed rulemaking, HUD will also 
be incorporating into the system the ability for five-year fungibility.
    HAs and their interest groups have requested clarification and 
expansion of eligible and ineligible work items. HUD currently provides 
examples of ineligible physical and management improvement work items 
in the CGP Handbook at paragraph 4-19. HUD will consider additional 
recommendations from HAs and their interest groups.
    The PHMAP rule has received many public comments which are now 
being reviewed. The modernization indicator is being revised to cover 
CGP. The CGP Audit Guide is under review by OMB.

F. Economic Opportunities for Low- and Very Low-Income Persons

    Section 3 of the Housing and Urban Development Act of 1968 (section 
3) requires that to the ``greatest extent feasible,'' opportunities for 
training and employment arising in connection with HUD programs be 
given to lower income persons residing within the unit of local 
government or the metropolitan area as determined by the Secretary. It 
also requires that to the ``greatest extent feasible,'' contracts for 
work to be performed in connection with any such project'' be awarded 
to business concerns, including but not limited to individuals or firms 
doing business in the field of planning, consulting, design, 
architecture, building construction, rehabilitation, maintenance, or 
repair, which are located in or owned in substantial part by persons 
residing in the same metropolitan area (or nonmetropolitan county) as 
the project.'' Existing regulations implementing these requirements 
appear at 24 CFR part 135. PHAs participating in the CGP program are 
required to comply with section 3. See 24 CFR Sec. 968.110(a).
    Section 3 was amended by section 915 of the Housing and Community 
Development Act of 1992, to require that HAs and their contractors and 
subcontractors, make their ``best efforts,'' consistent with existing 
Federal, State, and local laws and regulations, to give low- and very 
low-income persons the training and employment opportunities generated 
by development assistance (section 5 of the Act), operating assistance 
(section 9 of the Act), and modernization grants (section 14 of the 
Act). Section 3, as amended, also requires that HAs and their 
contractors and subcontractors, make their ``best efforts,'' consistent 
with existing Federal, State, and local laws and regulations, to award 
contracts for work to be performed in connection with development 
assistance, operating assistance and modernization grants, to business 
concerns that provide economic opportunities for low- and very low-
income persons.
    HUD has published a proposed rule to implement the amendments to 
section 3 by the Housing and Community Development Act of 1992. See 58 
FR 52534, dated October 8, 1993. The Secretary is committed to 
furthering economic opportunities to low- and very low-income persons 
covered by section 3. Until section 3 as amended, is implemented by 
regulations, HUD intends to advance the current requirements of section 
3 as provided in 24 CFR part 135. For CGP, HUD intends to require 
through the letter transmitting the FY 1994 presumptive estimate, that 
each HA use good faith efforts and provide anticipated projections of 
the contracts, jobs and training to section 3 residents as a result of 
the FY 1994 funding.
    By FY 1995, HUD expects to have an effective final rule 
implementing the amended section 3. For CGP, this proposed rule 
proposes that HAs certify as to compliance with section 3 and provide 
anticipated projections based on best efforts of the contracts, jobs 
and training to section 3 residents with their annual submissions. See 
Secs. 905.672(d)(7)(xviii) and 968.320(d)(7)(xviii). The Department 
also plans to require that HAs report their section 3 results annually 
(in one report covering all affected HUD programs administered by the 
HA). HAs would be required to keep files to support their annual 
submissions and annual reports along with their section 3 program plan. 
HUD would monitor each HA's section 3 efforts (not merely numbers of 
contracts, jobs or training) as part of the annual HUD review. HA 
comments on these proposed CGP provisions or alternative actions to 
support section 3 in CGP are requested.

EO 12866 Statement

    This proposed rule was reviewed and approved by the Office of 
Management and Budget under Executive Order 12866, Regulatory Planning 
and Review, which was signed by the President on September 30, 1993. 
Any changes made to the proposed rule as a result of that review 
process are clearly identified in the docket file, which is open for 
public inspection in the office of the Rules Docket Clerk, room 10276, 
Department of Housing and Urban Development, 451 Seventh Street, SW., 
Washington, DC 20410.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this proposed rule before publication and 
by approving it certifies that this proposed rule does not have a 
significant economic impact on a substantial number of small entities. 
The proposed rule provides revisions to the existing CGP under which 
HAs receive modernization assistance from HUD on the basis of a 
formula. HUD does not anticipate a significant economic impact on small 
entities since HAs will continue to carry out their modernization 
activities by entering into contracts for the work as they now do.

Finding of No Significant Impact

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

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that the policies 
contained in this proposed rule will not have substantial direct 
effects on states or their political subdivisions, or the relationship 
between the federal government and the states, or on the distribution 
of power and responsibilities among the various levels of government. 
As a result, the proposed rule is not subject to review under the 
order. The revised CGP is consistent with federalism principles since 
it reduces unnecessary burdens on HAs. While the program is revised, 
the primary change is only in the way that HUD processes and reviews HA 
modernization activities, and not the modernization activities. Since 
participation by HAs is discretionary, this proposed rule lacks the 
direct and substantial effects on HAs required for a policy with 
federalism implications under the Order.

Executive Order 12606, the Family

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

Regulatory Agenda

    This proposed rule was listed as item 1647 under the Office of 
Public and Indian Housing in the Department's Semiannual Regulatory 
Agenda published on October 25, 1993 (58 FR 56402, 56451) in accordance 
with Executive Order 12291 and the Regulatory Flexibility Act.

Anti-Lobbying

    On February 26, 1990, the Department published an interim rule (24 
CFR part 87) advising recipients and subrecipients of Federal 
contracts, grants, cooperative agreements and loans of a prohibition 
mandated by Congress. Section 319 of the Department of the Interior 
Appropriations Act (Pub. L. 101-121, approved October 23, 1989) 
generally prohibits recipients of Federal contracts, grants, and loans 
from using appropriated funds for lobbying the Executive or Legislative 
branches of the Federal Government in connection with a specific 
contract, grant, or loan. The interim rule generally prohibits the 
awarding of contracts, grants, cooperative agreements, or loans unless 
the recipient has made an acceptable certification regarding lobbying. 
In addition, the recipient must also file a disclosure if it has made 
or has agreed to make any payment with nonappropriated funds that would 
be prohibited, if paid with appropriated funds. IHAs established by an 
Indian Tribe as a result of the exercise of the tribe's sovereign power 
are excluded from coverage of the Byrd Amendment, but IHAs established 
under State law are not excluded from the statute's coverage.
    The certification and disclosure requirements apply to all grants 
in excess of $100,000. All potential grantees are required to submit 
the certification, and to make the required disclosure if the grant 
amount exceeds $100,000. Potential grantees should refer to 24 CFR part 
87 for the language for the certification and disclosure. The law 
provides substantial monetary penalties for failure to file the 
required certification or disclosure.

    The Catalog of Domestic Assistance numbers for the programs 
affected by this proposed rule are 14.146, 14.147, 14.850, 14.851, 
14.852, and 15.141.

List of Subjects

24 CFR Part 905

    Aged, Energy conservation, Grant programs--housing and community 
development, Grant programs--Indians, Indians, Individuals with 
disabilities, Lead poisoning, Loan programs--housing and community 
development, Loan programs--Indians, Low and moderate income housing, 
Public housing, Reporting and recordkeeping requirements.

24 CFR Part 968

    Grant programs--housing and community development, Indians, Loan 
programs--housing and community development, Public housing, Reporting 
and recordkeeping requirements.

    Accordingly, the Department proposes to amend 24 CFR parts 905 and 
968 as set forth below:

PART 905--INDIAN HOUSING PROGRAMS

    1. The authority citation for 24 CFR part 905 would be revised to 
read as follows:

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


Sec. 905.102  [Amended]

    2. Section 905.102 would be amended by removing the definitions for 
Annual statement and for Major changes.
    3. Section 905.601 would be amended by revising paragraph (b); by 
removing the reference to ``Sec. 905.669(b)(2)'' in paragraph (h) and 
inserting in its place ``Sec. 905.669(b)''; by adding three sentences 
to the end of paragraph (j); and by revising paragraph (k)(2)(i), to 
read as follows:


Sec. 905.601  Allocation of funds under section 14.

* * * * *
    (b) Set-aside for emergencies and disasters. For each FFY, HUD 
shall reserve from amounts approved in the appropriation act for grants 
under this part and part 968 of this title, $75 million (which shall 
include unused reserve amounts carried over from previous FFYs), which 
shall be made available to IHAs and PHAs for modernization needs 
resulting from natural and other disasters, and from emergencies. HUD 
shall replenish this reserve at the beginning of each FFY so that it 
always begins with a $75 million balance. Any unused funds from 
previous years will remain in the reserve until allocated. The 
requirements governing the reserve for disasters and emergencies and 
the procedures by which an IHA may request such funds, are set forth in 
Sec. 905.667.
* * * * *
    (j) Calculation of number of units. * * * New development units 
that are added to an IHA's or PHA's inventory will be added to the 
overall unit count so long as they are under ACC amendment and have 
reached DOFA by the first day in the FFY in which the formula is being 
run. Any increase in units (reaching DOFA and under ACC amendment) as 
of the beginning of the FFY shall result in an adjustment upwards in 
the number of units under the formula. New units reaching DOFA after 
this date will be counted for formula purposes as of the following FFY.
    (k) * * *
    (2) * * *
    (i) Increases in the number of units resulting from the conversion 
of existing units will be added to the overall unit count so long as 
they are under ACC amendment by the first day in the FFY in which the 
formula is being run;
* * * * *
    4. Section 905.666 would be amended by revising paragraphs (a)(1) 
through (a)(3), (f)(1)(iii), and (m) to read as follows:


Sec. 905.666  Eligible costs.

    (a) * * *
    (1) Undertaking activities described in its approved Five-Year 
Action Plan under Sec. 905.672(d)(5);
    (2) Carrying out emergency work, whether or not the need is 
indicated in the IHA's approved Comprehensive Plan (including Five-Year 
Action Plan) or Annual Submission;
    (3) Funding a replacement reserve to carry out eligible activities 
in future years, subject to the restrictions set forth in paragraph (f) 
of this section;
* * * * *
    (f) * * *
    (1) * * *
    (iii) A management improvement requires more funds than the IHA may 
use under its 20% limit for management improvements, and the IHA needs 
to save a portion of subsequent year(s) grants, to fund the work item;
* * * * *
    (m) Cost limitation. (1) Notwithstanding the full fungibility of 
work items in Sec. 905.675(c), an IHA shall not use more than a total 
of 20 percent of its annual grant for management improvement costs in 
account 1408, unless specifically approved by HUD, or unless the IHA is 
determined by the Field Office to be high performing and have 
administrative capacity under Sec. 905.135. To the maximum extent 
feasible, HAs should use management improvement funds to train 
residents in carrying out activities related to the modernization-
funded physical and management improvements.
    (2) Notwithstanding the full fungibility of work items in 
Sec. 905.675(c), an IHA shall not use more than a total of 7 percent of 
its annual grant on administrative costs in account 1410, excluding any 
costs related to in-house lead-based paint or asbestos testing, in-
house architectural/engineering (A/E) work, or other special 
administrative costs required by state, tribal or local law, unless 
specifically approved by HUD. In the case of an IHA whose jurisdiction 
covers an unusually large geographic area, an additional two percent of 
the annual grant may be spent on costs related to travelling to the 
IHA's developments for CGP-related business, as specifically approved 
by HUD. (For purposes of this paragraph, ``an unusually large 
geographic area'' means an area served by an IHA whose offices are 
physically separated from the majority of its developments by distances 
that require overnight travel and/or travel by air or other commercial 
carriers, e.g., a statewide IHA with developments in multiple 
localities; a regional IHA with developments in multiple counties or 
states; or an Alaska IHA with developments in multiple villages.);
* * * * *
    5. Section 905.667 would be amended by revising paragraphs (a)(1) 
and (a)(3) to read as follows:


Sec. 905.667  Reserve for emergencies and disasters.

    (a) Emergencies--(1) Eligibility for assistance. An IHA (including 
an IHA that is not considered to be administratively capable under 
Sec. 905.135) may obtain funds at any time, for any eligible emergency 
work item as defined in Sec. 905.102 (for IHAs participating in CGP) or 
for any eligible emergency work item (described as emergency 
modernization in Sec. 905.102) (for IHAs participating in CIAP), from 
the reserve established under Sec. 905.601(b). However, emergency 
reserve funds may not be provided to an IHA participating in CGP that 
has the necessary funds available from any other source, including its 
annual formula allocation under Sec. 905.601(e) and (f), other 
unobligated modernization funds, and its replacement reserves under 
Sec. 905.666. Emergency reserve funds may not be provided to an IHA 
partipating in CIAP that has the necessary funds available from any 
other source, including unobligated CIAP (and no CIAP modernization is 
available for the remainder of the fiscal year) and residual receipts. 
IHAs participating in CIAP must also have the emergency modernization 
work under contract within 6 months after receiving HUD's approval of 
emergency reserve funds. An IHA is not required to have an approved 
comprehensive plan under Sec. 905.672 before it can request emergency 
assistance from this reserve.
* * * * *
    (3) Repayment. An IHA that receives assistance for its emergency 
needs from the reserve under Sec. 905.601(b) must repay such assistance 
from its future allocations of assistance, where available. For HAs 
participating in the CGP, HUD shall deduct up to 50 percent of an IHA's 
succeeding year's formula allocation under Sec. 905.601 (e) and (f) to 
repay emergency funds previously provided by HUD to the IHA. The 
remaining balance, if any, shall be deducted from an IHA's succeeding 
years' formula allocations.
* * * * *
    6. Section 905.669 would be amended by adding three sentences to 
the end of paragraph (a)(1); by revising paragraphs (b) and (c); by 
adding a new paragraph (d); and by adding the OMB control number to the 
end of the section, to read as follows:


Sec. 905.669  Allocation of assistance.

    (a) * * *
    (1) * * * On an annual basis, HUD will transmit to the IHA the 
formula characteristics report which reflects the data that will be 
used to determine the IHA's formula share. The IHA will have 30 days to 
review and advise HUD of errors in this HUD report. Necessary 
adjustments will be made to the IHA's data before the formula is run 
for the current FFY.
* * * * *
    (b) HUD notification of formula amount; appeal rights. (1) Formula 
amounts notification. After HUD determines an IHA's formula allocation 
under Sec. 905.601 (e) and (f) based upon the IHA, development, and 
community characteristics, it shall notify the IHA of its formula 
amount and provide instruction on annual submission in accordance with 
Secs. 905.672(a) and 905.678;
    (2) Appeal based upon unique circumstances. An IHA may appeal in 
writing HUD's determination of its formula amount within 60 calendar 
days of the date of HUD's determination on the basis of ``unique 
circumstances.'' The IHA must indicate what is unique, and specify the 
manner in which it is different from all other IHAs participating in 
the CGP, and provide any necessary supporting documentation. HUD shall 
render a written decision on an IHA's appeal under this paragraph 
within 60 calendar days of the date of its receipt of the IHA's request 
for an appeal. HUD shall publish in the Federal Register a description 
of the facts supporting any successful appeals based upon ``unique 
circumstances.'' Any adjustments resulting from successful appeals in a 
particular FFY under this paragraph shall be made from the subsequent 
years' allocation of funds under this part;
    (3) Appeal based upon error. An IHA may appeal in writing HUD's 
determination of its formula amount within 60 calendar days of the date 
of HUD's determination on the basis of an error. The IHA may appeal on 
the basis of error the correctness of data in the formula 
characteristics report. The IHA must describe the nature of the error, 
and provide any necessary supporting documentation. HUD shall respond 
to the IHA's request within 60 calendar days of the date of its receipt 
of the IHA's request for an appeal. Any adjustment resulting from 
successful appeals in a particular FFY under this paragraph shall be 
made from subsequent years' allocation of funds under this part;
    (c) IHAs determined to be high risk. If an IHA is determined to 
have serious deficiencies in accordance with Sec. 905.135, or if the 
IHA fails to meet, or to make reasonable progress toward meeting, the 
goals previously established in its management improvement plan under 
Sec. 905.135, HUD may designate the IHA high risk. If the IHA is 
designated high risk with respect to modernization, HUD may withhold 
some or all of the IHA's annual grant; HUD may declare a breach of the 
grant agreement with respect to all or some of the IHA's functions so 
that the IHA or a particular function of the IHA may be administered by 
another entity; or HUD may take other sanctions authorized by law or 
regulation.
    (d) Obligation of formula funding. All formula funding should be 
obligated within two years of allocation or such longer period approved 
by HUD. If the IHA fails to obligate funds within this period, they may 
be subject to an alternative management strategy which may involve 
third-party oversight or administration of the modernization function. 
HUD would only require such action after a corrective action order had 
been issued under Sec. 905.687 and the IHA failed to comply with the 
order. HUD could then issue an alternative management strategy in a 
correction action order. An IHA may appeal in writing the corrective 
action order imposing an alternative management strategy within 60 days 
of that order. HUD Headquarters shall render a written decision on an 
IHA's appeal within 60 calendar days of the date of its receipt of the 
IHA's appeal.

(Approved by the Office of Management and Budget under control 
number 2577-0157)

    7. Section 905.672 would be amended by revising paragraphs (a), 
(b)(2)(i), (b)(3) through (b)(5), (c)(2), (d)(1), (d)(2)(i)(E), (d)(4), 
(d)(5)(i), (d)(5)(iii), (d)(6)(i), (d)(6)(ii), (d)(7)(v), (d)(7)(viii), 
and (d)(7)(xv); by adding a new paragraph (d)(7)(xviii); and by 
revising paragraphs (e)(2) through (e)(4), to read as follows:


Sec. 905.672  Comprehensive Plan (including Five-Year Action Plan).

    (a) Submission. HUD shall notify IHAs of the requested date for 
submitting or updating a Comprehensive Plan. For planning purposes, 
IHAs may use the amount they received under CGP in the prior year in 
developing their Comprehensive Plan or they may wait for the annual HUD 
notification of formula amount under Sec. 905.669(b)(1).
    (b) * * *
    (2) * * *
    (i) To assure that residents are fully briefed and involved in 
developing the content of, and monitoring the implementation of, the 
Comprehensive Plan including, but not limited to, the physical and 
management needs assessments, viability analysis, Five-Year Action 
Plan, and Work Statements for each year. If necessary, the IHA shall 
develop and implement capacity building strategies to ensure meaningful 
resident participation in CGP. Such technical assistance efforts for 
residents are eligible management improvement costs under CGP;
* * * * *
    (3) Public notice. Within a reasonable amount of time before the 
advance meeting for duly elected resident organizations under paragraph 
(b)(4) of this section, and the public hearing under paragraph (b)(5) 
of this section, the IHA shall provide public notice of the advance 
meeting and the public hearing in a manner determined by the IHA and 
which ensures notice to all duly elected resident organizations. The 
public notice shall also include a summary of activities of the 
previous year (uses of past funding) and progress update, estimated 
funding level (i.e., current year funding or formula amount, whichever 
the IHA elects); a summary of the CGP requirements; the estimated time 
frames for completion of the required CGP documents; and the 
requirement for resident participation in the planning, development and 
monitoring of modernization activities under the CGP;
    (4) Advance meeting for duly elected resident organizations. The 
IHA shall hold, within a reasonable amount of time before the public 
hearing under paragraph (b)(5) of the section, a meeting for residents 
and duly elected resident organizations at which the IHA shall explain 
the components of the Comprehensive Plan. The meeting shall be open to 
all residents and duly elected resident organizations;
    (5) Public Hearing. The IHA shall hold at least one public hearing, 
and any appropriate number of additional hearings, to ensure ample 
opportunity for residents, duly elected resident organizations, local 
government officials, and other interested parties, to express their 
priorities and concerns. The IHA shall give full consideration to the 
comments and concerns of residents, local government officials, and 
other interested parties.
    (c) * * *
    (2) A copy of the summary of total preliminary estimated costs to 
address physical needs by each development and management/operations 
needs IHA-wide and a specific description of the IHA's process for 
maximizing the level of participation by residents.
* * * * *
    (d) * * *
    (1) Summaries. An IHA shall include as part of its Comprehensive 
Plan the following summaries:
    (i) A summary of total preliminary estimated costs to address 
physical needs by each development and management needs IHA-wide; and
    (ii) A specific description of the IHA's process for maximizing the 
level of participation by residents during the development, 
implementation and monitoring of the comprehensive plan, a summary of 
the general issues raised on the plan by residents and others during 
the public comment process and the IHA's response to the general issue. 
IHA records, such as minutes of planning meetings or resident surveys, 
shall be maintained in the IHA's files and made available to residents, 
duly elected resident organizations, and other interested parties, upon 
request.
    (2) * * *
    (i) * * *
    (E) In addition, the IHA shall provide with respect to vacant or 
non-homebuyer-occupied Turnkey III units, the estimated number of units 
that the IHA is proposing for substantial rehabilitation and subsequent 
sale, in accordance with Sec. 905.666(d)(3).
* * * * *
    (4) Demonstration of long-term physical and social viability--(i) 
General. The plan shall include, on a development-by-development basis, 
an analysis of whether completion of the improvements and replacements 
identified under paragraphs (d)(2) and (d)(3) of this section will 
reasonably ensure the long-term physical and social viability of the 
development at a reasonable cost. The IHA shall keep documentation in 
its files to support its reasonable cost determinations of each major 
work item (e.g., kitchen cabinets, exterior doors). HUD will review 
cost reasonableness as part of its review of the Annual Submission and 
the Performance and Evaluation Report. Where necessary, HUD will review 
the IHA's documentation in support of its cost reasonableness;
    (ii) Determination of non-viability. Where an IHA's analysis of a 
development, under paragraph (d) of this section, establishes that 
completion of the identified improvements and replacements will not 
result in the long-term physical and social viability of the 
development at a reasonable cost, the IHA shall not expend CGP funds 
for the development, except for emergencies and essential non-routine 
maintenance necessary to maintain habitability until residents can be 
relocated. The IHA shall specify in its Comprehensive Plan the actions 
it proposes to take with respect to the non-viable development (e.g., 
demolition or disposition under 24 CFR part 905, subpart M).
    (5) Five-Year Action Plan--(i) General. The Comprehensive Plan 
shall include a rolling Five-Year Action Plan to carry out the 
improvements and replacements (or a portion thereof) identified under 
paragraphs (d)(2) and (d)(3) of this section. In developing its Five-
Year Action Plan, the IHA shall assume that the current year funding or 
formula amount will be available for each year of its Five-Year Action 
Plan, whichever the IHA is using for planning purposes, plus the IHA's 
estimate of the funds that will be available from other sources, such 
as State, local and tribal governments. All activities specified in an 
IHA's Five Year Action Plan are contingent upon the availability of 
funds, and the work items are fungible, i.e., interchangeable;
* * * * *
    (iii) Procedure for maintaining current Five-Year Action Plan. The 
IHA shall maintain a current Five-Year Action Plan by annually amending 
its Five-Year Action Plan, in conjunction with the Annual Submission;
    (6) * * *
    (i) The IHA developed the Comprehensive Plan/Five-Year Action Plan 
or amendments thereto in consultation with officials of the appropriate 
governing body and with development residents covered by the 
Comprehensive Plan/Five-Year Action Plan, in accordance with the 
requirements of Sec. 905.672 (b) and (c);
    (ii) The Comprehensive Plan/Five-Year Action Plan or amendments 
thereto are consistent with the appropriate governing body's assessment 
of its low-income housing needs and that the appropriate governing body 
will cooperate in providing resident programs and services; and
* * * * *
    (7) * * *
    (v) The proposed activities, obligations and expenditures in the 
Five-Year Action Plan/Annual Submission are consistent with the 
proposed or approved Comprehensive Plan of the IHA;
* * * * *
    (viii) The IHA has provided to HUD any documentation that the 
Department has requested to carry out its review under the National 
Environmental Policy Act (NEPA) and other related authorities in 
accordance with 24 CFR 905.120 (a) and (b), and will not obligate, in 
any manner, the expenditure of CGP funds, or otherwise undertake the 
activities identified in its Comprehensive Plan/Annual Submission, 
until the IHA receives written notification from HUD indicating that 
the Department has complied with its responsibilities under NEPA and 
other related authorities;
* * * * *
    (xv) The IHA has complied with the requirements governing tribal 
government and resident participation in accordance with 24 CFR 
905.672(b), 905.678(d), and 905.684, and has given full consideration 
to the priorities and concerns of tribal government and residents, 
including comments which were ultimately not adopted, in preparing the 
Comprehensive Plan/Five-Year Action Plan and any amendments thereto;
* * * * *
    (xviii) The IHA will comply with section 3 of the Housing and Urban 
Development Act of 1968, as amended, and make best efforts, consistent 
with existing Federal, State, and local laws and regulations, to give 
low- and very low-income persons, training and employment opportunities 
generated by CGP assistance, and to make best efforts, consistent with 
existing Federal, State, and local laws and regulations, to award 
contracts for work to be performed in connection with CGP assistance to 
business concerns that provide economic opportunities for low- and very 
low-income persons.
    (e) * * *
    (2) Amendments to needs assessments. The IHA must amend its plan by 
revising its needs assessments whenever it proposes to carry out 
activities in its Five-Year Action Plan or Annual Submission, that are 
not reflected in its current needs assessments (except in the case of 
emergencies). If the bases for the needs assessment have changed 
substantially, an IHA may propose an amendment to its needs 
assessments, in connection with the submission of its Annual Submission 
(see Sec. 905.678(b), or at any other time. These amendments shall be 
reviewed by HUD in accordance with Sec. 905.675;
    (3) Six-year revision of Comprehensive Plan. The physical and 
management needs assessments, and the summaries listed in 
Sec. 905.672(d)(1) are required to be revised only every sixth year, 
although the IHA may elect to revise some or all of these more 
frequently. Every sixth year, an IHA must submit to HUD, as a part of 
its Annual Submission, a complete revision of its Comprehensive Plan.
    (4) Annual revision of Five-Year Action Plan. Annually, the IHA 
shall submit to HUD, with its Annual Submission, an update of its Five-
Year Action Plan. Notwithstanding the new fifth year, the IHA shall 
identify changes in work categories from the previous year Five-Year 
Action Plan when making this annual submission.
* * * * *
    8. In Sec. 905.675, paragraph (b)(1) would be amended by inserting 
``and Sec. 968.103'' after the reference to ``Sec. 905.601'' and before 
the period; by revising paragraph (c); and by adding the OMB approval 
number to the end of the section, to read as follows:


Sec. 905.675  HUD review and approval of comprehensive plan (including 
action plan).

* * * * *
    (c) Effect of HUD approval of Comprehensive Plan. After HUD 
approves the Comprehensive Plan (including the Five-Year Action Plan), 
or any amendments to the plan, it shall be binding upon HUD and the 
IHA, until such time as the IHA submits, and HUD approves, an amendment 
to its plan. The IHA shall have full fungibility of work items (may 
undertake any of the work items) identified in any of the five years of 
the approved Five-Year Action Plan without further HUD approval. Actual 
uses of the funds are to be reflected in the IHA annual Performance and 
Evaluation Report for each grant. See Sec. 905.684. Except for 
emergencies, the IHA shall consult, to the extent practicable, the 
residents on significant changes (such as changes in scope of work) 
whenever it moves work items within the approved Five-Year Action Plan. 
Documentation of that consultation is to be retained in IHA files. If 
HUD determines as a result of an audit or monitoring findings that an 
IHA has provided false or substantially inaccurate data in its 
Comprehensive Plan/Annual Submission or has circumvented the intent of 
the program, HUD may condition the receipt of assistance, in accordance 
with Sec. 950.687. Moreover, in accordance with 18 U.S.C. 1001, any 
individual or entity who knowingly and willingly makes or uses a 
document or writing containing any false, fictitious or fraudulent 
statement or entry, in any matter within the jurisdiction of any 
department or agency of the United States, shall be fined not more than 
$10,000 or imprisoned for not more than five years, or both.

(Approved by the Office of Management and Budget under control 
number 2577-0157)

    9. Section 905.678 would be revised to read as follows:


Sec. 905.678  Annual submission of activities and expenditures.

    (a) General. The Annual Submission consists of a Five-Year Action 
Plan with a Work Statement for each of the five years and an 
implementation schedule for the current year, local government 
statement, materials demonstrating the partnership process, and other 
miscellaneous documents outlined in this section. For planning 
purposes, an IHA may use either the amount of funding received in the 
current year or the formula amount provided in HUD's notification under 
Sec. 905.669(b)(1) in developing the Five-Year Action Plan for 
presentation at the resident meetings and public hearing. The Work 
Statement for the first year of the Five-Year Action Plan is intended 
to provide a statement of the activities and costs that the IHA plans 
to undertake, in whole or in part, with the assistance to be provided 
by HUD in that year. The Work Statements for all five years will be at 
the same level of detail so that the IHA may interchange work items as 
discussed in Sec. 905.672(d)(5)(i).
    (b) Submission. After considering the amount of HUD assistance 
under paragraph (a) of this section, and estimating how much funding 
will be available from other sources, such as State and tribal 
governments, and determining its activities and costs based on the 
current FFY formula amount, the IHA shall submit its Annual Submission 
in accordance with instructions provided by HUD.
    (c) Acceptance for review. (1) Upon receipt of an Annual Submission 
from an IHA, HUD shall determine whether:
    (i) It is complete in all significant matters; and
    (ii) The IHA has submitted any additional information or assurances 
required as a result of HUD monitoring, findings of inadequate IHA 
performance, audit findings, and civil rights compliance finding.
    (2) The IHA has submitted any additional information or assurances 
required as a result of HUD monitoring findings of inadequate IHA 
performance, audit findings, and civil rights compliance findings. If 
the IHA has submitted a complete Annual Submission and all required 
information and assurances, HUD will accept the submission for review, 
as of the date of receipt. If the IHA has not submitted all required 
material, HUD will promptly notify the IHA that it has disapproved the 
submission, indicating the reasons for disapproval, the modifications 
required to qualify the Annual Submission for HUD review, and the date 
by which such modifications must be received by HUD.
    (d) Resident and local government participation. An IHA is required 
to develop its Annual Submission, including any proposed amendments to 
its Comprehensive Plan as provided in Sec. 905.672(e), in consultation 
with officials of the appropriate governing body (or, in the case of an 
IHA with developments in multiple jurisdictions, in consultation with 
the CEO of each such jurisdiction or with an advisory group 
representative of all jurisdictions) and with residents and especially 
duly elected resident organizations of the developments covered by the 
Comprehensive Plan, as follows:
    (1) Public notice. Within a reasonable amount of time before the 
advance meeting for residents under paragraph (d)(2) of this section, 
and the public hearing under paragraph (d)(3) of this section, the IHA 
shall provide public notice of the advance meeting and the public 
hearing in a manner determined by the IHA and which ensures notice to 
all duly elected resident organizations. The public notice shall also 
include a summary of activities of the previous year (uses of past 
funding) and progress update, estimated funding level (i.e., current 
year funding or formula amount, whichever the IHA elects); a summary of 
the CGP requirements; the estimated time frames for completion of the 
required CGP documents; and the requirement for resident participation 
in the planning, development and monitoring of modernization activities 
under the CGP;
    (2) Advance meeting with residents. The IHA shall at least annually 
hold a meeting open to all residents and duly elected resident 
organizations. The advance meeting shall be held within a reasonable 
amount of time before the public hearing under paragraph (d)(3) of this 
section. The IHA will provide residents with information concerning the 
contents of the IHA's Five-Year Action Plan (and any proposed 
amendments to the IHA's Comprehensive Plan to be submitted with the 
Annual Submission) so that residents can comment adequately at the 
public hearing on the contents of the Five-Year Action Plan and any 
proposed amendments to the Comprehensive Plan.
    (3) Public hearing. The IHA shall annually hold at least one public 
hearing, and any appropriate number of additional hearings, to ensure 
ample opportunity for residents of the developments covered by the 
Comprehensive Plan, officials of the appropriate governing body, and 
other interested parties, to express their priorities and concerns and 
discuss the current status of prior approved programs. The IHA shall 
give full consideration to the comments and concerns of residents, 
local government officials, and other interested parties in developing 
its Five-Year Action Plan, or any amendments to its Comprehensive Plan.
    (4) Expedited scheduling. IHAs are encouraged to hold the meeting 
with residents and duly elected resident organizations under paragraph 
(d)(2) of this section, and the public hearing under paragraph (d)(3) 
of this section between July 1 (i.e., after the end of the program 
year--June 30) and September 30, using the formula amount for the 
current FFY. If an IHA elects to use such expedited scheduling, it must 
explain at the meeting with residents and duly elected resident 
organizations and at the public hearing that the current FFY amount is 
not the actual grant amount for the subsequent year, but is rather the 
amount used for planning purposes and preparing the draft Performance 
and Evaluation Report. It must also explain that the Five-Year Action 
Plan will be adjusted when HUD provides notification of the actual 
formula amount, and explain which items may be added or deleted to 
adjust for the formula amount and that any added items will come from 
the Five-Year Action Plan.
    (e) Contents of Work Statement. The Work Statement for each year 
must include, for each development or on an IHA-wide basis for 
management improvements for which work is to be funded out of that 
year's grant:
    (1) A list of development accounts with a general description of 
work items;
    (2) The cost for each work item, as well as a summary of cost by 
development account;
    (3) The IHA-wide or development-specific management improvements to 
be undertaken during the year;
    (4) For each development and for or any management improvements not 
covered by a HUD-approved management improvement plan, a schedule for 
the use of current year funds, including target dates for the 
obligation and expenditure of the funds. In general, HUD expects that 
an IHA will obligate its current year's allocation of CGP funds (except 
for its funded replacement reserves) within two years, and expend such 
funds within three years, of the date of HUD approval, unless longer 
time-frames are approved by HUD due to local differences;
    (5) A summary description of the actions to be taken with non-CGP 
funds to meet physical and management improvement needs which have been 
identified by the IHA in its needs assessments;
    (6) Any documentation that HUD needs to assist it in carrying out 
its responsibilities under the National Environmental Policy Act and 
other related authorities in accordance with Sec. 905.120 (a) and (b);
    (7) Other information, as specified by HUD; and
    (8) An IHA resolution approving the Annual Submission or any 
amendments thereto, as set forth in Sec. 905.672(d)(7).
    (f) Additional submissions with Annual Submission. An IHA must 
submit with the Annual Submission any amendments to the Comprehensive 
Plan, as set forth in Sec. 905.672(e), and such additional information 
as may be prescribed by HUD. HUD shall review any proposed amendments 
to the Comprehensive Plan in accordance with review standards under 
Sec. 905.675(b).
    (g) HUD review and approval of Annual Submission--(1) General. An 
Annual Submission accepted in accordance with paragraph (a) of this 
section shall be considered to be approved, unless HUD notifies the IHA 
in writing, postmarked within 75 calendar days of the date that HUD 
receives the Annual Submission for review under paragraph (c) of this 
section, that HUD has disapproved the Annual Submission, indicating the 
reasons for disapproval, the modifications required to make the Annual 
Submission approvable, and the date by which such modifications must be 
received by HUD. HUD shall not disapprove an Annual Submission on the 
basis that the Department cannot complete its review under this section 
within the 75-day deadline;
    (2) Bases for disapproval for Annual Submission. HUD shall approve 
the Annual Submission, except where:
    (i) Plainly inconsistent with Comprehensive Plan. HUD determines 
that the activities and expenditures proposed in the Annual Submission 
are plainly inconsistent with the IHA's approved Comprehensive Plan;
    (ii) Contradiction of IHA resolution. HUD has evidence which tends 
to challenge, in a substantial manner, the certifications contained in 
the board resolution, as required by Sec. 905.672(d)(7).
    (h) Amendments to Annual Submission. The IHA shall advise HUD of 
all changes to the IHA's approved Work Statement for year one in its 
Performance and Evaluation Report submitted under Sec. 905.684. Any 
additional work items (changes which add work items), except for 
emergency work, must be within the IHA's approved Five-Year Action Plan 
or receive prior HUD approval.
    (i) Extension of time for performance. An IHA may revise the target 
dates for fund obligation and expenditure in the approved Annual 
Submission whenever any valid delay outside the IHA's control occurs, 
as specified by HUD. Such revision is subject to HUD review under 
Sec. 905.687(a)(2) as to the IHA's continuing capacity. HUD shall not 
review as to an IHA's continuing capacity any revisions to an IHA's 
Comprehensive Plan and related statements where the basis for the 
revision is that HUD has not provided the amount of assistance set 
forth in the Annual Submission, or has not provided such assistance in 
a timely manner.
    (j) ACC Amendment. After HUD approval of each year's Annual 
Submission, HUD and the IHA shall enter into an ACC amendment to obtain 
modernization funds. The ACC amendment shall require low-income use of 
housing for not less than 20 years from the date of the ACC amendment 
(subject to sale of homeownership units in accordance with the terms of 
the ACC).
    (k) Declaration of Trust. An IHA shall execute and file for record 
a Declaration of Trust as provided under the ACC to protect the rights 
and interests of HUD throughout the 20-year period during which the IHA 
is obligated to operate its developments in accordance with the ACC, 
the Act, and HUD regulations and requirements. A Declaration of Trust 
is not required for Mutual Help units.

(Information collections requirements have been approved by the 
Office of Management and Budget under control number 2577-0157)

    10. Section 905.681 would be amended by revising paragraph (a) 
introductory text and paragraph (b), to read as follows:


Sec. 905.681  Conduct of modernization activities.

    (a) Initiation of activities. After HUD has approved a Five-Year 
Action Plan and entered into an ACC amendment or grant agreement with 
the IHA for year one of the Plan, the IHA shall undertake the 
modernization activities and expenditures set forth in its approved 
Work Statement for year one or substitute work items from within the 
approved Five-Year Action Plan, subject to the following requirements:
* * * * *
    (b) Fund requisitions. To request modernization funds against the 
approved Work Statement for year one, the IHA shall comply with 
requirements prescribed by HUD.
* * * * *
    11. Section 905.684 would be amended by revising the section 
heading and paragraphs (a) and (b)(2); by removing paragraph (b)(3); by 
redesignating paragraphs (b)(4) through (b)(7) as paragraphs (b)(3) 
through (b)(6), respectively; and by revising newly designated 
paragraphs (b)(4) and (b)(6), to read as follows:


Sec. 905.684  IHA Performance and Evaluation Report.

    (a) Submission. For any FFY in which an IHA has received assistance 
under this subpart, the IHA shall submit a Performance and Evaluation 
Report, in a form and at a time to be prescribed by HUD, describing its 
use of assistance in accordance with the approved Five-Year Action 
Plan. The IHA must make reasonable efforts to notify residents and 
officials of the appropriate governing body of the availability of the 
draft report, make copies available to residents in the development 
office, and provide residents with at least 30 calendar days in which 
to comment on the report.
    (b) * * *
    (2) An explanation of how the IHA has used the CGP funds to address 
the needs identified in its Comprehensive Plan and to carry out the 
activities identified in its approved Five-Year Action Plan, and shall 
specifically address:
    (i) Any funds used for emergency needs not set forth in its Five-
Year Action Plan; and
    (ii) Any changes to the Annual Submission under Sec. 905.678(h);
* * * * *
    (4) The current status of the IHA's obligations and expenditures 
and specifying how the IHA is performing with respect to its 
implementation schedules, and an explanation of any necessary revision 
to the planned target dates;
* * * * *
    (6) A resolution by the IHA Board of Commissioners approving the 
Performance and Evaluation Report and containing a certification that 
the IHA has made reasonable efforts to notify residents in the 
development(s) and local government officials of the opportunity to 
review the draft report and to comment on it before its submission to 
HUD, and that copies of the report were provided to residents in the 
development office, to local government officials, or furnished upon 
their request.
* * * * *
    12. Section 905.687 would be amended as follows: by revising 
paragraphs (a)(1)(i), (a)(2)(i)(A), and (a)(3)(ii); by adding a new 
paragraph (a)(3)(iii); by revising paragraph (e)(2); by redesignating 
paragraph (e)(6) as (e)(8); by redesignating paragraphs (e)(4) and 
(e)(5) as (e)(5) and (e)(6); by revising redesignated paragraph (e)(5); 
by redesignating the second paragraph (e)(3) as (e)(4); and by adding a 
new paragraph (e)(7) to read as follows:


Sec. 905.687  HUD review of IHA performance.

    (a) * * *
    (1) * * *
    (i) In making this determination, HUD will review the IHA's 
performance to determine whether the modernization activities 
undertaken during the period under review conform substantially to the 
activities specified in the approved Five-Year Action Plan. HUD will 
also review an IHA's schedules which are provided with its Annual 
Submission for purposes of determining whether the IHA has carried out 
its modernization activities in a timely manner;
* * * * *
    (2) * * *
    (i) * * *
    (A) Carried out its activities under the CGP program, as well as 
the CIAP, in a timely manner, taking into account the level of funding 
available and whether the IHA obligates its modernization funds within 
two years from the execution of the ACC amendment and expends such 
modernization funds within three years of ACC amendment execution, or 
such longer period if agreed to by HUD in an implementation schedule, 
except in circumstances beyond the IHA's reasonable control.
* * * * *
    (3) * * *
    (ii) With respect to the management condition of the IHA, whether 
the IHA is making reasonable progress in implementing, the work items 
(specified in its annual submission and Five-Year Action Plan), 
necessary to eliminate the deficiencies identified in its management 
needs assessment; and
    (iii) In determining whether the IHA has made reasonable progress, 
HUD will take into account the level of funding available and whether 
the IHA obligates its modernization funds within two years from the 
execution of the ACC amendment and expends such modernization funds 
within three years of ACC amendment execution, or such longer period if 
agreed to by HUD in an implementation schedule. The IHA must 
demonstrate to HUD's satisfaction that any lack of timeliness (beyond 
the time periods specified in this paragraph or date specified in a HUD 
approved implementation schedule) has resulted from factors beyond the 
IHA's reasonable control.
* * * * *
    (e) * * *
    (2) Submit schedules for completing the work identified in its Work 
Statements and report periodically on its progress on meeting the 
schedules;
* * * * *
    (5) Submit additional material in support of one or more of the 
statements, resolutions, and certifications submitted as part of the 
IHA's Comprehensive Plan, Five-Year Action Plan, or Performance and 
Evaluation Report;
* * * * *
    (7) Submit to an alternative management strategy which may involve 
third-party oversight or administration of the modernization function 
(see Sec. 905.669(d)); and
* * * * *

PART 968--PUBLIC HOUSING MODERNIZATION

    13. The authority citation for 24 CFR part 968 would continue to 
read as follows:

    Authority: 42 U.S.C. 1437d, 1437l; 42 U.S.C. 3535(d).

    14. Section 968.103 would be amended by revising paragraph (b); by 
adding three sentences to the end of paragraph (j); and by revising 
paragraph (k)(2)(i), to read as follows:


Sec. 968.103  Allocation of funds under section 14.

* * * * *
    (b) Set-aside for emergencies and disasters. For each FFY, HUD 
shall reserve from amounts approved in the appropriation act for grants 
under part 905 of this title and part 968, $75 million (which shall 
include unused reserve amounts carried over from previous FFYs), which 
shall be made available to PHAs and IHAs for modernization needs 
resulting from natural and other disasters, and from emergencies. HUD 
shall replenish this reserve at the beginning of each FFY so that it 
always begins with a $75 million balance. Any unused funds from 
previous years will remain in the reserve until allocated. The 
requirements governing the reserve for disasters and emergencies and 
the procedures by which a PHA may request such funds, are set forth in 
Sec. 968.312.
* * * * *
    (j) Calculation of number of units. * * * New development units 
that are added to an PHA's or IHA's inventory will be added to the 
overall unit count so long as they are under ACC amendment and have 
reached DOFA by the first day in the FFY in which the formula is being 
run. Any increase in units (reaching DOFA and under ACC amendment) as 
of the beginning of the FFY shall result in an adjustment upwards in 
the number of units under the formula. New units reaching DOFA after 
this date will be counted for formula purposes as of the following FFY.
    (k) * * *
    (2) * * *
    (i) Increases in the number of units resulting from the conversion 
of existing units will be added to the overall unit count so long as 
they are under ACC amendment by the first day in the FFY in which the 
formula is being run;
* * * * *


Sec. 968.305  [Amended]

    15. Section 968.305 would be amended by removing the definitions 
for Annual statement and for Major changes.
    16. Section 968.310 would be amended by revising paragraphs (a)(1), 
(a)(2), (f)(1)(iii), and (m); and by removing the reference to 
``paragraph (g)'' in paragraph (a)(3) and inserting in its place 
``paragraph (f)'', to read as follows:


Sec. 968.310  Eligible costs.

    (a) * * *
    (1) Undertaking activities described in its approved Five-Year 
Action Plan under Sec. 968.320(d)(5);
    (2) Carrying out emergency work, whether or not the need is 
indicated in the PHA's approved Comprehensive Plan (including Five-Year 
Action Plan) or Annual Submission;
* * * * *
    (f) * * *
    (1) * * *
    (iii) A management improvement requires more funds than the PHA may 
use under its 20% limit for management improvements, and the PHA needs 
to save a portion of subsequent year(s) grants, to fund the work item;
* * * * *
    (m) Cost limitation. (1) Notwithstanding the full fungibility of 
work items in Sec. 968.325(c), a PHA shall not use more than a total of 
20 percent of its annual grant for management improvement costs in 
account 1408, unless specifically approved by HUD or the PHA has been 
designated as a high performer under PHMAP. To the maximum extent 
feasible, HAs should use management improvement funds to train 
residents in carrying out activities related to the modernization-
funded physical and management improvements.
    (2) Notwithstanding the full fungibility of work items in 
Sec. 968.325(c), a PHA shall not use more than a total of 7 percent of 
its annual grant on administrative costs in account 1410, excluding any 
costs related to in-house lead-based paint or asbestos testing, in-
house architectural/engineering (A/E) work, or other special 
administrative costs required by state or local law, unless 
specifically approved by HUD. In the case of a PHA whose jurisdiction 
covers an unusually large geographic area, an additional two percent of 
the annual grant may be spent on costs related to travelling to the 
PHA's developments for CGP-related business, as specifically approved 
by HUD. (For purposes of this paragraph, ``an unusually large 
geographic area'' means an area served by a PHA whose offices are 
physically separated from the majority of its developments by distances 
that require overnight travel and/or travel by air or other commercial 
carriers, e.g., a statewide PHA with developments in multiple 
localities; a regional PHA with developments in multiple counties or 
states; or an Alaska IHA with developments in multiple villages.);
* * * * *
    17. Section 968.312 would be amended by revising paragraphs (a)(1) 
and (a)(3) to read as follows:


Sec. 968.312  Reserve for emergencies and disasters.

    (a) Emergencies--(1) Eligibility for assistance. A PHA (including a 
PHA that has been designated as mod troubled under PHMAP) may obtain 
funds at any time, for any eligible emergency work item as defined in 
Sec. 968.305 (for PHAs participating in CGP) or for any eligible 
emergency work item (described as emergency modernization in 
Sec. 968.205) (for PHAs participating in CIAP), from the reserve 
established under Sec. 968.103(b). However, emergency reserve funds may 
not be provided to a PHA participating in CGP that has the necessary 
funds available from any other source, including its annual formula 
allocation under Sec. 968.103 (e) and (f), other unobligated 
modernization funds, and its replacement reserves under 
Sec. 968.310(a)(3). Emergency reserve funds may not be provided to a 
PHA participating in CIAP that has the necessary funds available from 
any other source, including unobligated CIAP (and no CIAP modernization 
is available for the remainder of the fiscal year) and residual 
receipts. PHAs participating in CIAP must also have the modernization 
work under contract within 6 months after receiving HUD's approval of 
emergency reserve funds. A PHA is not required to have an approved 
comprehensive plan under Sec. 968.320 before it can request emergency 
assistance from this reserve.
* * * * *
    (3) Repayment. A PHA that receives assistance for its emergency 
needs from the reserve under Sec. 968.103(b) must repay such assistance 
from its future allocations of assistance, where available. For PHAs 
participating in the CGP, HUD shall deduct up to 50 percent of a PHA's 
succeeding year's formula allocation under Sec. 968.103 (e) and (f) to 
repay emergency funds previously provided by HUD to the PHA. The 
remaining balance, if any, shall be deducted from a PHA's succeeding 
years' formula allocations.
* * * * *
    18. Section 968.315 would be amended by revising the section 
heading; by adding three sentences to the end of paragraph (a)(1); by 
revising paragraphs (b), (c)(1) and (c)(5); by adding a new paragraph 
(d); and by adding the OMB control number to the end of the section, to 
read as follows:


Sec. 968.315  Allocation of assistance.

    (a) * * *
    (1) * * * On an annual basis, HUD will transmit to the PHA, the 
formula characteristics report which reflects the data that will be 
used to determine the PHA's formula share. The PHA will have 30 days to 
review and advise HUD of errors in this HUD report. Necessary 
adjustments will be made to the PHA's data before the formula is run 
for the current FFY.
* * * * *
    (b) HUD notification of formula amount; appeal rights--(1) Formula 
amounts notification. After HUD determines a PHA's formula allocation 
under Sec. 968.103 (e) and (f) based upon the PHA, development, and 
community characteristics, it shall notify the PHA of its formula 
amount and provide instruction on annual submission in accordance with 
Secs. 968.320 and 968.330;
    (2) Appeal based upon unique circumstances. A PHA may appeal in 
writing HUD's determination of its formula amount within 60 calendar 
days of the date of HUD's determination on the basis of ``unique 
circumstances.'' The PHA must indicate what is unique, and specify the 
manner in which it is different from all other PHAs participating in 
the CGP, and provide any necessary supporting documentation. HUD shall 
render a written decision on an PHA's appeal under this paragraph 
within 60 calendar days of the date of its receipt of the PHA's request 
for an appeal. HUD shall publish in the Federal Register a description 
of the facts supporting any successful appeals based upon ``unique 
circumstances.'' Any adjustments resulting from successful appeals in a 
particular FFY under this paragraph shall be made from subsequent 
years' allocation of funds under this part;
    (3) Appeal based upon error. A PHA may appeal in writing HUD's 
determination of its formula amount within 60 calendar days of the date 
of HUD's determination on the basis of an error. The PHA may appeal on 
the basis of error the correctness of data in the formula 
characteristics report. The PHA must describe the nature of the error, 
and provide any necessary supporting documentation. HUD shall respond 
to the PHA's request within 60 calendar days of the date of its receipt 
of the PHA's request for an appeal. Any adjustment resulting from 
successful appeals in a particular FFY under this paragraph shall be 
made from subsequent years' allocation of funds under this part;
    (c) Reduced formula allocation for PHAs designated as mod troubled 
under PHMAP--(1) Notification. After a PHA is designated as a mod 
troubled agency under PHMAP (24 CFR part 901), HUD shall inform the PHA 
that its funding may be limited under this subpart because of its 
designation as a mod troubled PHA. HUD shall also provide the PHA with 
information concerning the PHA's funding levels for CGP, CIAP and MROP 
for each of the preceding three FFYs for purposes of determining the 
PHA's reduced formula allocation, in accordance with paragraph 
(c)(2)(ii) of this section. In addition, HUD will provide the PHA with 
information on its full formula allocation under Sec. 968.103 (e) and 
(f), and the amount which represents 25 percent of the difference 
between the average amounts provided to the PHA in each of the 
preceding three FFYs and its full formula allocation.
* * * * *
    (5) Reallocation of funds withheld from mod troubled PHAs. Any 
amounts which are not provided to a PHA under paragraph (c)(1) of this 
section because the PHA is designated as a mod troubled agency under 
PHMAP, shall be reallocated by HUD to other PHAs under this subpart 
which are not designated as either troubled or mod troubled agencies 
under PHMAP, and to IHAs under 24 CFR part 905 (subpart I) which have 
been determined to be administratively capable, in accordance with 
Sec. 905.135 of this chapter, the ACA, and the Field Office Monitoring 
of IHAs Handbook. Such funds shall be reallocated in the next FFY based 
upon the relative needs of these PHAs and IHAs, as determined under the 
formula.
* * * * *
    (d) Obligation of formula funding. All formula funding should be 
obligated within two years of allocation or such longer period approved 
by HUD. If the PHA fails to obligate funds within the approved time 
period, they may be subject to an alternative management strategy which 
may involve third-party oversight or administration of the 
modernization function. HUD would only require such action after a 
corrective action order had been issued under Sec. 968.345 and the PHA 
failed to comply with the order. HUD could then issue an alternative 
management strategy in a corrective action order. A PHA may appeal in 
writing the corrective action order imposing an alternative management 
strategy within 60 days of that order. HUD Headquarters shall render a 
written decision on a PHA's appeal within 60 calendar days of the date 
of its receipt of the PHA's appeal.

(Approved by the Office of Management and Budget under control 
number 2577-0157)

    19. Section 968.320 would be amended by revising the section 
heading; by revising paragraphs (a), (b)(2)(i), (b)(3) through (b)(5), 
(c)(2), (d)(1)(i), (d)(1)(ii), (d)(2)(i)(E), (d)(4), (d)(5)(i), 
(d)(5)(iii), (d)(6)(i), (d)(6)(ii), (d)(7)(v), (d)(7)(viii) and 
(d)(7)(xv); by adding a new paragraph (d)(7)(xviii); by revising 
paragraphs (e)(2) through (e)(4); and by adding the OMB control number 
to the end of the section, to read as follows:


Sec. 968.320   Comprehensive Plan (including Five-Year Action Plan).

    (a) Submission. HUD shall notify PHAs of the requested date for 
submitting or updating a Comprehensive Plan. For planning purposes, 
PHAs may use the amount they received under CGP in the prior year in 
developing their Comprehensive Plan or they may wait for the annual HUD 
notification of formula amount under Sec. 968.315(b)(1).
    (b) * * *
    (2) * * *
    (i) To assure that residents are fully briefed and involved in 
developing the content of, and monitoring the implementation of, the 
Comprehensive Plan including, but not limited to, the physical and 
management needs assessments, viability analysis, Five-Year Action 
Plan, and Work Statements for each year. If necessary, the PHA shall 
develop and implement capacity building strategies to ensure meaningful 
resident participation in CGP. Such technical assistance efforts for 
residents are eligible management improvement costs under CGP;
* * * * *
    (3) Public notice. Within a reasonable amount of time before the 
advance meeting for residents under paragraph (b)(4) of this section, 
and the public hearing under paragraph (b)(5) of this section, the PHA 
shall provide public notice of the advance meeting and the public 
hearing in a manner determined by the PHA and which ensures notice to 
all duly elected resident organizations. The public notice shall also 
include a summary of activities of the previous year (uses of past 
funding) and progress update, estimated funding level (i.e., current 
year funding or formula amount, whichever the PHA elects); a summary of 
the CGP requirements; the estimated time frames for completion of the 
required CGP documents; and the requirement for resident participation 
in the planning, development and monitoring of modernization activities 
under the CGP;
    (4) Advance meeting for residents. The PHA shall hold, within a 
reasonable amount of time before the public hearing under paragraph 
(b)(5) of the section, a meeting for residents and duly elected 
resident organizations at which the PHA shall explain the components of 
the Comprehensive Plan. The meeting shall be open to all residents and 
duly elected resident organizations;
    (5) Public hearing. The PHA shall hold at least one public hearing, 
and any appropriate number of additional hearings, to ensure ample 
opportunity for residents, local government officials, and other 
interested parties, to express their priorities and concerns. The PHA 
shall give full consideration to the comments and concerns of 
residents, local government officials, and other interested parties.
    (c) * * *
    (2) A copy of the summary of total preliminary estimated costs to 
address physical needs by each development and management/operations 
needs PHA-wide and a specific description of the PHA's process for 
maximizing the level of participation by residents.
* * * * *
    (d) * * *
    (1) Summaries. A PHA shall include as part of its Comprehensive 
Plan the following summaries:
    (i) A summary of total preliminary estimated costs to address 
physical needs by each development and management needs PHA-wide; and
    (ii) A specific description of the PHA's process for maximizing the 
level of participation by residents during the development, 
implementation and monitoring of the comprehensive plan, a summary of 
the general issues raised on the plan by residents and others during 
the public comment process and the PHA's response to the general 
issues. PHA records, such as minutes of planning meetings or resident 
surveys, shall be maintained in the PHA's files and made available to 
residents, duly elected resident organizations, and other interested 
parties, upon request.
* * * * *
    (2) * * *
    (i) * * *
    (E) In addition, the PHA shall provide with respect to vacant or 
non-home buyer-occupied Turnkey III units, the estimated number of 
units that the PHA is proposing for substantial rehabilitation and 
subsequent sale, in accordance with Sec. 968.310(d)(3).
* * * * *
    (4) Demonstration of long-term physical and social viability--(i) 
General. The plan shall include, on a development-by-development basis, 
an analysis of whether completion of the improvements and replacements 
identified under paragraphs (d)(2) and (d)(3) of this section will 
reasonably ensure the long-term physical and social viability of the 
development at a reasonable cost. The PHA shall keep documentation in 
its files to support its reasonable cost determinations of each major 
work item (e.g., kitchen cabinets, exterior doors). HUD will review 
cost reasonableness as part of its review of the Annual Submission and 
the Performance and Evaluation Report. Where necessary, HUD will review 
the PHA's documentation in support of its cost reasonableness;
    (ii) Determination of non-viability. Where a PHA's analysis of a 
development, under paragraph (d) of this section, establishes that 
completion of the identified improvements and replacements will not 
result in the long-term physical and social viability of the 
development at a reasonable cost, the PHA shall not expend CGP funds 
for the development, except for emergencies and essential non-routine 
maintenance necessary to maintain habitability until residents can be 
relocated. The PHA shall specify in its Comprehensive Plan the actions 
it proposes to take with respect to the non-viable development (e.g., 
demolition or disposition under 24 CFR part 970).
    (5) Five-Year Action Plan--(i) General. The Comprehensive Plan 
shall include a rolling Five-Year Action Plan to carry out the 
improvements and replacements (or a portion thereof) identified under 
paragraphs (d)(2) and (d)(3) of this section. In developing its Five-
Year Action Plan, the PHA shall assume that the current year funding or 
formula amount will be available for each year of its Five-Year Action 
Plan, whichever the PHA is using for planning purposes, plus the PHA's 
estimate of the funds that will be available from other sources, such 
as State and local governments. All activities specified in an PHA's 
Five-Year Action Plan are contingent upon the availability of funds, 
and the work items are fungible, i.e., interchangeable;
* * * * *
    (iii) Procedure for maintaining current Five-Year Action Plan. The 
PHA shall maintain a current Five-Year Action Plan by annually amending 
its Five-Year Action Plan, in conjunction with the Annual Submission;
    (6) * * *
    (i) The PHA developed the Comprehensive Plan/Five-Year Action Plan 
or amendments thereto in consultation with officials of the appropriate 
governing body and with development residents covered by the 
Comprehensive Plan/Five-Year Action Plan, in accordance with the 
requirements of Sec. 968.320(b)(1) and (2);
    (ii) The Comprehensive Plan/Five-Year Action Plan or amendments 
thereto are consistent with the appropriate governing body's assessment 
of its low-income housing needs (as evidenced by its Comprehensive 
Housing Affordability Strategy under 24 CFR part 91, if applicable), 
and that the appropriate governing body will cooperate in providing 
resident programs and services; and
* * * * *
    (7) * * *
    (v) The proposed activities, obligations and expenditures in the 
Five-Year Action Plan/Annual Submission are consistent with the 
proposed or approved Comprehensive Plan of the PHA;
* * * * *
    (viii) The PHA has provided to HUD any documentation that the 
Department has requested to carry out its review under the National 
Environmental Policy Act (NEPA) and other related authorities in 
accordance with 24 CFR 968.110(c), (d) and (m), and will not obligate, 
in any manner, the expenditure of CGP funds, or otherwise undertake the 
activities identified in its Comprehensive Plan/Annual Submission, 
until the PHA receives written notification from HUD indicating that 
the Department has complied with its responsibilities under NEPA and 
other related authorities;
* * * * *
    (xv) The PHA has complied with the requirements governing local 
government and resident participation in accordance with 24 CFR 
968.320(b) and (c), 968.330(d), and 968.340, and has given full 
consideration to the priorities and concerns of local government and 
residents, including comments which were ultimately not adopted, in 
preparing the Comprehensive Plan/Five-Year Action Plan and any 
amendments thereto;
* * * * *
    (xviii) The PHA will comply with section 3 of the Housing and Urban 
Development Act of 1968, as amended, and make best efforts, consistent 
with existing Federal, State, and local laws and regulations, to give 
low- and very low-income persons, training and employment opportunities 
generated by CGP assistance, and to make best efforts, consistent with 
existing Federal, State, and local laws and regulations, to award 
contracts for work to be performed in connection with CGP assistance to 
business concerns that provide economic opportunities for low- and very 
low-income persons.
    (e) * * *
    (2) Amendments to needs assessments. The PHA must amend its plan by 
revising its needs assessments whenever it proposes to carry out 
activities in its Five-Year Action Plan or Annual Submission that are 
not reflected in its current needs assessments (except in the case of 
emergencies). If the bases for the needs assessment have changed 
substantially, a PHA may propose an amendment to its needs assessments, 
in connection with the submission of its Annual Submission (see 
Sec. 968.330(b), or at any other time. These amendments shall be 
reviewed by HUD in accordance with Sec. 968.325;
    (3) Six-year revision of Comprehensive Plan. The physical and 
management needs assessments, and the summaries listed in 
Sec. 968.320(d)(1) are required to be revised only every sixth year, 
although the PHA may elect to revise some or all of these more 
frequently. Every sixth year, a PHA must submit to HUD, as a part of 
its annual submission, a complete revision of its Comprehensive Plan.
    (4) Annual revision of Five-Year Action Plan. Annually, the PHA 
shall submit to HUD, with its Annual Submission, an update of its Five-
Year Action Plan. Notwithstanding the new fifth year, the PHA shall 
identify changes in work categories from the previous year Five-Year 
Action Plan when making this Annual Submission.
* * * * *
(Approved by the Office of Management and Budget under control 
number 2577-0157)

    20. Section 968.325 would be amended by revising the section 
heading and paragraph (c); and by adding the OMB control number to the 
end of the section, to read as follows:


Sec. 968.325  HUD review and approval of Comprehensive Plan (including 
Five-Year Action Plan).

* * * * *
    (c) Effect of HUD approval of Comprehensive Plan. After HUD 
approves the Comprehensive Plan (including the Five-Year Action Plan), 
or any amendments to the plan, it shall be binding upon HUD and the 
PHA, until such time as the PHA submits, and HUD approves, an amendment 
to its plan. The PHA shall have full fungibility of work items (may 
undertake any of the work items) identified in any of the five years of 
the approved Five-Year Action Plan without further HUD approval. Actual 
uses of the funds are to be reflected in the PHA annual Performance and 
Evaluation Report for each grant. See Sec. 968.340. Except for 
emergencies, the PHA shall consult, to the extent practicable, the 
residents on significant changes (such as changes in scope of work) or 
whenever it moves work items within the approved Five-Year Action Plan. 
Documentation of that consultation is to be retained in PHA files. If 
HUD determines as a result of an audit or monitoring findings that a 
PHA has provided false or substantially inaccurate data in its 
Comprehensive Plan/Annual Submission or has circumvented the intent of 
the program, HUD may condition the receipt of assistance, in accordance 
with Sec. 968.345. Moreover, in accordance with 18 U.S.C. 1001, any 
individual or entity who knowingly and willingly makes or uses a 
document or writing containing any false, fictitious or fraudulent 
statement or entry, in any matter within the jurisdiction of any 
department or agency of the United States, shall be fined not more than 
$10,000 or imprisoned for not more than five years, or both.

(Approved by the Office of Management and Budget under control 
number 2577-0157)

    21. Section 968.330 would be amended by revising paragraphs (a), 
(b), (c) introductory text, (c)(2), (d), (e) introductory text, (e)(1), 
(e)(8), (f), (g)(1), (g)(2) introductory text, (g)(2)(i), (h), (i), and 
(j); by adding a new paragraph (k); and by adding the OMB control 
number to the end of the section, to read as follows:


Sec. 968.330  Annual Submission of activities and expenditures.

    (a) General. The Annual Submission consists of a Five-Year Action 
Plan with a Work Statement for each of the five years and an 
implementation schedule for the current year, local government 
statement, materials demonstrating the partnership process, and other 
miscellaneous documents outlined in this section. For planning 
purposes, a PHA may use either the amount of funding received in the 
current year or the formula amount provided in HUD's notification under 
Sec. 968.315(b)(1) in developing the Five-Year Action Plan for 
presentation at the resident meetings and public hearing. The Work 
Statement for the first year of the Five-Year Action Plan is intended 
to provide a statement of the activities and costs that the PHA plans 
to undertake, in whole or in part, with the assistance to be provided 
by HUD in that year. The Work Statement for all five years will be at 
the same level of detail so that the PHA may interchange work items as 
discussed in Sec. 968.320(d)(5)(i).
    (b) Submission. After considering the amount of HUD assistance 
under paragraph (a) of this section, and estimating how much funding 
will be available from other sources, such as State and local 
governments, and determining its activities and costs based on the 
current FFY formula amount, the PHA shall submit its Annual Submission 
in accordance with instructions provided by HUD.
    (c) Acceptance for review. Upon receipt of an Annual Submission 
from a PHA, HUD shall determine whether:
* * * * *
    (2) The PHA has submitted any additional information or assurances 
required as a result of HUD monitoring findings of inadequate PHA 
performance, audit findings, and civil rights compliance findings. If 
the PHA has submitted a complete Annual Submission and all required 
information and assurances, HUD will accept the submission for review, 
as of the date of receipt. If the PHA has not submitted all required 
material, HUD will promptly notify the PHA that it has disapproved the 
submission, indicating the reasons for disapproval, the modifications 
required to qualify the Annual Submission for HUD review, and the date 
by which such modifications must be received by HUD.
    (d) Resident and local government participation. A PHA is required 
to develop its Annual Submission, including any proposed amendments to 
its Comprehensive Plan as provided in Sec. 968.320 (b) and (c), in 
consultation with officials of the appropriate governing body (or, in 
the case of a PHA with developments in multiple jurisdictions, in 
consultation with the CEO of each such jurisdiction or with an advisory 
group representative of all jurisdictions) and with residents and 
especially duly elected resident organizations of the developments 
covered by the Comprehensive Plan, as follows:
    (1) Public notice. Within a reasonable amount of time before the 
advance meeting for residents under paragraph (d)(2) of this section, 
and the public hearing under paragraph (d)(3) of this section, the PHA 
shall provide public notice of the advance meeting and the public 
hearing in a manner determined by the PHA and which ensures notice to 
all duly elected resident organizations. The public notice shall also 
include a summary of activities of the previous year (uses of past 
funding) and progress update, estimated funding level (i.e., current 
year funding or formula amount, whichever the PHA elects); a summary of 
the CGP requirements; the estimated time frames for completion of the 
required CGP documents; and the requirement for resident participation 
in the planning, development and monitoring of modernization activities 
under the CGP;
    (2) Advance Meeting with residents. The PHA shall at least annually 
hold a meeting open to all residents and duly elected resident 
organizations. The advance meeting shall be held within a reasonable 
amount of time before the public hearing under paragraph (d)(3) of this 
section. The PHA will provide residents with information concerning the 
contents of the PHA's Five-Year Action Plan (and any proposed 
amendments to the PHA's Comprehensive Plan to be submitted with the 
Annual Submission) so that residents can comment adequately at the 
public hearing on the contents of the Five-Year Action Plan and any 
proposed amendments to the Comprehensive Plan.
    (3) Public hearing. The PHA shall annually hold at least one public 
hearing, and any appropriate number of additional hearings, to ensure 
ample opportunity for residents of the developments covered by the 
Comprehensive Plan, officials of the appropriate governing body, and 
other interested parties, to express their priorities and concerns and 
discuss the current status of prior approved programs. The PHA shall 
give full consideration to the comments and concerns of residents, 
local government officials, and other interested parties in developing 
its Five-Year Action Plan, or any amendments to its Comprehensive Plan.
    (4) Expedited scheduling. PHAs are encouraged to hold the meeting 
with residents and duly elected resident organizations under paragraph 
(d)(2) of this section, and the public hearing under paragraph (d)(3) 
of this section between July 1 (i.e., after the end of the program 
year--June 30) and September 30, using the formula amount for the 
current FFY. If a PHA elects to use such expedited scheduling, it must 
explain at the meeting with residents and duly elected resident 
organizations and at the public hearing that the current FFY amount is 
not the actual grant amount for the subsequent year, but is rather the 
amount used for planning purposes and preparing the draft Performance 
and Evaluation Report. It must also explain that the Five-Year Action 
Plan will be adjusted when HUD provides notification of the actual 
formula amount, and explain which items may be added or deleted to 
adjust for the formula amount and that any added items will come from 
the Five-Year Action Plan.
    (e) Contents of Work Statement. The Work Statement for each year 
must include, for each development or on a PHA-wide basis for 
management improvements for which work is to be funded out of that 
year's grant:
    (1) A list of development accounts with a general description of 
work items;
* * * * *
    (8) A PHA resolution approving the Annual Submission or any 
amendments thereto, as set forth in Sec. 968.320(d)(7).
    (f) Additional submissions with Annual Submission. A PHA must 
submit with the Annual Submission any amendments to the Comprehensive 
Plan, as set forth in Sec. 968.320(e), and such additional information 
as may be prescribed by HUD. HUD shall review any proposed amendments 
to the Comprehensive Plan in accordance with review standards under 
Sec. 968.325(b).
    (g) HUD review and approval of Annual Submission--(1) General. An 
Annual Submission accepted in accordance with paragraph (a) of this 
section shall be considered to be approved, unless HUD notifies the PHA 
in writing, postmarked within 75 calendar days of the date that HUD 
receives the Annual Submission for review under paragraph (c) of this 
section, that HUD has disapproved the Annual Submission, indicating the 
reasons for disapproval, the modifications required to make the Annual 
Submission approvable, and the date by which such modifications must be 
received by HUD. HUD shall not disapprove an Annual Submission on the 
basis that the Department cannot complete its review under this section 
within the 75-day deadline;
    (2) Bases for disapproval for Annual Submission. HUD shall approve 
the Annual Submission, except where:
    (i) Plainly inconsistent with Comprehensive Plan. HUD determines 
that the activities and expenditures proposed in the Annual Submission 
are plainly inconsistent with the PHA's approved Comprehensive Plan;
* * * * *
    (h) Amendments to Annual Submission. The PHA shall advise HUD of 
all changes to the PHA's approved Work Statement for year one in its 
Performance and Evaluation Report submitted under Sec. 968.305. Any 
additional work items (changes which add work items), except for 
emergency work, must be within the PHA's approved Five-Year Action Plan 
or receive prior HUD approval.
    (i) Extension of time for performance. A PHA may revise the target 
dates for fund obligation and expenditure in the approved Annual 
Submission whenever any valid delay outside the PHA's control occurs, 
as specified by HUD. Such revision is subject to HUD review under 
Sec. 968.345(a)(2) as to the PHA's continuing capacity. HUD shall not 
review as to a PHA's continuing capacity any revisions to a PHA's 
Comprehensive Plan and related statements where the basis for the 
revision is that HUD has not provided the amount of assistance set 
forth in the Annual Submission, or has not provided such assistance in 
a timely manner.
    (j) ACC Amendment. After HUD approval of each year's Annual 
Submission, HUD and the PHA shall enter into an ACC amendment to obtain 
modernization funds. The ACC amendment shall require low-income use of 
housing for not less than 20 years from the date of the ACC amendment 
(subject to sale of homeownership units in accordance with the terms of 
the ACC).
    (k) Declaration of trust. A PHA shall execute and file for record a 
Declaration of Trust as provided under the ACC to protect the rights 
and interests of HUD throughout the 20-year period during which the PHA 
is obligated to operate its developments in accordance with the ACC, 
the Act, and HUD regulations and requirements.

(Approved by the Office of Management and Budget under control 
number 2577-0157)

    22. Section 968.335 would be amended by revising paragraph (a) 
introductory text and paragraph (b), to read as follows:


Sec. 968.335  Conduct of modernization activities.

    (a) Initiation of activities. After HUD has approved a Five-Year 
Action Plan and entered into an ACC amendment or grant agreement with 
the PHA for year one of the Plan, the PHA shall undertake the 
modernization activities and expenditures set forth in its approved 
Work Statement for year one or substitute work items from within the 
approved Five-Year Action Plan, subject to the following requirements:
* * * * *
    (b) Fund requisitions. To request modernization funds against the 
Work Statement, the PHA shall comply with requirements prescribed by 
HUD.
* * * * *
    23. Section 968.340 would be amended by revising paragraphs (a) and 
(b)(2); by removing paragraph (b)(3); by redesignating paragraphs 
(b)(4) through (b)(7) to read paragraphs (b)(3) through (b)(6), 
respectively; by revising the newly designated paragraphs (b)(4) and 
(b)(6); and by adding the OMB control number to the end of the section, 
to read as follows:


Sec. 968.340  PHA Performance and Evaluation Report.

    (a) Submission. For any FFY in which a PHA has received assistance 
under this subpart, the PHA shall submit a Performance and Evaluation 
Report, in a form and at a time to be prescribed by HUD, describing its 
use of assistance in accordance with the approved Five-Year Action 
Plan. The PHA must make reasonable efforts to notify residents and 
officials of the appropriate governing body of the availability of the 
draft report, make copies available to residents in the development 
office, and provide residents with at least 30 calendar days in which 
to comment on the report.
    (b) * * *
    (2) An explanation of how the PHA has used the CGP funds to address 
the needs identified in its Comprehensive Plan and to carry out the 
activities identified in its approved Five-Year Action Plan, and shall 
specifically address:
    (i) Any funds used for emergency needs not set forth in its Five-
Year Action Plan; and
    (ii) Any changes to the Annual Submission under Sec. 968.330;
* * * * *
    (4) The current status of the PHA's obligations and expenditures 
and specifying how the PHA is performing with respect to its 
implementation schedules, and an explanation of any necessary revision 
to the planned target dates;
* * * * *
    (6) A resolution by the PHA Board of Commissioners approving the 
Performance and Evaluation Report and containing a certification that 
the PHA has made reasonable efforts to notify residents in the 
development(s) and local government officials of the opportunity to 
review the draft report and to comment on it before its submission to 
HUD, and that copies of the report were provided to residents in the 
development office, to local government officials, or furnished upon 
their request.
    24. Section 968.345 would be amended by revising paragraphs 
(a)(1)(i), (a)(1)(ii), (a)(2)(i)(A), and (a)(3)(ii); by adding a new 
paragraph (a)(3)(iii); by revising paragraphs (e)(2) and (e)(4); by 
redesignating paragraph (e)(7) to read paragraph (e)(8); by adding a 
new paragraph (e)(7); and by adding the OMB control number to the end 
of the section, to read as follows:


Sec. 968.345  HUD review of PHA performance.

    (a) * * *
    (1) * * *
    (i) In making this determination, HUD will review the PHA's 
performance to determine whether the modernization activities 
undertaken during the period under review conform substantially to the 
activities specified in the approved Five-Year Action Plan. HUD will 
also review a PHA's schedules which are provided with its Annual 
Submission for purposes of determining whether the PHA has carried out 
its modernization activities in a timely manner;
    (ii) HUD will review a PHA's performance to determine whether the 
activities carried out comply with the requirements of the Act, 
including the requirement that work carried out meets the modernization 
and energy conservation standards in Sec. 968.115, this part, and other 
applicable laws and regulations. This review should also include a 
review of the PHA's section 3 (of the Housing and Urban Development Act 
of 1968) past performance.
    (2) * * *
    (i) * * *
    (A) Carried out its activities under the CGP program, as well as 
the CIAP, in a timely manner, taking into account the level of funding 
available and whether the PHA obligates its modernization funds within 
two years from the execution of the ACC amendment and expends such 
modernization funds within three years of ACC amendment execution, or 
such longer period if agreed to by HUD in an implementation schedule, 
except in circumstances beyond the PHA's reasonable control.
* * * * *
    (3) * * *
    (ii) With respect to the management condition of the PHA, whether 
the PHA has achieved, or is making reasonable progress towards 
implementing the work items specified in its annual submission and 
Five-Year Action Plan which are designed to address deficiencies 
identified through PHMAP, audits, or HUD reviews; and
    (iii) In determining whether the PHA has made reasonable progress, 
HUD will take into account the level of funding available and whether 
the PHA obligates its modernization funds within two years from the 
execution of the ACC amendment and expends such modernization funds 
within three years of ACC amendment execution, or such longer period if 
agreed to by HUD in an implementation schedule. The PHA must 
demonstrate to HUD's satisfaction that any lack of timeliness (beyond 
the time periods specified in this paragraph or date specified in a HUD 
approved implementation schedule) has resulted from factors beyond the 
PHA's reasonable control.
* * * * *
    (e) * * *
    (2) Submit schedules for completing the work identified in its Work 
Statements and report periodically on its progress on meeting the 
schedules;
* * * * *
    (4) Submit additional material in support of one or more of the 
statements, resolutions, and certifications submitted as part of the 
PHA's Comprehensive Plan, Five-Year Action Plan, or Performance and 
Evaluation Report;
* * * * *
    (7) Submit to an alternative management strategy which may involve 
third-party oversight or administration of the modernization function 
(see Sec. 968.315(d)); and
* * * * *
(Approved by the Office of Management and Budget under control 
number 2577-0157)

    Dated: March 2, 1994.
Michael B. Janis,
General Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. 94-5146 Filed 3-7-94; 8:45 am]
BILLING CODE 4210-33-P