[Federal Register Volume 59, Number 163 (Wednesday, August 24, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20655]


[[Page Unknown]]

[Federal Register: August 24, 1994]


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Part II





Department of Housing and Urban Development





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Office of the Assistant Secretary for Public and Indian Housing



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24 CFR Part 905 et al.




Public and Indian Housing Amendment to the Tenant Participation and 
Tenant Opportunities in Public and Indian Housing; Final Rule
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Public and Indian Housing

24 CFR Parts 905, 913, 964 and 990

[Docket No. R-94-1707; FR-3568-F-03]
RIN 2577-AB36

 
Public and Indian Housing Amendment to the Tenant Participation 
and Tenant Opportunities in Public and Indian Housing

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

ACTION: Final rule.

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SUMMARY: This final rule amends the regulations on tenant participation 
in public and Indian housing to provide a comprehensive framework for 
tenant opportunities programs which includes new policies, procedures 
and guidelines for tenant participation; revision of the Resident 
Management Program to the Tenant Opportunities Program; and the 
addition of regulations to govern the Family Investment Centers (FIC) 
Program. These changes are being made to provide for new resident 
programs, as well as to address several weaknesses in the existing 
regulations which have interfered with successful program 
implementation.

EFFECTIVE DATE: September 23, 1994.

FOR FURTHER INFORMATION CONTACT: For questions concerning the Public 
Housing rule contact Dorothy Walker or Marcia Martin, Office of 
Resident Initiatives, Room 4112, telephone (202) 708-3611, or 708-0850. 
For Indian Housing, contact Ed Fagan, Office of Native American 
Programs, Room 4144, telephone (202) 708-2980 (these are not toll-free 
numbers). Hearing- or speech-impaired persons may use the 
Telecommunications Devices for the Deaf (TDD) by contacting the Federal 
Information Relay Service on 1-800-877-TDDY (1-800-877-8339) or 202-
708-9300 (not a toll free number) for information on the program. (The 
telephone numbers listed above are not toll-free.)

SUPPLEMENTARY INFORMATION:

I. Information Collections

    The information collection requirements contained in this rule have 
been submitted to the Office of Management and Budget (OMB) for review 
under the Paperwork Reduction Act of 1980 (44 U.S.C. 3501-3520) and 
have been approved and assigned OMB number 2577-0127.

II. Background

    Section 20 of the United States Housing Act of 1937, as amended, 
(42 U.S.C. 1437r) (the ``1937 Act'') was enacted to encourage increased 
resident management of public housing projects * * * ``to promote 
formation and development of resident management entities.'' The 
Department implemented section 20 by regulations (24 CFR 964 for Public 
Housing, and 24 CFR Part 905, subpart O for Indian Housing), that 
governed tenant participation and resident management in public/Indian 
housing under Section 20 of the 1937 Act.
    Section 20 also authorizes funds for technical assistance and 
training to resident councils (RCs)/resident management corporations 
(RMCs) to promote increased resident management of public housing. 
HUD's experience in providing grants to RCs/RMCs under the Public 
Housing Resident Management Program has revealed that major changes 
were needed in the provisions of the program. RCs/RMCs and PHAs/IHAs 
(hereinafter referred to as ``HAs'') across the country overwhelmingly 
requested revamping of the program to assist in meeting their 
residents' need for economic development, education, job training and 
development, social services, and opportunities for other self-help 
initiatives.

III. Overview of Public and Indian Housing Changes

    Several weaknesses in the regulations have interfered with 
successful program implementation. The current regulations fail to 
establish clear and detailed policy on resident participation and 
guidance on the structure for public housing resident organizations. 
Additionally, the current regulations fail to establish specific 
requirements for resident involvement in public/Indian housing 
management, and to encourage a strong partnership between HAs and 
resident councils. [Note that references to resident councils in this 
overview affect resident organizations in IHAs.]
    Internal conflicts between competing resident councils in a 
development pose serious problems to HUD with respect to program 
eligibility and participation, as well as with respect to HA 
recognition. The Department is concerned about the need to provide more 
details on how resident councils/resident management corporations 
should be structured and how to broaden tenant involvement in public 
housing.
    The Department recognizes the need to increase the amount of cash 
contributions for resident council activities (presently limited at 
three (3) dollars per unit per year) and to compensate resident council 
officers who are serving as volunteers in the public housing community.
    The Secretary established an Interim Resident Advisory Committee 
consisting of representatives of regional and state resident public 
housing organizations who developed a Policy Paper on resident 
involvement in public housing. Public Housing Advocacy Groups [Public 
Housing Authorities Directors Association (PHADA), Council of Large 
Public Housing Authorities (CLPHA) and National Association of Housing 
and Redevelopment Officials (NAHRO)] were given an opportunity to 
review and comment on the Policy Paper.
    Recommendations from the Interim Resident Advisory Committee on 
Tenant Involvement in Public Housing and requests for changes in the 
Resident Management Technical Assistance Program are the basis for the 
comprehensive revision of 24 CFR Part 964.
    The major changes in this rule allow for broader, more flexible 
programs aimed at increasing the capacity of resident entities to 
participate significantly in all aspects of public housing operations 
while simultaneously permitting further economic uplift opportunities, 
to the extent permitted under section 20 of the 1937 Act. Section 20 
requires that all activities funded under it be related to improved 
living conditions and public housing operations. (See Secs. 905.967 and 
964.205.) The Department has proposed amendments to section 20, as a 
part of HUD's legislative proposal, to permit funding of a broader 
range of resident initiative activities to include activities that are 
not necessarily related to resident management or housing authority 
operations.
    The current regulation on the Tenant Participation and Resident 
Management Program (24 CFR Part 964) is renamed by this final rule as 
the ``Tenant Participation and Tenant Opportunities in the Public 
Housing Program'' for public housing. This final rule replaces the 
Resident Management Program under subpart C with the Tenant 
Opportunities Program (TOP). For Indian housing, the program is named 
``Resident Participation and Opportunities for Indian Housing.'' (24 
CFR part 905, subpart O).
    The revised program (TOP) is designed to (1) Prepare residents to 
experience the dignity of meaningful work, to own and operate resident 
businesses, and to move toward financial independence; (2) enable them 
to choose where they want to live; and (3) assure meaningful 
participation in the management of their housing developments. The 
authority for the TOP program comes from Section 20 of the 1937 Act. 
Also under Section 20, technical assistance grants are available for 
``the development of resident-managed entities (including the formation 
of such entities), the development of the management capability of 
newly formed or existing entities, the identification of the social 
support needs of residents of public housing projects, and the securing 
of such support.'' ``TOP technical assistance grants'' can enable 
residents to manage their developments or portions of their 
developments. The results are significant and multifaceted. For 
example, resident managed activities have resulted in economic 
development, resident self-sufficiency, improved living conditions, and 
enhanced social services for residents (e.g., child care and other 
youth programs).
    The Resident Management Program will continue to be an option to 
resident councils/resident management corporations who are interested 
in performing management functions in one or more projects of a HA. 
None of the requirements for the resident management program will be 
changed. However, some of the provisions are being moved to other HUD 
regulations or issuances. For example, the requirements under subpart C 
(Sec. 964.39) governing the operating subsidy, budget, operating 
reserves, etc. are being moved to 24 CFR Part 990--Annual Contributions 
for Operating Subsidy. The Department believes these provisions of 
Sec. 964.39 are more appropriately placed in that regulation. Also, the 
requirements for the RMC management contract contents are being removed 
from subpart C and are contained in HUD Notice PIH 93-56 (HA), which 
also includes the model management contract.
    Subpart A of part 964 is being expanded to add policies on 
partnerships between HAs and residents. For example, HAs are required 
to provide office space and meeting facilities to a duly elected 
resident council, free of charge, for the purposes of conducting 
resident activities.
    Also, the section on definitions (Sec. 964.7) is being amended by 
removing terms such as ``resident council'', ``project'', and ``tenant 
participation''. The eligibility requirements for a voting member of a 
resident council have been expanded and clarified. The frequency of 
elections for resident management corporations has been established.
    Subpart B of part 964 is being expanded substantially to establish 
policies and procedures for HAs with respect to resident participation 
activities. For example, HAs shall provide any funds they receive for 
resident participation activities to the duly elected resident council. 
Parts 990 and 905, subpart J, are being amended to require an addition 
of $25 per unit per year to the HA's operating subsidy calculation for 
units represented by a duly elected resident council, which will be 
paid to the HA only if appropriations are available for that purpose. 
Fifteen dollars of the $25 will fund the duly elected resident 
councils, the jurisdiction-wide councils and stipends, as discussed 
further in this preamble. The remaining ten dollars is for the HAs to 
cover resident-related responsibilities, including but not limited to 
third party supervision of elections, recalls and arbitrations. The HUD 
Circular HM 7475.9, dated February 10, 1972, authorized cash 
contributions for resident council activities for three ($3) dollars 
per unit per year. The Department believes that an increase of $12 per 
unit per year is reasonable and, if available, will provide more 
resources necessary to create a bona fide partnership among the duly 
elected resident council and the HA. Therefore, this rule replaces any 
existing guidance or authority including HM 7475.9. Strong partnerships 
are critical for achieving mutual goals contained in this subpart.
    Also, HUD is encouraging HAs to provide stipends in an amount up to 
$200 per month/per officer to resident council officers who serve as 
volunteers in the public housing development to carry out these duties 
and functions as officers of the resident council. The Department 
believes that such a stipend will enable these volunteers to defray the 
costs associated with volunteer efforts, such as child care, 
transportation, special equipment, clothing, etc.
    The current Part 964 regulations lack specificity regarding 
resident elections and organizational policies, and have made it 
difficult to determine what is a ``duly elected resident council,'' and 
that has caused conflicts among the residents.
    This final rule adds new policies and procedures for resident 
councils by (1) Defining what is a ``duly elected resident council,'' 
(2) detailing minimum standards for elections of resident councils, and 
(3) specifying the relationship between the resident councils and 
resident management corporations. Resident councils are required to 
meet HUD's election standards in order to receive official recognition 
from the HA and HUD and to receive funds in conjunction with the 
conduct of resident council business. The role of the jurisdiction-wide 
resident council is established under this rule. The rule also contains 
provisions that expand the resident participation requirements to 
strongly support resident participation in all aspects of a HA's 
management operations, and these requirements give rights to residents 
to freely organize and represent their interests.
    The rule adds a new subpart D to part 964 to establish the Family 
Investment Center (FIC) Program, as provided for under section 22 of 
the 1937 Act (42 U.S.C. 1437t) (added by section 515 of the National 
Affordable Housing Act, Pub. L. 101-625). The Indian Housing FIC 
Program is found in 24 CFR 905.980. The FIC program provides families 
living in public housing with better access to educational and 
employment opportunities. This new subpart is being added to Part 964 
to include FIC because it complements the Department's resident 
participation and self-sufficiency initiatives. The program was 
proposed by a national association on behalf of numerous housing 
authorities. Representatives from public/Indian housing authorities, 
resident councils/resident management corporations and nonprofit 
housing agencies were convened at the Department to discuss program 
provisions and provide policy recommendations during the initial 
program planning stage. Some HAs will combine their FIC and Family 
Self-Sufficiency (FSS) programs. This final rule provides that Section 
8 FSS Program participants are eligible to participate in the FIC 
program when it is combined with FSS, but that income exclusions that 
are provided to public housing residents participating in employment 
training and supportive service programs do not apply to Section 8 FSS 
families. If a public housing family under FSS is currently putting 
their funds in an escrow account, they cannot also be eligible for the 
income exclusion.
    Sections 905.985 and 964.320 provide HUD policy on training, 
employment and contracting of public/Indian housing residents under 
Section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C. 
1701u). Section 915 of the Housing and Community Development Act of 
1992 (Pub. L. 102-550) made significant changes to Section 3. HUD 
published an interim rule implementing those changes on June 30, 1994. 
Section 3, as amended, requires that HAs 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, operation and modernization assistance provided 
pursuant to Sections 5, 9 and 14 of the U.S. Housing Act of 1937, to 
business concerns which provide economic opportunities to low income 
persons. As amended, Section 3 establishes an order of priority to 
which the HA's efforts must be directed. Thus, the first level of 
priority is to residents of the housing development for which the 
assistance is provided. This rule includes provisions consistent with 
the interim Section 3 rule.
    The reader should note that combination terms such as ``tenant and 
resident,'' ``tenant council'' and ``resident council,'' and ``tenant 
management corporation'' and ``resident management corporation'' are 
similar terms and may be used interchangeably. Hereafter, for ease of 
discussion, the rule will use the terms resident, resident council and 
resident management corporation, as appropriate.

IV. Public Comments

    On April 19, 1994, at 59 FR 18666, the Department published a 
proposed rule and allowed 30 days for the public to comment. The 
Department received 31 comments in response to the proposed regulation: 
20 from housing authorities, two from housing authority advocacy 
groups, six from resident councils/resident organizations, two from 
residents, one from a HUD field office, and three from private 
organizations. Following the general comments discussed below, there is 
a listing of the specific issues raised in the comments and the 
Department's responses to the issues.
    While this final rule applies both to public and Indian housing 
communities, there are separate regulations for each: Part 964 for 
Public Housing and Part 905, subpart O for Indian Housing. General and 
specific comments and responses are grouped by the source of the 
comment (public housing commenters or Indian housing commenters). In 
many cases, the comments and responses below are applicable to both.

General Public Housing Comments

    Overall, there was widespread support for the concept of resident 
participation as well as for the new Tenant Opportunities Program (TOP) 
and the Family Investment Centers (FIC) Programs contained in the 
proposed rule. Seven commenters stated that the 30-day comment period 
was too short. However, because consultation took place while the 
policy was being developed, and comments were submitted by various 
interested parties, the Department believes that a longer period was 
unnecessary.
    There was also at least one comment on the proliferation on new 
specialized programs. Because of the rapid growth of new programs, this 
comprehensive regulation provides a common policy and definition for 
administering these programs.
    There were several comments from housing authorities on the 
rationale for HUD requiring resident participation with duly-elected 
resident groups rather than any residents in the public housing 
community. The Department believes that a clear-cut policy of 
accountability through the elected resident leaders will assure 
adequate representation and mitigate criticism of housing authority 
favoritism. In order to provide time for the public housing community 
to implement elections, etc. to comply with this duly elected resident 
council requirement, the Department has determined the date for 
compliance with this regulation will be April 3, 1995.
    There were also concerns that the Department may be providing 
prescriptive policies on resident participation. The Department has 
developed policies for the basic resident participation requirements to 
minimize ambiguity--on resident membership, election frequency and the 
residents' partnership with the housing authority. However, the 
regulation provides significant flexibility for the method of 
implementation. For example, with respect to election standards, the 
regulation discusses standards but leaves it up to the public housing 
community regarding the specifics.

Specific Public Housing Comments

    Comment. Funding Issues: (Secs. 964.115, 964.105, 964.150) One 
commenter requested more clarity between the Resident Council and the 
Jurisdiction-Wide Resident Council with respect to which organization 
would be eligible to receive the $15.00 per unit/per year for resident 
services. Concern was raised that the operating subsidy funding for 
resident council activities may be required to provide the funds for 
resident activities. One commenter requested that ``subject to 
appropriations'' be added to Sec. 990.108. Two PHAs expressed concern 
that the provision of stipends to resident council officers should also 
be an add-on to the PFS. One tenant organization expressed concern 
about the impact of withholding for Social Security and income tax on 
the residents receiving the stipends. One PHA requested clarification 
on the demand for HAs to provide tenant services funding regardless of 
the HA financial status.
    Response. Section 964.150 has been revised to clarify for whom the 
funding is intended. The duly elected Resident Councils at each 
development and/or jurisdiction-wide councils are eligible to receive 
the resident portion of the Tenant Services Account, i.e., $15 per unit 
per year. Where both organizations exist, the distribution will be 
agreed upon by the HA and the respective organizations. Dispute 
resolution procedures are added at Sec. 964.150(c). The resident 
officer stipends (up to $200 per month/per officer to be determined 
jointly by the resident council and HA) are also included in the $15 
per unit per year funding. The $15 per unit per year is a 500% increase 
from the current guideline of $3 per unit per year. In addition, the 
$10 per unit per year--as a new policy--is for the housing authority to 
cover resident-related responsibilities, including but not limited to 
third party supervision of elections, recalls and use of mediation/
arbitration services.
    With respect to funding for resident services, section 964.150 
states that 24 CFR part 990 would provide an addition to the operating 
subsidy eligibility in the amount of $25 per unit per year for units 
represented by a duly elected resident council and the provision of 
these funds is subject to availability of appropriations. The HA and 
resident council should collaborate on the appropriate use of these 
funds. The Department is aware that even with this increase, there may 
be insufficient funds for resident council expenses plus stipends. The 
provision of stipends is not a requirement and will be decided by the 
local resident council officers and the HA. If Congress does not 
appropriate funds, the HA and duly-elected resident council may 
negotiate funds for tenant services based on the availability of funds.
    With respect to how stipends are counted for income tax purposes, 
the stipends are not a salary but reimbursement for expenses incurred. 
Under this definition, stipends will not be treated as income by HUD in 
its programs. The treatment of stipends as income for social security 
and income tax purposes cannot be addressed by HUD; this issue must be 
discussed with Social Security Administration and IRS. However, HUD can 
assure that stipends shall not be treated as income for rent purposes.
    Comment. Funding Issue: (Sec. 964.150) Five HA comments agreed with 
proposed increase of funding for resident participation. Four HA 
comments and two housing advocacy organizations expressed concern that 
funding for resident activities may not be sufficient for required 
activities under the regulation. However, three PHAs oppose an increase 
in funding for resident participation from $3.00 per unit/per year to 
$25.00 per unit/per year because resident councils are already 
receiving substantial funding under the Tenant Opportunities Program/
Technical Assistance Grant, and the Comprehensive Grant Program. One 
commenter recommended an increase in the $10 per unit/per month for 
housing authority activities.
    Response. The Department believes that an increase in support for 
resident participation activities from $3.00 per unit/per year to 
$25.00 per unit/per year (of this amount $15.00 will be provided to the 
duly elected resident council) is reasonable and long overdue to 
support the increasing activities and community involvement of these 
organizations. While TOP funds are available for such activities, those 
funds can only be obtained on a competitive basis, and the availability 
of CGP Management Improvement Program funds is contingent upon the 
Public Housing Authorities' priorities to improve management 
operations. The Department believes that the portion for the PHAs is 
equitable in light of the functions to be provided under each and the 
funding available to PHAs.
    Comment. Audit Issue: (Secs. 905.972(a) and 964.230(a)(2)) One 
commenter requested change to a reference in Sec. 905.972(a) from 
``audit of books and records'' to ``audits of financial statements;'' 
and change to a reference in Sec. 964.230(a)(2) from ``* * * activities 
and expenditures * * *'' to ``* * * financial statements * * *.''
    Response. The above-mentioned provisions will be changed to state 
review of financial statements. Such a review of the financial 
statements would include scrutiny of expenditures related to the 
workplan as well as compliance with the HUD grant agreement.
    Comment. Conflict of Interest Issue: (Sec. 964.145) Three tenant 
organizations objected to the Conflict of Interest policy because it 
would deplete the executive board of the Resident Council/Advisory 
Board. It was also noted that over 50 percent of resident leaders are 
employed by HAs. Two HAs observed that resident employment encourages 
participation in resident governance and should be encouraged when 
residents are not employed in supervisory capacities.
    Response. The conflict of interest policy has been revised to state 
that ``Resident council officers cannot serve as employees in a policy 
making position at the HA or as a contractor to the HA. However, 
seasonal, part time or non-supervisory positions at the HA or their 
contractors which are not involved in policy making work are exempt 
from the conflict of interest policy.''
    Comment. FIC Issue: (Sec. 964.305) One PHA objected to the small 
amount of 15 percent allowed for supportive services and recommends an 
increase to 25 percent.
    Response. The cap on supportive services (15 percent) is stipulated 
in the law. The Department agrees that the current statutory policy is 
too restrictive and has included in its legislative proposal raising 
the limit to 30 percent.
    Comment. Threshold Issue: (Sec. 964.18) Two HAs suggested that the 
threshold for applicability of this regulation--i.e., HAs of 100 
units--was too low and should be increased to HAs of 250 or even 1250 
units.
    Response. The Department agrees with the commenter that the 
threshold should be increased to 250 units. This would make the 
threshold comparable with that of the Comprehensive Grant Program. HAs 
with fewer than 250 units cannot deny residents the opportunity to 
organize. This regulation is intended to provide all resident groups 
with the opportunities available under this regulation.
    Comment. Office Space Issue: (Sec. 964.18) One HA objected to the 
provision of office space for the duly elected resident council 
especially at smaller complexes and said it should only be required at 
public housing developments of 250 units and over. Two other commenters 
felt that there would not be space for resident councils--even at 
larger authorities--especially when there was a long waiting list. 
Commenters felt that office space should be covered by operating 
subsidy.
    One housing advocacy organization recommended that flexibility 
should be granted to the HA and that assistance with alternative 
locations might be sufficient for small HAs. Another housing advocacy 
organization suggested that office space be required only in projects 
above 250 units.
    Response. The Department agrees with the first commenter that 
providing office space to resident councils may not be feasible in 
small HAs without any community space options and few units. In such 
cases, the HA should make every effort to assist RCs in obtaining space 
when units are not available. If there is no community or rental space 
available, a request to approve a vacant rental unit for this non-
dwelling use will be considered on a case-by-case basis. Subject to 
appropriations, these units will be eligible for operating subsidy.
    Comment. Elections Issue: (Sec. 964.130) One HA objected to a third 
party supervision for resident council elections especially in cases 
where the HA and resident organization are in agreement. Opposition was 
expressed to three (3) year terms, with two HAs suggesting that shorter 
terms will solve problems of effective resident representation and the 
filling of vacancies. Four commenters expressed concern about the 
requirement in Sec. 964.115 for approval of 51 percent of ``voting 
membership'' instead of \2/3\ of voters to recall a resident board.
    Response. A third party supervision, even in cases where the HA and 
resident organization are in agreement, provides for a neutral monitor 
to oversee elections and recall procedures. Holding elections at least 
every three (3) years provides for continuity and allows time for each 
resident council board to plan and implement any new activities. 
Resident Council By-Laws must include provisions for recall elections 
of representatives, including officers. These provisions shall allow 
for a petition or other means of expression of the voting membership 
for such a recall vote to be taken. The local resident council voting 
membership shall determine the threshold for recall. This threshold 
shall not be less than 10 percent of the voting membership.
    Comment. HA Operations Issue: (Sec. 964.135) Two HAs opposed 
resident participation in all issues and facets of a PHA's operations.
    Response. Resident participation in all issues and facets provides 
support to the HA for improved living conditions and resident 
satisfaction in public housing communities. Residents can provide 
valuable input regarding the conditions of the property and the 
performance of employees and contractors.
    Comment. Policy Issue: (Sec. 964.12) One interest group opposed 
changing Resident Management to TOP; however, one commenter supported 
the new TOP. One RMC objected to the requirement imposed by the 
regulation for adopting the model contract for RMCs entering into a 
contract with a HA, and the removal of sections governing the operating 
subsidy and comprehensive improvement assistance program.
    Response. Resident councils, resident management corporations, and 
HAs across the country requested that HUD revamp the Resident 
Management Technical Assistant Grant Program (RM TAG) to meet the 
residents' needs for economic development, education, job training and 
development, social services and other self-help opportunities. The 
residents still have the option to undertake property management, if 
they desire. The expanded range of activities provided by TOP will meet 
the residents needs. The language in the proposed rule stated that the 
model contract in HUD Notice PIH 93-56 must be followed unless HUD 
approves a requested change. It should be noted that there are minimum 
statutory and regulatory requirements in the model contract which must 
be used and any other provisions would be considered voluntary or 
advisory. The section on operating subsidy is being moved to Part 990 
so that all procedures covering operating subsidy are contained in the 
same regulation. Information on CIAP/CGP has been inserted in the 
resident management requirements section of this final regulation in 
Sec. 964.225.
    Comment. Voting Issue: (Sec. 964.115(c)) Two HAs requested 
clarification on the voting membership.
    Response. The voting membership is limited to designated heads of 
households (any age) and other members of a household who are 18 years 
or older whose name appears on the lease of a unit in the public 
housing development represented by the resident council.
    Comment. RC/RMC Clarification Issue: (Sec. 964.120(f)) One HA 
requested clarification on RMC recognition in the instance where a 
resident organization (RO) is formed after an RMC is established. For 
example, must the new RO and the voting membership or all of the 
residents approve the establishment of such an organization.
    Response. The newly formed duly elected resident council and the 
RMC should work together to establish a method of documenting, i.e., 
through a resident council board resolution, the approval of the duly 
elected representative body for resident management.
    Comment. Resident Training Issue: (Sec. 964.140) One resident 
organization, one advocacy organization, and one HA each expressed 
concern that there is insufficient funding to adequately train 
interested residents in overall policy development and direction of HA 
operations.
    Response. The Department is requesting $85 million for the TOP 
Program for FY 1995, which represents a three-fold increase from FY 
1994 funding to provide additional training for residents. The option 
also exists to use several other resources available to train the 
residents, such as: (1) the HA staff, (2) CGP/CIAP, (3) operating 
subsidies, (4) TOP TAG and (5) Section 8 administrative fees. In 
addition, the RC/RMC together with the HA could form a partnership with 
other local and community organizations to provide the support for 
training.
    Comment. Partnerships Issue: (Sec. 964.14) One HA supports 
partnerships but is concerned that outside partnerships may become the 
governing entity. The commenter believes that the primary partnerships 
should be fostered between RCs and HAs.
    Response. HUD promotes partnerships between residents and HAs which 
are an essential component to building, strengthening and improving 
public housing. However, strong partnerships with other organizations 
are also critical for creating positive changes in lifestyles thus 
improving the quality of life for public housing residents, and the 
surrounding community. However, these outside partners cannot be 
recognized or assume the role of the duly-elected governing entity.
    Comment. Expanding Resident Council Issue: (Sec. 964.105) One HA 
comment requested clarification about whether an HA with an existing 
jurisdiction-wide resident council can help establish new resident 
councils in scattered sites or separate groups of buildings.
    Response. The Department encourages the development of new resident 
councils, or revival of inactive resident councils, at all housing 
developments including scattered sites.

General Indian Housing Comments

    The Department received 18 comments specifically related to 24 CFR 
Part 905, Subpart O--Resident Participation and Opportunities for 
Indian housing. Eleven were from Field Offices of Native American 
Programs, four from an Indian housing authority, one from a public 
housing authority, one from an advocacy group and one from a private 
organization.
    Comment. Replace the term ``tenant'' with ``resident'' since it can 
be applied appropriately to all program participants, rental and 
homeownership. In Indian housing, resident implies a sense of ownership 
and permanence which are important attitudes to convey in order to 
accomplish the mission of the Office of Native American Programs 
(ONAP).
    Response. The Department agrees with the comment for the Indian 
housing program. The only reference to tenant will remain in the title 
of the Tenant Opportunities Program. This new title reflects the 
revised program created to provide more program flexibility to address 
the needs in communities to improve living conditions and housing 
operations.

Specific Indian Housing Comments

Section 905.102(2)(viii)(D)  Stipends
    Comment: One commenter stated: Currently there is no limit to the 
number of officers of a resident organization or the number of 
organizations. Some large IHAs have over 50 resident organizations. The 
cost involved for stipends could be substantial if each RO has 5 
officers who receive $200 per month, with 50 ROs the cost equals 
$600,000. It could be very difficult to determine who should receive 
funding and IHAs could be forced to use operating reserves. For 
instance, an IHA with 14,000 units will receive $140,000 although 
stipends amount to $600,000. The inability to pay stipends could cause 
potential problems between the IHA and RO.
    Several commenters requested clarification on how the stipend is to 
be paid. Is it paid from the $25 per unit per year? Is it from the IHA 
$10 per unit per year or the RO $15 per unit per year?
    Another commenter recommended that the words ``excluding training 
costs'' should be added to the end of the eligible activities for 
stipend use. The commenter felt that the maximum stipend amount should 
not limit training that ONAP and the IHA determine is important for 
resident leaders to attend.
    One commenter supported the stipend stating it was extremely 
important because it recognizes the economic position of many resident 
leaders and the need to avoid out of pocket expenses from resident 
leaders.
    Response: It is intended that the $15 per unit per year for 
resident participation activities of the resident organization will be 
used to fund stipends. Section 905.965 is revised to clarify questions 
raised regarding the funding for stipends. Also, the Department is 
aware that even with this increase, there may be insufficient funds for 
resident organization expenses plus stipends. The provision of stipends 
is not a requirement and will be decided by the local resident 
organization and the IHA. If there is no appropriation for this 
additional cost item under the operating subsidy, the IHA and resident 
organizations must determine how to use existing funds to accomplish 
priority resident activities.
    Regarding the third comment, the stipend is intended to cover costs 
related to officer volunteer efforts. It does not limit funding to 
resident organizations for training. These costs can be covered under 
905.965 which would provide $15 per unit per year for resident 
participation activities of the RO. IHAs may use other resources for 
resident participation activities.
Section 905.720  Other Costs
    Comment: A commenter expressed concerns about the cost of stipends 
to the IHA. Also, will stipends be eligible even if there are no 
appropriations to fund the cost? Another commenter suggested that 
consideration must be given for higher cost areas, especially in Alaska 
where village travel is by airplane.
    Response: If there are no appropriations to fund resident 
participation, stipends will still be an eligible cost; however, the 
IHA and RO must determine if resources are available. The issue of 
higher travel costs in Alaska can be resolved by waiver requests since 
the provision is regulatory, not statutory.
Section 905.962  Definition of RO
    Comment: One commenter recommended that HUD require each IHA to 
adopt a policy and procedure to formally recognize resident 
organizations based on the referenced definition.
    Response: Only one comment was received requesting that recognition 
of an RO be mandatory. The Department does not believe this is 
sufficient to change the current regulatory requirements which provide 
for local decision making between the IHA and RO.
Section 905.963  HUD's Role in Activities Under This Subpart
    Comment: The form and extent of resident participation or resident 
management are local decisions to be made jointly by ROs and IHAs. The 
regulation discusses the duty to bargain, but if either party does not, 
there is no consequence for not doing so. If an RO isn't organized, it 
is not eligible for the $15 per unit funding. Therefore, control of 
whatever negotiation there might be is in the hands of the IHA. This is 
an unfair advantage for the IHA.
    Response: A resident organization can organize without IHA 
involvement and can also be eligible for funding if it meets the 
requirements in accordance with Sec. 905.962. However, HUD strongly 
recommends a partnership between the resident organization and the IHA. 
The IHA and the duly elected resident organization shall collaborate on 
how funds will be distributed. A mechanism to address disputes on 
funding decisions is provided for in the rule. The payment of stipends 
to resident organization officers will be funded from the $15 per unit 
per year for resident participation activities.
Section 905.964  Resident Participation Requirements
    Comment: Section 905.964 (a)(1) should be revised to state that an 
IHA must provide residents with current information concerning the 
IHA's policies on resident participation in management, ``development 
and modernization'' in order to cover all aspects of the IHA's 
programs.
    Response: Subpart O only deals with resident participation in 
management. Both the subparts on development and modernization contain 
specific regulatory requirements regarding resident participation. This 
language is consistent with subpart O and, therefore, we are keeping 
the language as currently stated.
Section 905.969  Resident Management Requirements
    Comment: Several resident organizations in the State of Alaska have 
questioned whether or not a recognized Tribal government in the 
community may act in the capacity of the resident organization. In most 
of the Alaskan Native communities, the tribal government represents the 
Native residents. Most tribal organizations already have mechanisms in 
place that would allow greater resident participation, which could lead 
to expedience in communities becoming self-sufficient. Where the 
majority of residents in a community request that the Tribal Government 
act in the capacity as the RO with the IHA, a Memorandum of Agreement 
might be executed to establish such a relationship.
    Response: If a tribal government wishes to assume the 
responsibilities of an RO or RMC, an entity must be created that meets 
the requirements of 24 CFR 905.962. The tribal government may not act 
as an RO or RMC without complying with those requirements. This does 
not prevent the tribal government from authorizing or creating such an 
entity under tribal law.
Section 905.972(b)  TOP Audit
    Comment: The references to ``audit of books and records'' in the 
title of proposed sections 905.972(a) and 905.972(b) should be changed 
to ``audit of financial statements'' because independent auditors audit 
financial statements, not ``books and records.''
    The proposed rule should specify the basis of accounting to be used 
in preparing the financial statements. We recommend that the financial 
statements be prepared in accordance with generally accepted accounting 
principles (GAAP).
    The final rule should state that an audit conducted in accordance 
with the Single Audit Act or OMB Circular A-133, if applicable, would 
satisfy the audit requirement.
    Response: The sections have been changed to reflect the comment on 
review of financial statements. Such a review of the financial 
statements would include scrutiny of expenditures related to the 
workplan as well as compliance with the HUD grant agreement.
Section 905.980  FIC General
    Comment: Remove the following language from the responsibilities of 
a FIC Coordinator, ``mobilizing public and private resources to ensure 
that the supportive services identified can be funded over the five-
year period, at least, following the initial receipt of funding.''
    Response: This language is statutory (Section 515 of National 
Affordable Housing Act) and therefore cannot be removed without 
legislative change.
    Comment: There is no reference to determine eligibility for program 
participants.
    Response: The only eligible applicants are IHAs based on the 
statute. Eligibility is documented in 905.982. IHA is defined in 
905.102 of 24 CFR part 905.
Section 905.982  FIC Eligibility
    Comment: Under this program and any other programs that are created 
to directly associate with residents, eligible applicants should be 
extended to include the Tribal governments. Recommend using the word 
``improved'' in place of ``Better'' since ``improved'' is used in other 
parts of this document. Also, add the word ``support'' in reference to 
services being provided.
    Response: The provision that eligible applicants are public or 
Indian housing authorities is statutory and cannot be changed without 
legislation.
Section 905.983  FIC Activities
    Comment: The new activities such as new construction or acquisition 
have not been added yet as indicated in the NOFA.
    Response: The Public and Indian Housing regulation is changed to 
reflect eligibility for new construction and acquisition.

V. Section-By-Section Changes Made By This Final Rule

A. Public Housing Changes--Part 964

    1. Subpart A is amended as follows:
    a. Section 964.1 Purpose is streamlined.
    b. Section 964.3 Applicability and scope remains unchanged.
    c. Section 964.7 Definitions is amended by removing several 
definitions such as project and tenant participation; by moving terms 
such as Resident Council and Resident Management Corporation to a more 
appropriate section under subpart B, and by expanding definitions; and 
by adding new terms which relate to the FIC program.
    d. Section 964.11  HUD policy on tenant participation is amended to 
strongly support tenant participation in all the functions of an HA's 
management operations and give rights to residents to freely organize 
and represent their interests.
    e. Section 964.12  HUD policy on Tenant Opportunities Program (TOP) 
provides HUD's policy on the Tenant Opportunities Program. Subpart C of 
the current regulation is changed from ``Resident Management Program'' 
to ``Tenant Opportunities Program'' (TOP). The name is being changed to 
TOP because it reflects the evolution of the program over time, to 
enhance resident capacity in a variety of ways, including job training, 
economic development, and self-sufficiency activities carried out by 
resident councils/resident management corporations in public housing. 
Resident management is a component of TOP and resident councils/
resident management corporations may continue to engage in activities 
relative to public housing management. Tenant opportunities programs 
are proven to be effective in facilitating economic uplift as well as 
in improving the overall conditions in public housing.
    f. Section 964.14  HUD policy on partnerships is added to provide 
HUD policy on partnerships between HAs and residents. Strong 
partnerships between HAs and resident councils/resident management 
corporations are key to the success of program objectives, and critical 
for achieving specific and mutual goals and creating positive change 
for residents in public housing.
    g. Section 964.15  HUD policy on resident management remains 
unchanged. This section states HUD's support for resident councils/
resident management corporations who are interested in managing various 
businesses in the public housing community; e.g., lawn service 
maintenance or day care.
    h. Section 964.16  HUD role in activities under this part--
Monitoring is added to describe HUD's proactive responsibility for 
promoting tenant participation and tenant opportunities in public 
housing. It provides that HUD will monitor program progress to ensure 
efficient and effective operations pursuant to this rule.
    i. Section 964.18  HA role in activities under subparts B&C 
establishes a stronger HA role under this subpart. HAs shall, upon 
request, provide office space to a duly elected resident council and 
shall negotiate in good faith usage of community space for meetings and 
other activities for residents. HAs have a responsibility to negotiate 
such usage of space with the duly elected resident council.
    j. Section 964.24  HUD policy on FIC program provides HUD's policy 
and support for the FIC program.
    k. Section 964.30  Other program requirements provides Civil Rights 
compliance requirements and all other Federal laws, executive orders, 
regulations and policies for programs conducted and administered under 
this rule.
    2. Subpart B is amended as follows:
    a. Section 964.100  Role of resident council which establishes the 
role of a resident council and Sec. 964.105  Role of the jurisdiction-
wide resident council which establishes the role of a jurisdiction-wide 
resident council are added to the rule.
    b. Section 964.110  Resident membership on HA Board of 
Commissioners encourages resident membership on HA Board of 
Commissioners.
    c. Section 964.115  Resident council requirements describes the 
provisions necessary for the Resident Council to receive official 
recognition from the HA and HUD. In the previous rule, this provision 
was included in the definitions section, and in this rule it becomes a 
separate section.
    d. Section 964.117  Resident council partnerships is added to 
encourage and promote partnerships between the resident councils and 
public/private organizations. While the Department encourages 
partnerships to complement council activities, such organizations must 
not become the governing entity of the resident council.
    e. Section 964.120  Resident management corporation requirements 
establishes characteristics in order to receive formal recognition by 
the HA and HUD. In the previous rule, this was included in the 
definitions section and in this rule, it becomes a separate section.
    f. Section 964.125  Eligibility for resident council membership is 
added to provide guidance on eligibility for council membership. This 
section establishes that any member of a household, whose name is on 
the lease, may be a member of a resident council. However, in order to 
be a voting member of the resident council, a person's name must appear 
on the lease of a unit in the public housing development, and he/she 
must be: (1) a legal head of household (means the member of the family 
who is the head of the household for purposes of determining income 
eligibility and rent), or (2) 18 years of age or older.
    g. Section 964.130  Election procedures and standards is added to 
provide minimum standards for resident council elections including the 
requirement for supervision by an independent third party. HAs shall 
monitor the resident council's elections to ensure compliance with 
HUD's minimum standards.
    h. Section 964.135  Resident involvement in HA management is added 
to provide policy on resident involvement in HA management operations. 
Residents shall participate fully in the overall policy development, as 
well as in operations of an HA.
    i. Section 964.140  Resident training  is added to encourage HAs to 
take the lead in providing training opportunities for public housing 
residents. If residents are willing, they may receive training from the 
HA and become involved in implementing various Federal programs.
    j. Section 964.145  Conflict of interest is added to provide policy 
on resident council officers serving as contractors or as employees of 
an HA.
    k. Section 964.150  Funding tenant participation is added to 
establish policy on funding duly elected resident councils. Subject to 
appropriations, HAs shall provide funds to the duly elected resident 
council for tenant participation activities. This rule also makes an 
amendment to 24 CFR Part 990 for tenant services to include up to $25 
per unit per year, subject to the availability of appropriations, as an 
add-on to the Performance Funding System (PFS).
    3. Subpart C is amended as follows:
    a. Section 964.200  General is added to provide information on the 
provisions of the TOP.
    b. Section 964.205  Eligibility is added to define who is eligible 
to apply and receive a technical assistance grant, and to outline 
eligible activities under TOP.
    c. Section 964.210  Announcement of funding availability is added 
to describe notification of funding availability for obtaining funds to 
participate in TOP.
    d. Section 964.215  Grant agreement provides the terms of the grant 
agreement for the proposed activities under the TOP program.
    e. Section 964.220  Technical assistance describes HUD's commitment 
to fund TOP activities.
    f. Section 964.225  Resident management requirements provides 
minimal guidelines for HAs and residents for the performance of 
management functions.
    g. Section 964.230  Audit and administrative requirements provides 
audit and administrative guidelines for recipients of TOP grant funds 
and resident management corporations contracting with an HA for 
management responsibilities.
    4. Subpart D is added to the Part 964 as follows:
    a. Section 964.300  General provides the purpose and program 
provisions of the FIC program. FIC provides families living in public 
housing with better access to educational and employment opportunities 
to achieve self-sufficiency and independence.
    b. Section 964.305  Eligibility for FIC provides eligible 
activities and requirements under the FIC program.
    c. Section 964.308  Supportive services requirements for FIC 
provides supportive services requirements essential for families living 
with children in public housing.
    d. Section 964.310  Audit/Compliance Requirements for FIC provides 
audit and compliance requirements governing the program.
    e. Section 964.315  HAs role in FIC activities under this part 
provides the process required to assure that HA residents are informed 
about FIC.
    f. Section 964.320  HUD policy on training, employment, contracting 
and subcontracting of public/Indian housing residents under FIC states 
HUD's policy on resident training, employment and contracting under 
FIC.
    g. Section 964.325  Announcement of funding availability for FIC 
indicates that the Notice of Funding Availability (NOFA) will be 
published periodically and contain specific information regarding 
eligibility, funding criteria, etc.
    h. Section 964.330  Grant set-aside assistance for FIC states HUD's 
policy of permitting up to five percent (5%) of amounts available in 
any fiscal year to augment grants previously awarded under this 
program.
    i. Section 964.335  Grant agreement for FIC provides the grant 
agreement term.
    j. Section 964.340  Resident compensation for FIC provides 
guidelines governing employment compensation under this program.
    k. Section 964.45  Treatment of income provides provisions for 
income exclusions for any resident participating in the FIC program.
    l. Section 964.350  Administrative Requirements for FIC provides 
administrative and reporting requirements governing the FIC program.

B. Indian Housing Changes--Part 905

    The rule also revises 24 CFR 905, subpart O, ``Resident 
Participation and Opportunities.'' The Indian housing section is 
similar to its public housing counterpart, but does not contain some of 
the provisions in 24 CFR Part 964 in an effort to tailor them 
specifically to the generally smaller size of most Indian Housing 
Authorities (IHA). However, all activities, functions and benefits 
permitted under any public housing resident programs will remain 
eligible activities, functions and benefits for Indian housing resident 
programs.
    The major changes in the rule allow for broader, more flexible 
programs aimed at increasing the capacity of Indian housing resident 
organizations and resident management corporations to carry out their 
organizational functions in a more structured manner while 
simultaneously permitting further economic uplift opportunities.
    Within the subpart there is a general section; a Tenant 
Opportunities Program (TOP) section; and a Family Investment Centers 
Program section. The current Indian Housing Resident Management Program 
under existing regulations is viable and remains an option under TOP. 
None of the requirements for the resident management program are 
changed; however, some sections are being moved to other sections of 
the 905 regulations or HUD handbooks.

C. Miscellaneous Conforming Changes

    Changes that have been made to other parts are (1) the exclusion 
from income of stipends to RC officers and of training grants under the 
FIC program that are added to 905 and 913; (2) the provision for 
payments to duly elected resident organization officers, and the 
inclusion of requirements governing the RMC Operating subsidy, budget, 
operating reserves, etc., that are made to 990; and 3) changes for the 
resident participation subpart that are made in part 905 to parallel 
changes in part 964.

Other Matters

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this rule before publication and by 
approving it certifies that this rule does not have a significant 
economic impact on a substantial number of small entities. The rule 
provides substantial revisions to the regulations concerning Tenant 
Participation and Management in Public Housing under which resident 
councils/resident management corporations receive funding on a 
competitive basis. HUD does not anticipate a significant economic 
impact on small entities since resident councils/resident management 
corporations will continue to obtain by contract technical assistance 
to carry out program activities.

Environmental Impact

    A finding of no significant impact with respect to the environment 
has been made in accordance with HUD regulations in 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 between 7:30 a.m. and 5:30 p.m. 
weekdays in the office of the Rules Docket Clerk at the above address.

Executive Order 12866

    This rule was reviewed by the Office of Management and Budget under 
Executive Order 12866, Regulatory Planning and Review. Any changes made 
to the rule as a result of that review are clearly identified in the 
docket file which is available for public inspection in the office of 
the Department's Rules Docket Clerk, room 10276, 451 Seventh Street, 
SW, Washington, DC.

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 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 rule is not subject to review under the order. The revised rule is 
consistent with federalism principles since it reduces unnecessary 
burdens on resident organizations. Since participation by resident 
organizations is discretionary, this rule lacks the direct and 
substantial effects on resident organizations 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 rule has a beneficial 
effect on the family, and thus, does not require further review. No 
significant change in existing HUD policies or programs will result 
from promulgation of this rule, as those policies and programs relate 
to family concerns.

Regulatory Agenda

    This rule was listed as Item No. 1685 in the Department's 
Semiannual Agenda of Regulations published on April 25, 1994, (59 FR 
20424, 20469) in accordance with Executive Order 12866 and the 
Regulatory Flexibility Act.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic Assistance program number is 14.853.

List of Subjects

24 CFR Part 905

    Aged, Energy conservation, Grant programs--housing and community 
development, Grant programs--Indians, Homeownership, 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 913

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

24 CFR Part 964

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

24 CFR Part 990

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

    Accordingly, parts 905, 913, 964, and 990 of title 24 of the Code 
of Federal Regulations are amended as follows:

PART 905--INDIAN HOUSING PROGRAMS

    1. The authority citation for part 905 is revised to read as 
follows:

    Authority: 25 U.S.C. 450e(b); 42 U.S.C. 1437aa, 1437bb, 1437c, 
1437cc, 1437d(c)(4)(D), 1437ee and 3535(d).

    2. In Sec. 905.102, the definition of Annual income is amended by:
    a. Removing the word ``or'' at the end of paragraph (2)(viii)(B);
    b. Adding the word ``or'' at the end of paragraph (2)(viii)(C);
    c. Adding a new paragraph (2)(viii)(D);
    d. Removing the word ``or'' at the end of paragraph (2)(x);
    e. Redesignating paragraph (2)(xi) as paragraph (2)(xii); and
    f. Adding a new paragraph (2)(xi), to read as follows:


Sec. 905.102.  Definitions.

* * * * *
    Annual income.
* * * * *
    (2) * * *
    (viii) * * *
    (D) A resident stipend, but only if the resident stipend does not 
exceed $200 per month per officer to resident organization officers. 
Stipends are intended to cover costs related to officers' volunteer 
efforts and include but are not limited to the following items: child 
care, transportation, special equipment and special clothing.
* * * * *
    (xi) The earnings and benefits to any resident resulting from the 
participation in a program providing employment training and supportive 
services in accordance with the Family Support Act of 1988, section 22 
of the U.S. Housing Act of 1937 (42 U.S.C. 1437 et seq.), or any 
comparable Federal, State, Tribal or local law during the exclusion 
period. For purposes of this paragraph (2)(xi), the following 
definitions apply:
    (A) Comparable Federal, State, Tribal or Local law means a program 
providing employment training and supportive services that--
    (1) Is authorized by a Federal, State, Tribal or local law;
    (2) Is funded by Federal, State, Tribal or local government;
    (3) Is operated or administered by a public agency; and
    (4) Has as its objective to assist participants in acquiring job 
skills.
    (B) Exclusion period means the period during which the resident 
participates in a program described in this section, plus 18 months 
from the date the resident begins the first job acquired by the 
resident after completion of such program that is not funded by public 
housing assistance under the U.S. Housing Act of 1937. If the resident 
is terminated from employment without good cause, the exclusion period 
shall end.
    (C) Earnings and Benefits means the incremental earnings and 
benefits resulting from a qualifying employment training program or 
subsequent job; or
* * * * *
    3. In Sec. 905.434, a new paragraph (b)(7) is added, to read as 
follows:


Sec. 905.434  Operating subsidy.

* * * * *
    (b) * * *
    (7) Subject to appropriations, in accordance with the provisions of 
subpart O of this part and procedures determined by HUD, each IHA shall 
receive $25 per unit per year for units represented by a duly elected 
resident organization for resident participation activities. Of this 
amount, $15 per unit per year shall fund resident participation 
activities of the duly elected ROs including but not limited to 
stipends. Ten dollars per unit per year shall fund IHA costs incurred 
in carrying out resident participation activities.
* * * * *
    4. In Sec. 905.720, a new paragraph (g) is added, to read as 
follows:


Sec. 905.720  Other costs.

* * * * *
    (g) Funding for resident organization expenses. In accordance with 
the provisions of 24 CFR Part 905, subpart O and procedures determined 
by HUD, each IHA with a duly elected resident organization shall 
include in the operating subsidy eligibility calculation, $25 per unit 
per year (subject to appropriations) for each unit represented by a 
duly-elected resident organization in support of the duly elected 
resident organization's activities.
* * * * *
    5. Subpart O of Part 905 is revised to read as follows:

Subpart O--Resident Participation and Opportunities General Provisions

Sec.
905.960  Purpose.
905.961  Applicability and scope.
905.962  Definitions.
905.963  HUD's role in activities under this subpart.
905.964  Resident participation requirements.
905.965  Funding Resident Participation.

Tenant Opportunities Program

905.966  General.
905.967  Eligible TOP Activities.
905.968  Technical assistance.
905.969  Resident management requirements.
905.970  Management specialist.
905.971  Operating subsidy, preparation of operating budget, 
operating reserves and retention of excess revenues.
905.972  TOP Audit and administrative requirements.

Family Investment Centers (FIC) Program

905.980  General.
905.982  Eligibility.
905.983  FIC Activities.
905.984  IHA role in activities under this part.
905.985  HUD Policy on training, employment, contracting and 
subcontracting of Indian housing residents.
905.986  Grant Set-Aside Assistance.
905.987  Resident compensation.
905.988  Administrative requirements.

Subpart O--Resident Participation and Opportunities General 
Provisions


Sec. 905.960  Purpose.

    The purpose of this subpart is to recognize the importance of 
involving residents in creating a positive living environment and in 
contributing to the successful operation of Indian housing.


Sec. 905.961  Applicability and scope.

    (a) This subpart applies to any Indian housing authority (IHA) that 
has an Annual Contributions Contract (ACC) with the Department. This 
subpart does not apply to housing assistance payments under section 8 
of the U.S. Housing Act of 1937.
    (b) This subpart contains HUD's policies, procedures, and 
requirements for the participation of Indian housing residents in 
Indian housing management.
    (c) This subpart is designed to encourage increased resident 
participation in Indian housing.
    (d) This subpart is not intended to negate any pre-existing 
arrangements for resident management in Indian housing between an IHA 
and a resident management corporation.
    (e) This subpart includes requirements for the Family Investment 
Centers (FIC) Program, which was established by Section 515 of the 
National Affordable Housing Act, which created a new Section 22 of the 
Act. The FIC program is designed to provide families living in Indian 
housing with better access to educational and employment opportunities.


Sec. 905.962  Definitions.

    Family Investment Center. A facility in or near Indian housing 
which provides families living in Indian housing with better access to 
educational and employment opportunities to achieve self sufficiency 
and independence.
    Management. All activities for which the IHA is responsible to HUD 
under the ACC, within the definition of ``operation'' under the Act and 
the ACC, including the development of resident programs and services.
    Management contract. A written agreement between a resident 
management corporation and an IHA, as provided by Sec. 905.969.
    Project. For purposes of this subpart, any of the following could 
be the subject of a management contract:
    (1) One or more contiguous buildings.
    (2) An area of contiguous row houses.
    (3) Scattered site buildings.
    (4) Scattered site single-family units.
    Resident management. The performance of one or more management 
activities for one or more projects by a resident management 
corporation under a management contract with the IHA.
    Resident Management Corporation (RMC). A Resident Management 
Corporation is an entity that proposes to enter into, or enters into, a 
contract to manage IHA property. The corporation must have each of the 
following characteristics:
    (1) It must be a nonprofit organization that is incorporated under 
the laws of the State or Indian tribe in which it is located.
    (2) It may be established by more than one resident organization, 
so long as each such organization both approves the establishment of 
the corporation and has representation on the Board of Directors of the 
corporation.
    (3) It must have an elected Board of Directors.
    (4) Its by-laws must require the Board of Directors to include 
representatives of each resident organization involved in establishing 
the corporation.
    (5) Its voting members are required to be residents of the project 
or projects it manages.
    (6) It must be approved by the resident organization. If there is 
no organization, a majority of the households of the project or 
projects must approve the establishment of such an organization.
    Resident Organization (RO). A Resident Organization (or ``Resident 
Council'' as defined in section 20 of the Act) is an incorporated or 
unincorporated nonprofit organization or association that meets each of 
the following criteria:
    (1) It must consist of residents only, and only residents may vote.
    (2) If it represents residents in more than one development or in 
all of the developments of an IHA, it must fairly represent residents 
from each development that it represents.
    (3) It must adopt written procedures providing for the election of 
specific officers on a regular basis.
    (4) It must have a democratically elected governing board. The 
voting membership of the board shall consist solely of the residents of 
the development or developments that the RO represents.
    Resident-owned business. Any business concern which is owned and 
controlled by public housing residents. (The term ``resident-owned 
business'' includes sole proprietorships.) For purposes of this part, 
``owned and controlled'' means a business:
    (1) Which is at least 51 percent owned by one or more public 
housing residents; and
    (2) Whose management and daily business operations are controlled 
by one or more such individuals.
    Resident participation. A process of consultation between residents 
and the IHA concerning matters affecting the management of Indian 
housing.


Sec. 905.963  HUD's role in activities under this subpart.

    (a) General. Subject to the requirements of this part and other 
requirements imposed on IHAs by the ACC, statute or regulation, the 
form and extent of resident participation or resident management are 
local decisions to be made jointly by ROs and the IHAs.
    (b) Duty to bargain in good faith. If an IHA refuses to negotiate 
with a RMC in good faith or, after negotiations, refuses to enter into 
a contract, the corporation may file an informal appeal with HUD, 
setting out the circumstances and providing copies of relevant 
materials evidencing the corporation's efforts to negotiate a contract. 
HUD shall require the IHA to respond with a report stating the IHA's 
reasons for rejecting the corporation's contract offer or for refusing 
to negotiate. Thereafter, HUD shall require the parties (with or 
without direct HUD participation) to undertake or to resume 
negotiations on a contract providing for resident management, and shall 
take such other actions as are necessary to resolve the conflicts 
between the parties. If no resolution is achieved within 90 days from 
the date HUD required the parties to undertake or resume such 
negotiations, HUD shall serve notice on both parties that 
administrative remedies have been exhausted (except that, pursuant to 
mutual agreement of the parties, the time for negotiations may be 
extended by no more than an additional 30 days).


Sec. 905.964  Resident participation requirements.

    (a) IHA responsibilities. (1) An IHA must provide the residents or 
any resident organization with current information concerning the IHA's 
policies on resident participation in management, including guidance on 
information and recognition of a RO, and, where appropriate, a RMC.
    (2) An IHA must consult with residents or resident organizations 
(if they exist), to determine the extent to which residents desire to 
participate in the management of their housing and the specific methods 
that may be mutually agreeable to the IHA and the residents.
    (3) When requested by residents, an IHA must provide appropriate 
guidance to residents to assist them in establishing and maintaining a 
RO, and, where appropriate, a RMC.
    (b) Recognition. A resident organization may request that it be 
recognized as the official organization representing the residents in 
meetings with the IHA or with other entities.
    (c) Written understanding. At a minimum, the IHA and the RO shall 
put in writing their understanding concerning the elements of their 
relationship.
    (d) Conflict of interest. Resident council officers cannot serve as 
contractors or employees if they are in policy making or supervisory 
positions at the IHA.


Sec. 905.965  Funding resident participation.

    Funding will be provided under subpart J of this part, for the 
following:
    (a) Resident Organizations. (1) Subject to appropriations, the IHA 
shall provide funds to ROs for resident participation activities. 
Eligibility to receive operating subsidy for duly elected RO activities 
at $25 per unit per year is an additional category of subsidy 
eligibility for units represented by a duly elected resident 
organization under the Performance Funding System. Of this amount, $15 
per unit per year shall fund resident participation activities of the 
duly elected ROs. Ten dollars per unit per year shall fund IHA costs 
incurred in carrying out resident participation activities.
    (2) The IHA and the duly elected resident organization at each 
development shall collaborate on how the funds will be distributed for 
resident participation activities. If disputes regarding funding 
decisions arise between the parties, the matter shall be referred to 
the HUD Headquarters for intervention. HUD Headquarters may require the 
parties to undertake further negotiations to resolve the dispute. If no 
resolution is achieved within 90 days from the date of renegotiation, 
Headquarters shall take appropriate actions to settle the dispute in a 
fair and equitable manner.
    (b) Stipends. (1) IHAs may provide stipends to officers of the duly 
elected RO. The stipend, which may be up to $200 per month per officer, 
shall be decided locally by the ROs and the IHA. Subject to 
appropriations, the stipends will be funded from the portion of the 
operating subsidy funding for RO expenses ($15.00 per unit per year). 
(See definition of annual income in Sec. 905.102 for exclusion for 
these stipends.)
    (2) Funding provided by an IHA to a duly elected RO may be made 
only under a written agreement between the IHA and a RO, which includes 
a RO budget and assurance that all RO expenditures will not contravene 
provisions of law and will promote serviceability, efficiency, economy 
and stability in the operation of the local development. The agreement 
must require the local RO to account to the IHA for the use of the 
funds and permit the IHA to inspect and audit the resident council's 
financial records related to the agreement.

Tenant Opportunities Program


Sec. 905.966  General.

    The Indian Tenant Opportunities Program (TOP) (which is the program 
similar to the public housing TOP for public housing residents) 
provides technical assistance for various activities including resident 
management for ROs/RMCs as authorized by Section 20 of the Act. The TOP 
provides opportunities for RO/RMCs to improve living conditions and 
resident satisfaction in Indian housing communities.


Sec. 905.967  Eligible TOP activities.

    Activities to be funded and carried out by an eligible RO or 
resident management corporation, as defined in subpart B of this part, 
must improve the living conditions and Indian housing operations and 
may include any combination of, but are not limited to, the following:
    (a) Resident Capacity Building. (1) Training Board members in 
community organizing, Board development, and leadership training;
    (2) Determining the feasibility of resident management enablement 
for a specific project or projects; and
    (3) Assisting in the actual creation of a RMC, such as consulting 
and legal assistance to incorporate, preparing by-laws and drafting a 
corporate charter.
    (b) Resident Management. (1) Training residents, as potential 
employees of a RMC, in skills directly related to the operation, 
management, maintenance and financial systems of a project;
    (2) Training of residents with respect to fair housing 
requirements; and
    (3) Gaining assistance in negotiating management contracts, and 
designing a long-range planning system.
    (c) Resident Management Business Development. (1) Training related 
to resident-owned business development and technical assistance for job 
training and placement in RMC developments;
    (2) Technical assistance and training in resident managed business 
development through:
    (i) Feasibility and market studies;
    (ii) Development of business plans;
    (iii) Outreach activities; and
    (iv) Innovative financing methods including revolving loan funds.
    (3) Legal advice in establishing a resident managed business 
entity.
    (d) Social Support Needs (such as self-sufficiency and youth 
initiatives). (1) Feasibility studies to determine training and social 
services needs;
    (2) Training in management-related trade skills, computer skills, 
etc;
    (3) Management-related employment training and counseling;
    (4) Coordination of support services;
    (5) Training for programs such as child care, early childhood 
development, parent involvement, volunteer services, parenting skills, 
before and after school programs; and
    (6) Training programs on health, nutrition and safety.
    (7) Training in the development of strategies to successfully 
implement a youth program. For example, assessing the needs and 
problems of the youth, improving youth initiatives that are currently 
active, and training youth, housing authority staff, resident 
management corporations and resident organizations on youth initiatives 
and program activities.
    (8) Workshops for youth services, child abuse and neglect 
prevention, tutorial services, in partnership with community-based 
organizations such as local Boys and Girls Clubs, YMCA/YWCA, Boy/Girl 
Scouts, Campfire and Big Brother/Big Sisters, etc. Other HUD programs 
such as the Youth Sports Program and the Public Housing Drug 
Elimination Programs also provide funding in these areas; and
    (e) Homeownership Opportunity. Determining feasibility for 
homeownership by residents, including assessing the feasibility of 
other housing (including HUD owned or held single or multi-family) 
affordable for purchase by residents.
    (f) General. (1) Required training on HUD regulations and policies 
governing the operation of low-income public and Indian housing 
including contracting/procurement regulations, financial management, 
capacity building to develop the necessary skills to assume management 
responsibilities at the development and property management;
    (2) Purchasing hardware, i.e., computers and software, office 
furnishings and supplies, in connection with business development. 
Every effort must be made to acquire donated or discounted hardware;
    (3) Training in accessing other funding sources; and
    (4) Hiring trainers or other experts. RO/RMCs must ensure that this 
training is provided by a qualified housing management specialist, a 
community organizer, the IHA, or other sources knowledgeable about the 
program.


Sec. 905.968  Technical assistance.

    To the extent that grant authority is available, HUD shall provide 
financial assistance to ROs or RMCs that obtain, by contract or 
otherwise, technical assistance for the development of resident 
management entities, including the formation of these entities; the 
development of the management capabilities of newly formed or existing 
entities; the identification of the social support needs of residents 
of projects, and the securing of this support; and a wide range of 
activities to further the purposes of this subpart.


Sec. 905.969  Resident management requirements.

    The following requirements apply when an IHA and its residents are 
interested in providing for resident performance of management 
functions in one or more projects under this subpart.
    (a) Resident management corporation. Residents interested in 
contracting with an IHA must establish a RMC that meets the 
requirements for such a corporation, as specified in this subpart.
    (b) Management Contract. (1) A management contract between the IHA 
and a RMC is required for resident management. The IHA and the 
corporation may agree to the performance by the corporation of any or 
all management functions for which the IHA is responsible to HUD under 
the ACC, and any other functions not inconsistent with the ACC and 
applicable laws and regulations. The management contract must be in 
conformance with the minimum requirements established by HUD.
    (2) The management contract may include specific provisions 
governing management personnel; compensation for maintenance laborers 
and mechanics and administrative employees employed in the operation of 
the project, except that the amount of this compensation must meet 
applicable labor standard requirements of Federal law; rent collection 
procedures; resident income verification; resident eligibility 
determinations; resident eviction; the acquisition of supplies and 
materials; and such other matters as the IHA and the corporation 
determine to be appropriate, and as HUD may specify in administrative 
instructions.
    (3) The management contract shall be treated as a contracting out 
of services, and must be subject to any provision of a collective 
bargaining agreement regarding the contracting out of services to which 
the IHA is subject.
    (4) Provisions on competitive bidding and requirements of prior 
written HUD approval of contracts contained in the ACC do not apply to 
the decision of an IHA to contract with a RMC.
    (c) Prohibited activities. An IHA may not contract for assumption 
by the RMC of the IHA's underlying responsibilities to HUD under the 
ACC.
    (d) Bonding and insurance. Before assuming any management 
responsibility under its contract, the RMC must provide fidelity 
bonding and insurance, or equivalent protection that is adequate (as 
determined by HUD and the IHA) to protect HUD and the IHA against loss, 
theft, embezzlement, or fraudulent acts on the part of the corporation 
or its employees.


Sec. 905.970  Management specialist.

    The RO must select, in consultation with the IHA, a qualified 
Indian housing management specialist to assist in determining the 
feasibility of, and to help establish, a RMC and to provide training 
and other duties in connection with operating the TOP project. The 
Housing Management Specialist (Trainer) can be a non-profit 
organization, the IHA or a consultant.


Sec. 905.971  Operating subsidy, preparation of operating budget, 
operating reserves and retention of excess revenues.

    (a) Calculation of operating subsidy. Operating subsidy will be 
calculated separately for any project managed by a resident management 
corporation. This subsidy computation will be the same as the separate 
computation made for the balance of the projects in the IHA in 
accordance with subpart J of this part, with the following exceptions:
    (1) The project managed by a resident management corporation will 
have an Allowable Expense Level based on the actual expenses for the 
project in the fiscal year immediately preceding management under this 
subpart. These expenditures will include the project's share of any 
expenses which are overhead or centralized IHA expenditures. The 
expenses must represent a normal year's expenditures for the project, 
and must exclude all expenditures which are not normal fiscal year 
expenditures as to amount or as to the purpose for which expended. 
Documentation of this expense level must be presented with the project 
budget and approved by HUD. Any project expenditures funded from a 
source of income other than operating subsidies or income generated by 
the locally owned Indian housing program will be excluded from the 
subsidy calculation. For budget years after the first budget year under 
management by the resident management corporation, the Allowable 
Expense Level will be calculated as it is for all other projects, in 
accordance with subpart J of this part.
    (2) The resident management corporation project will estimate 
dwelling rental income based on the rent roll of the project 
immediately preceding the assumption of management responsibility under 
this subpart, increased by the estimate of inflation of resident income 
used in calculating PFS subsidy.
    (3) The resident management corporation will exclude, from its 
estimate of other income, any increased income directly generated by 
activities of the corporation or facilities operated by the 
corporation.
    (4) Any reduction in the subsidy of an IHA that occurs as a result 
of fraud, waste, or mismanagement by the IHA shall not affect the 
subsidy calculation for the resident management corporation project.
    (b) Calculation of total income and preparation of operating 
budget. No reduction. (1) Subject to paragraph (c) of this section, the 
amount of funds provided by an IHA to a project managed by a resident 
management corporation under this subpart may not be reduced during the 
three-year period beginning on the date a resident management 
corporation first assumes management responsibility for the project.
    (2) Treatment of technical assistance. For purposes of determining 
the amount of funds provided to a project under paragraph (b)(1) of 
this section, the provision of technical assistance by the IHA to the 
resident management corporation will not be included.
    (3) Operating budget. The resident management corporation and the 
IHA shall submit a separate operating budget, including the calculation 
of operating subsidy eligibility in accordance with paragraph (a) of 
this section, for the project managed by a resident management 
corporation to HUD for approval. This budget will reflect all project 
expenditures and will identify which expenditures are related to the 
responsibilities of the resident management corporation and which are 
related to functions which will continue to be performed by the IHA.
    (4) Operating reserves. (i) Each project or part of a project that 
is operating in accordance with the ACC amendment relating to this 
subpart and in accordance with a contract vesting maintenance 
responsibilities in the resident management corporation will have 
transferred, into a sub-account of the operating reserve of the host 
IHA, an operating reserve. Where all maintenance responsibilities for 
the resident-managed project are the responsibility of the corporation, 
the amount of the reserve made available to projects under this subpart 
will be the per unit cost amount available in the IHA operating 
reserve, exclusive of all inventories, prepaids and receivables (at the 
end of the IHA fiscal year preceding implementation), multiplied by the 
number of units in the project operated in accordance with the 
provisions of this subpart. Where some, but not all, maintenance 
responsibilities are vested in the resident management corporation, the 
contract may provide for an appropriately reduced portion of the 
operating reserve to be transferred into the corporation's sub-account.
    (ii) The use of the reserve will be subject to all administrative 
procedures generally applicable to the Indian housing program. Any 
expenditure of funds from the reserve will be for eligible expenditures 
which are incorporated into an operating budget subject to approval by 
HUD.
    (iii) Investment of funds held in the reserve will be in accordance 
with the provisions of chapter 4 of the Financial Management Handbook, 
7475.1 REV, and interest generated will be included in the calculation 
of operating subsidy in accordance with subpart J of this part.
    (c) Adjustments to total income. (1) Operating subsidy will reflect 
changes in inflation, utility rates and consumption, and changes in the 
number of units in the project.
    (2) In addition to the amount of income derived from the project 
(from sources such as rents and charges) and the operating subsidy 
calculated in accordance with paragraph (a) of this section, the 
contract may specify that income be provided to the project from other 
sources of income of the IHA.
    (3) The following conditions may not affect the amounts to be 
provided to a project managed by a resident management corporation 
under this subpart:
    (i) Any reduction in the total income of an IHA that occurs as a 
result of fraud, waste, or mismanagement by the IHA; or
    (ii) Any change in the total income of an IHA that occurs as a 
result of project-specific characteristics that are not shared by the 
project managed by the corporation under this subpart.
    (d) Retention of excess revenues. Any income generated by a 
resident management corporation that exceeds the income estimated for 
the income category involved must be excluded in subsequent years in 
calculating:
    (1) The operating subsidy provided to an IHA under subpart J of 
this part; and
    (2) The funds provided by the IHA to the resident management 
corporation.
    (e) Use of retained revenues. Any revenues retained by a resident 
management corporation under paragraph (d) of this section may only be 
used for purposes of improving the maintenance and operation of the 
project, establishing business enterprises that employ residents of 
Indian housing, or acquiring additional dwelling units for low-income 
families. Units acquired by the resident management corporation will 
not be eligible for payment of operating subsidy.


Sec. 905.972  TOP audit and administrative requirements.

    (a) Annual audit of financial statements. The financial statements 
of a RMC managing a project under this subpart must be audited annually 
by a licensed certified public accountant, designated by the RMC, in 
accordance with generally accepted government audit standards. A 
written report of each audit must be forwarded to HUD and the IHA 
within 30 days of issuance.
    (b) Relationship to other authorities. The requirements of 
paragraph (a) of this section are in addition to any other Federal law 
or other requirement that would apply to the availability and audit of 
financial statements of RMCs under this part.
    (c) General administrative requirements. Except as modified by this 
part, RMCs must comply with the requirements of OMB Circulars A-110 and 
A-122, as applicable.

Family Investment Centers (FIC) Program


Sec. 905.980  General.

    (a) The Family Investment Centers (FIC) Program. This program 
provides families living in Indian housing with better access to 
educational and employment opportunities by:
    (1) Developing facilities in or near Indian housing for training 
and support services;
    (2) Mobilizing public and private resources to expand and improve 
the delivery of such services;
    (3) Providing funding for such essential training and support 
services that cannot otherwise be funded; and
    (4) Improving the capacity of management to assess the training and 
service needs of families, coordinating the provision of training and 
services that meet such needs, and ensuring the long-term provision of 
such training and services.
    (b) Supportive Services. New or significantly expanded services 
essential to providing families in Indian housing with better access to 
educational and employment opportunities to achieve self-sufficiency 
and independence. IHAs applying for funds to provide supportive 
services must demonstrate that the services will be provided at a 
higher level than currently provided. Supportive services may include:
    (1) Child care;
    (2) Employment training and counseling;
    (3) Computer skills training;
    (4) Education including remedial education; literacy training; 
completion of secondary or post secondary education and assistance in 
the attainment of certificates of high school equivalency;
    (5) Business, entrepreneurial training and counseling;
    (6) Transportation necessary to enable any participating family 
member to receive available services or to commute to his/her place of 
employment;
    (7) Personal welfare (e.g. substance/alcohol abuse treatment and 
counseling, self-development counseling, etc.);
    (8) Supportive Health Care Services (e.g., outreach and referral 
services); and
    (9) Any other services and resources, including case management, 
determined to be appropriate in assisting eligible residents.
    (c) FIC Service Coordinator. Any person who is responsible for:
    (1) Determining the eligibility and assessing needs of families to 
be serviced by the FIC;
    (2) Assessing training and service needs of eligible residents;
    (3) Working with service providers to coordinate the provision of 
services and to tailor the services to the needs and characteristics of 
eligible residents;
    (4) Mobilizing public and private resources to ensure that the 
supportive services identified can be funded over the five-year period, 
at least, following the initial receipt of funding;
    (5) Monitoring and evaluating the delivery, impact and 
effectiveness of any supportive service funded with capital or 
operating assistance under the FIC program.
    (6) Coordinating the development and implementation of the FIC 
Program with other self-sufficiency, educational and employment 
programs; and
    (7) Performing other duties and functions that are appropriate for 
providing eligible residents with better access to educational and 
employment opportunities.


Sec. 905.982  Eligibility.

    An IHA may apply to establish one or more FICs for more than one 
Indian housing development. An IHA must demonstrate a firm commitment 
of assistance from one or more sources ensuring that supportive 
services will be provided for not less than one year following the 
completion of activities.


Sec. 905.983  FIC activities.

    Activities that may be funded and carried out by an eligible IHA 
may include:
    (a) The renovation, conversion, or combination of vacant dwelling 
units to create common areas to accommodate the provision of supportive 
services;
    (b) The renovation of existing common areas to accommodate the 
provision of supportive services;
    (c) The acquisition, construction, or renovation of facilities 
located near the premises of one or more IHA developments to 
accommodate the provision of supportive services;
    (d) The provision of not more than 15 percent of the total cost of 
supportive services (which may be provided directly to eligible 
residents by the IHA or by contract or lease through other appropriate 
agencies or providers), but only if the IHA demonstrates that:
    (1) The supportive services are appropriate to improve the access 
of eligible residents to employment and educational opportunities; and
    (2) The IHA has made diligent efforts to use or obtain other 
available resources to fund or provide such services; and
    (e) The employment of service coordinators.


Sec. 905.984  IHA role in activities under this part.

    An IHA shall develop a process that ensures that RO/RMC 
representatives and residents are fully informed of, and have an 
opportunity to comment on, the contents of the application and 
activities at all stages of the application and grant award process. 
The IHA shall give full and fair consideration to the comments and 
concerns of the residents.


Sec. 905.985  HUD policy on training, employment, contracting and 
subcontracting of Indian housing residents.

    In accordance with Section 3 of the Housing and Urban Development 
Act of 1968 and the implementing regulations at 24 CFR part 135, IHAs, 
their contractors and subcontractors shall use best efforts, consistent 
with existing Federal, State, Tribal and local laws and regulations 
(including Section 7(b) of the Indian Self-Determination and Education 
Assistance Act), to give low and very low-income persons the training 
and employment opportunities generated by Section 3 covered assistance 
(as this term is defined in 24 CFR 135.7) and to give Section 3 
business concerns the contracting opportunities generated by Section 3 
covered assistance.


Sec. 905.986  Grant Set-Aside Assistance.

    HUD may set-aside five percent of any amounts available in each 
fiscal year (subsequent to the first funding cycle) to supplement 
grants previously awarded under this program. These supplemental grants 
would be awarded to IHAs that demonstrate that funds cannot otherwise 
be obtained and are needed to provide adequate service levels to 
residents.


Sec. 905.987  Resident compensation.

    Residents employed pursuant to a FIC grant shall be paid at a rate 
not less than the highest of:
    (a) The minimum wage that would be applicable to the employee under 
the Fair Labor Standards Act of 1938 (FLSA), if section 6(a)(1) of the 
FLSA applied to the resident and if the resident was not exempt under 
section 13 of the FLSA;
    (b) The State, local or Tribal minimum wage for the most nearly 
comparable covered employment; or
    (c) The prevailing rate of pay for persons employed in similar 
public occupations by the same employer.


Sec. 905.988  Administrative requirements.

    Each IHA receiving a grant shall submit to the HUD Field Office an 
annual progress report describing and evaluating the use of grant 
amounts received under this program.

PART 913--DEFINITION OF INCOME, INCOME LIMITS, RENT AND 
REEXAMINATION OF FAMILY INCOME FOR THE PUBLIC HOUSING PROGRAM

    6. The authority citation for part 913 continues to read as 
follows:

    Authority: 42 U.S.C. 1437a, 1437d, 1437n and 3535(d).

    7. In Sec. 913.106, paragraph (c) is amended by:
    a. Removing the word ``or'' from the end of paragraph (c)(8)(ii);
    b. Adding the word ``or'' at the end of paragraph (c)(8)(iii);
    c. Adding a new paragraph (c)(8)(iv);
    d. Removing the word ``or'' from the end of paragraph (c)(10);
    e. Redesignating paragraph (c)(11) as paragraph (c)(12); and
    f. Adding a new paragraph (c)(11), to read as follows:


Sec. 913.106  Annual income.

* * * * *
    (c) * * *
    (8) * * *
    (iv) A resident service stipend, but only if the resident service 
stipend does not exceed $200 per month/per officer to resident council 
officers. Stipends are intended to cover costs related to officers' 
volunteer efforts and include but are not limited to the following 
items: child care, transportation, special equipment and special 
clothing.
* * * * *
    (11) The earnings and benefits to any resident resulting from the 
participation in a program providing employment training and supportive 
services in accordance with the Family Support Act of 1988, section 22 
of the U.S. Housing Act of 1937, or any comparable Federal, State, or 
local law during the exclusion period. For purposes of this paragraph, 
the following definitions apply.
    (i) Comparable Federal, State or Local law means a program 
providing employment training and supportive services that--
    (A) Is authorized by a federal, state or local law;
    (B) Is funded by federal, state or local government;
    (C) Is operated or administered by a public agency; and
    (D) Has as its objective to assist participants in acquiring job 
skills.
    (ii) Exclusion period means the period during which the resident 
participates in a program described in this section, plus 18 months 
from the date the resident begins the first job acquired by the 
resident after completion of such program that is not funded by public 
housing assistance under the U.S. Housing Act of 1937. If the resident 
is terminated from employment without good cause, the exclusion period 
shall end.
    (iii) Earnings and Benefits means the incremental earnings and 
benefits resulting from a qualifying employment training program or 
subsequent job. (This provision does not apply to residents 
participating in the Family Self-Sufficiency Program who are utilizing 
the escrow account.)
* * * * *
    8. Part 964, consisting of Secs. 964.1 through 964.350, is revised 
in its entirety, to read as follows:

PART 964--TENANT PARTICIPATION AND TENANT OPPORTUNITIES IN PUBLIC 
HOUSING

Subpart A--General Provisions

Sec.
964.1  Purpose.
964.3  Applicability and scope.
964.7  Definitions.
964.11  HUD policy on tenant participation.
964.12  HUD policy on the Tenant Opportunities Program (TOP).
964.14  HUD policy on partnerships.
964.15  HUD policy on resident management.
964.16  HUD role in activities under this part.
964.18  HA role in activities under subparts B & C.
964.24  HUD policy on FIC Program.
964.30  Other Program requirements.

Subpart B--Tenant Participation

964.100  Role of resident council.
964.105  Role of the Jurisdiction-Wide Resident Council.
964.110  Resident membership on HA Board of Commissioners.
964.115  Resident council requirements.
964.117  Resident council partnerships.
964.120  Resident management corporation requirements.
964.125  Eligibility for resident council membership.
964.130  Election procedures and standards.
964.135  Resident involvement in HA management operations.
964.140  Resident training.
964.145  Conflict of interest.
964.150  Funding tenant participation.

Subpart C--Tenant Opportunities Program

964.200  General.
964.205  Eligibility.
964.210  Notice of funding availability.
964.215  Grant agreement.
964.220  Technical assistance.
964.225  Resident management requirements.
964.230  Audit and administrative requirements.

Subpart D--Family Investment Centers (FIC) Program

964.300  General.
964.305  Eligibility.
964.308  Supportive services requirements.
964.310  Audit/compliance requirements.
964.315  HAs role in activities under this part.
964.320  HUD Policy on training, employment, contracting and 
subcontracting of public housing residents.
964.325  Notice of funding availability.
964.330  Grant set-aside assistance.
964.335  Grant agreement.
964.340  Resident compensation.
964.345  Treatment of income.
964.350  Administrative requirements.

    Authority: 42 U.S.C. 1437d, 1437g, 1437l, 1437r, 1437t, 3535(d).

Subpart A--General Provisions


Sec. 964.1  Purpose.

    The purpose of this part is to recognize the importance of resident 
involvement in creating a positive living environment and in actively 
participating in the overall mission of public housing.


Sec. 964.3  Applicability and scope.

    (a) The policies and procedures contained in this part apply to any 
HA that has a Public Housing Annual Contributions Contract (ACC) with 
HUD. This part does not apply to PHAs with housing assistance payments 
contracts with HUD under section 8 of the U.S. Housing Act of 1937.
    (b) Subpart B of this part contains HUD policies, procedures, and 
requirements for the participation of residents in public housing 
operations. These policies, procedures, and requirements apply to all 
residents participating under this part.
    (c)(1) Subpart C of this part contains HUD policies, procedures, 
and requirements for residents participating in the Tenant 
Opportunities Program (TOP) (replaces the Resident Management Program 
under Section 20 of the United States Housing Act of 1937). Resident 
management in public housing is viable and remains an option under TOP.
    (2) Subpart C of this part is not intended to negate any pre-
existing arrangements for resident management in public housing between 
a PHA and a resident management corporation. On or after September 23, 
1994, any new, renewed or renegotiated contracts must meet the 
requirements of this part, the ACC and all applicable laws and 
regulations.
    (d) Subpart D of this part includes requirements for the Family 
Investment Centers (FIC) Program which was established by Section 22 of 
the United States Housing Act of 1937 (42 U.S.C. 1437t) to provide 
families living in public housing and Indian housing with better access 
to educational and employment opportunities.
    (e) The term ``resident,'' as used throughout this part, is 
interchangeable with the term ``tenant,'' to reflect the fact that 
local resident organizations have differing preferences for the terms. 
Terms such as ``resident council'' and ``tenant council'' and 
``resident management'' and ``tenant management'' are interchangeable. 
Hereafter, for ease of discussion, the rule will use the terms 
resident, resident council and resident management corporation, as 
appropriate.


Sec. 964.7  Definitions.

    Annual Contributions Contract (ACC). A contract (in the form 
prescribed by HUD) under which HUD agrees to provide financial 
assistance, and the HA agrees to comply with HUD requirements for the 
development and operation of the public housing project.
    Eligible residents for FIC. A participating resident of a 
participating HA. If the HA is combining FIC with the Family Self-
Sufficiency (FSS) program, the term also means Public Housing FSS and 
Section 8 families participating in the FSS program. Although Section 8 
FSS families are eligible residents for FIC, they do not qualify for 
income exclusions that are provided for public housing residents 
participating in employment and supportive service programs.
    Family Investment Centers (FIC). A facility on or near public 
housing which provides families living in public housing with better 
access to educational and employment opportunities to achieve self-
sufficiency and independence.
    FIC service coordinator. Any person who is responsible for:
    (1) Determining the eligibility and assessing needs of families to 
be served by the FIC;
    (2) Assessing training and service needs of eligible residents;
    (3) Working with service providers to coordinate the provision of 
services on a HA-wide or less than HA-wide basis, and to tailor the 
services to the needs and characteristics of eligible residents;
    (4) Mobilizing public and private resources to ensure that the 
supportive services identified can be funded over the five-year period, 
at least, following the initial receipt of funding.
    (5) Monitoring and evaluating the delivery, impact, and 
effectiveness of any supportive service funded with capital or 
operating assistance under the FIC program;
    (6) Coordinating the development and implementation of the FIC 
program with other self-sufficiency programs, and other education and 
employment programs; and
    (7) Performing other duties and functions that are appropriate for 
providing eligible residents with better access to educational and 
employment opportunities.
    Management. All activities for which the HA is responsible to HUD 
under the ACC, within the definition of ``operation'' under the Act and 
the ACC, including the development of resident programs and services.
    Management contract. A written agreement between a resident 
management corporation and a HA, as provided by subpart C.
    Public Housing Agency (HA). Any State, county, municipality, or 
other governmental entity or public body (or agency or instrumentality 
thereof) which is authorized to engage in or assist in the development 
and operation of low-income housing.
    Public housing development (Development). The term ``development'' 
has the same meaning as that provided for ``low-income housing 
project'' as that term is defined Section 3(b)(1) of the Act.
    Resident management. The performance of one or more management 
activities for one or more projects by a resident management 
corporation under a management contract with the HA.
    Resident management corporation. An entity that proposes to enter 
into, or enters into, a contract to manage one or more management 
activities of a HA.
    Resident-owned business. Any business concern which is owned and 
controlled by public housing residents. (The term ``resident-owned 
business'' includes sole proprietorships.) For purposes of this part, 
``owned and controlled'' means a business:
    (1) Which is at least 51 percent owned by one or more public 
housing residents; and
    (2) Whose management and daily business operations are controlled 
by one or more such individuals.
    Supportive services for FIC. New or significantly expanded services 
that are essential to providing families living with children in public 
housing with better access to educational and employment opportunities 
to achieve self-sufficiency and independence.
    Tenant Opportunities Program (TOP). The TOP program is designed to 
prepare residents to experience the dignity of meaningful work, to own 
and operate resident businesses, to move toward financial independence, 
and to enable them to choose where they want to live and engage in 
meaningful participation in the management of housing developments in 
which they live. Financial assistance in the form of technical 
assistance grants is available to RCs/RMCs to prepare to manage 
activities in their public housing developments.
    Vacant unit under FIC. A dwelling unit that is not under an 
effective lease to an eligible family. An effective lease is a lease 
under which an eligible family has a right to possession of the unit 
and is being charged rent, even if the amount of any utility allowance 
equals or exceeds the amount of a total resident payment that is based 
on income and, as a result, the amount paid by the family to the HA is 
zero.


Sec. 964.11  HUD policy on tenant participation.

    HUD promotes resident participation and the active involvement of 
residents in all aspects of a HA's overall mission and operation. 
Residents have a right to organize and elect a resident council to 
represent their interests. As long as proper procedures are followed, 
the HA shall recognize the duly elected resident council to participate 
fully through a working relationship with the HA. HUD encourages HAs 
and residents to work together to determine the most appropriate ways 
to foster constructive relationships, particularly through duly-elected 
resident councils.


Sec. 964.12  HUD policy on the Tenant Opportunities Program (TOP).

    HUD promotes TOP programs to support activities that enable 
residents to improve the quality of life and resident satisfaction, and 
obtain other social and economic benefits for residents and their 
families. Tenant opportunity programs are proven to be effective in 
facilitating economic uplift, as well as in improving the overall 
conditions of the public housing communities.


Sec. 964.14  HUD policy on partnerships.

    HUD promotes partnerships between residents and HAs which are an 
essential component to building, strengthening and improving public 
housing. Strong partnerships are critical for creating positive changes 
in lifestyles thus improving the quality of life for public housing 
residents, and the surrounding community.


Sec. 964.15  HUD policy on resident management.

    It is HUD's policy to encourage resident management. HUD encourages 
HAs, resident councils and resident management corporations to explore 
the various functions involved in management to identify appropriate 
opportunities for contracting with a resident management corporation. 
Potential benefits of resident-managed entities include improved 
quality of life, experiencing the dignity of meaningful work, enabling 
residents to choose where they want to live, and meaningful 
participation in the management of the housing development.


Sec. 964.16  HUD role in activities under this part.

    (a) General. Subject to the requirements of this part and other 
requirements imposed on HAs by the ACC, statute or regulation, the form 
and extent of resident participation including resident management are 
local decisions to be made jointly by resident councils/resident 
management corporations and their HAs. HUD will promote tenant 
participation and tenant opportunities programs, and will provide 
additional guidance, as necessary and appropriate. In addition, HUD 
will endeavor to provide technical assistance in connection with these 
initiatives.
    (b) Monitoring. HUD shall ensure that the requirements under this 
part are operating efficiently and effectively.


Sec. 964.18  HA role in activities under subparts B & C.

    (a) HAs with 250 units or more.
    (1) A HA shall officially recognize a duly elected resident council 
as the sole representative of the residents it purports to represent, 
and support its tenant participation activities.
    (2) When requested by residents, a HA shall provide appropriate 
guidance to residents to assist them in establishing and maintaining a 
resident council.
    (3) A HA may consult with residents, or resident councils (if they 
exist), to determine the extent to which residents desire to 
participate in activities involving their community, including the 
management of specific functions of a public housing development that 
may be mutually agreeable to the HA and the resident council/resident 
management corporation.
    (4) A HA shall provide the residents or any resident council with 
current information concerning the HA's policies on tenant 
participation in management.
    (5) If requested, a HA should provide a duly recognized resident 
council office space and meeting facilities, free of charge, preferably 
within the development it represents. If there is no community or 
rental space available, a request to approve a vacant unit for this 
non-dwelling use will be considered on a case-by-case basis.
    (6) If requested, a HA shall negotiate with the duly elected 
resident council on all uses of community space for meetings, 
recreation and social services and other resident participation 
activities pursuant to HUD guidelines. Such agreements shall be put 
into a written document to be signed by the HA and the resident 
council. If a HA fails to negotiate with a resident council in good 
faith or, after negotiations, refuses to permit such usage of community 
space, the resident council may file an informal appeal with HUD, 
setting out the circumstances and providing copies of relevant 
materials evidencing the resident council's efforts to negotiate a 
written agreement. HUD shall require the HA to respond with a report 
stating the HA's reasons for rejecting the request or for refusing to 
negotiate. HUD shall require the parties (with or without direct HUD 
participation) to undertake or to resume negotiations on an agreement. 
If no resolution is achieved within 90 days from the date HUD required 
the parties to undertake or resume such negotiations, HUD shall serve 
notice on both parties that administrative remedies have been exhausted 
(except that, pursuant to mutual agreement of the parties, the time for 
negotiations may be extended by no more than an additional 30 days).
    (7) In no event shall HUD or a HA recognize a competing resident 
council once a duly elected resident council has been established. Any 
funding of resident activities and resident input into decisions 
concerning public housing operations shall be made only through the 
officially recognized resident council.
    (8) The HA shall ensure open communication and frequent meetings 
between HA management and resident councils and shall encourage the 
formation of joint HA management-resident committees to work on issues 
and planning.
    (9) The resident council shall hold frequent meetings with the 
residents to ensure that residents have input, and are aware and 
actively involved in HA management-resident council decisions and 
activities.
    (10) The HA and resident council shall put in writing in the form 
of a Memorandum of Understanding the elements of their partnership 
agreement and it shall be updated at least once every three (3) years.
    (11) The HA, in collaboration with the resident councils, shall 
assume the lead role for assuring maximum opportunities for skills 
training for public housing residents. To the extent possible, the 
training resources should be local to ensure maximum benefit and on-
going access.
    (b) HAs with fewer than 250 units. (1) HAs with fewer than 250 
units of public housing have the option of participating in programs 
under this part.
    (2) HAs shall not deny residents the opportunity to organize. If 
the residents decide to organize and form a resident council, the HA 
shall comply with the following:
    (i) A HA shall officially recognize a duly elected resident council 
as the sole representative of the residents it purports to represent, 
and support its tenant participation activities.
    (ii) When requested by residents, a HA shall provide appropriate 
guidance to residents to assist them in establishing and maintaining a 
resident council.
    (iii) A HA shall provide the residents or any resident council with 
current information concerning the HA's policies on tenant 
participation in management.
    (iv) In no event shall HUD or a HA officially recognize a competing 
resident council once a duly elected resident council has been 
established. If a duly elected resident council has been formed, any 
input into changes concerning public housing operations shall be made 
only through the officially recognized resident council.


Sec. 964.24  HUD policy on FIC Program.

    HUD promotes Family Investment Centers which provide better access 
to educational and employment opportunities for residents living in 
public housing. HUD encourages resident involvement in the FIC Program 
and promotes resident-HA partnerships to achieve mutual goals.


Sec. 964.30  Other Program requirements.

    All programs under this part must be conducted and administered in 
accordance with the Civil Rights requirements cited below and comply 
with all other Federal laws, executive orders, regulations and 
policies.
    (a) Fair Housing Requirements. The requirements of the Fair Housing 
Act (42 U.S.C. 3601-19) and regulations pursuant thereto (24 CFR Part 
100); Executive Order 11063 (Equal Opportunity in Housing) and 
regulations pursuant thereto (24 CFR Part 107); the fair housing poster 
regulations (24 CFR Part 110) and the advertising guidelines (24 CFR 
Part 109).
    (b) Nondiscrimination in Housing. Title VI of the Civil Rights Act 
of 1964 (42 U.S.C. 2000d) and regulations pursuant thereto (24 CFR Part 
1).
    (c) Discrimination on the Basis of Age or Handicap. The 
prohibitions against discrimination on the basis of age under the Age 
Discrimination Act of 1975 (42 U.S.C. 6101-07) and regulations issued 
pursuant thereto (24 CFR Part 146), and the prohibitions against 
discrimination against handicapped individuals under Section 504 of the 
Rehabilitation Act of 1973 (29 U.S.C. 794) and regulations issued 
pursuant thereto (24 CFR Part 8).
    (d) Employment Opportunities. The requirements of Section 3 of the 
Housing and Urban Development Act of 1968 (12 U.S.C. 1701u) (Employment 
Opportunities for Lower Income Persons in Connection with Assisted 
Projects).
    (e) Minority and Women's Business Enterprises. The requirements of 
Executive Orders 11246, 11625 12432, and 12138. Consistent with HUD's 
responsibilities under these orders, recipients must make efforts to 
encourage the use of minority and women's business enterprises in 
connection with funded activities.
    (f) Affirmative Outreach. The Affirmative Fair Housing Marketing 
Program requirements of 24 CFR Part 200, Subpart M and the implementing 
regulations at 24 CFR part 108.
    (g) Disability Requirements--Fair Housing Act, Section 504 and the 
Americans with Disabilities Act. The recipient must comply with the 
reasonable modification and accommodation requirements of the Fair 
Housing Act and the accessibility requirements of the Fair Housing Act 
and Section 504 of the Rehabilitation Act of 1973, as amended. 
Recipient must also comply with Title II of the Americans with 
Disabilities Act of 1990 (42 U.S.C. 12131) and implementing regulation 
at 28 CFR Part 35.

Subpart B--Tenant Participation


Sec. 964.100  Role of resident council.

    The role of a resident council is to improve the quality of life 
and resident satisfaction and participate in self-help initiatives to 
enable residents to create a positive living environment for families 
living in public housing. Resident councils may actively participate 
through a working partnership with the HA to advise and assist in all 
aspects of public housing operations.


Sec. 964.105  Role of the jurisdiction-wide resident council.

    (a) Jurisdiction-wide resident council. Resident councils may come 
together to form an organization which can represent the interest of 
residents residing in units under a HA's jurisdiction. This can be 
accomplished by the presidents of duly elected resident councils 
forming an organization, by resident councils electing a representative 
to the organization, or through jurisdiction-wide elections. If duly 
elected resident councils form such an organization, the HA shall 
recognize it as the voice of authority-wide residents for input into 
housing authority policy making.
    (b) Function. The jurisdiction-wide council may advise the Board of 
Commissioners and executive director in all areas of HA operations, 
including but not limited to occupancy, general management, 
maintenance, security, resident training, resident employment, social 
services and modernization priorities.
    (c) Cooperation with other groups. There shall be regularly 
scheduled meetings between the HA and the local duly elected resident 
council, and the jurisdiction-wide resident council to discuss 
problems, plan activities and review progress.


Sec. 964.110  Resident membership on HA Board of Commissioners.

    HUD encourages to the maximum extent possible resident membership 
on HA Board of Commissioners, for the purpose of having maximum input 
into HA policy and decision-making on matters concerning public 
housing.


Sec. 964.115  Resident council requirements.

    A resident council shall consist of persons residing in public 
housing and must meet each of the following requirements in order to 
receive official recognition from the HA/HUD, and be eligible to 
receive funds for resident council activities, and stipends for 
officers for their related costs for volunteer work in public housing:
    (a) It may represent residents residing:
    (1) In scattered site buildings;
    (2) In areas of contiguous row houses; or
    (3) In one or more contiguous buildings;
    (4) In a development; or
    (5) In a combination of these buildings or developments;
    (b) It must adopt written procedures such as by-laws, or a 
constitution which provides for the election of residents to the 
governing board by the voting membership of the residents residing in 
public housing, described in paragraph (b) of this section, on a 
regular basis but at least once every three (3) years. The written 
procedures must provide for the recall of the resident board by the 
voting membership. These provisions shall allow for a petition or other 
expression of the voting membership's desire for a recall election, and 
set the number of percentage of voting membership (``threshold'') who 
must be in agreement in order to hold a recall election. This threshold 
shall not be less than 10 percent of the voting membership.
    (c) It must have a democratically elected governing board that is 
elected by the voting membership. At a minimum, the governing board 
should consist of five (5) elected board members.
    The voting membership must consist of heads of households (any age) 
and other residents at least 18 years of age or older and whose name 
appears on a lease for the unit in the public housing that the resident 
council represents.


Sec. 964.117  Resident council partnerships.

    A resident council may form partnerships with outside 
organizations, provided that such relationships are complementary to 
the resident council in its duty to represent the residents, and 
provided that such outside organizations do not become the governing 
entity of the resident council.


Sec. 964.120  Resident management corporation requirements.

    A resident management corporation must consist of residents 
residing in public housing and have each of the following 
characteristics in order to receive official recognition by the HA and 
HUD:
    (a) It shall be a non-profit organization that is validly 
incorporated under the laws of the State in which it is located;
    (b) It may be established by more than one resident council, so 
long as each such council:
    (1) Approves the establishment of the corporation; and
    (2) Has representation on the Board of Directors of the 
corporation;
    (c) It shall have an elected Board of Directors, and elections must 
be held at least once every three (3) years;
    (d) Its by-laws shall require the Board of Directors to include 
resident representatives of each resident council involved in 
establishing the corporation; include qualifications to run for office, 
frequency of elections, procedures for recall, and term limits if 
desired.
    (e) Its voting members shall be heads of households (any age) and 
other residents at least 18 years of age and whose name appears on the 
lease of a unit in the public housing represented by the resident 
management corporation;
    (f) Where a resident council already exists for the development, or 
a portion of the development, the resident management corporation shall 
be approved by the resident council board and a majority of the 
residents. If there is no resident council, a majority of the residents 
of the public housing development it will represent must approve the 
establishment of such a corporation for the purposes of managing the 
project; and
    (g) It may serve as both the resident management corporation and 
the resident council, so long as the corporation meets the requirements 
of this part for a resident council.


Sec. 964.125  Eligibility for resident council membership.

    (a) Any member of a public housing household whose name is on the 
lease of a unit in the public housing development and meets the 
requirements of the by-laws is eligible to be a member of a resident 
council. The resident council may establish additional criteria that 
are non-discriminatory and do not infringe on rights of other residents 
in the development. Such criteria must be stated in the by-laws or 
constitution as appropriate.
    (b) The right to vote for resident council board shall be limited 
to designated heads of households (any age) and other members of the 
household who are 18 years or older whose name appears on the lease of 
a unit in the public housing development represented by the resident 
council.
    (c) Any qualified voting member of a resident council who meets the 
requirements described in the by-laws and is in compliance with the 
lease may seek office and serve on the resident council governing 
board.


Sec. 964.130  Election procedures and standards.

    At a minimum, a resident council may use local election boards/
commissions. The resident council shall use an independent third-party 
to oversee elections and recall procedures.
    (a) Resident councils shall adhere to the following minimum 
standards regarding election procedures:
    (1) All procedures must assure fair and frequent elections of 
resident council members--at least once every three years for each 
member.
    (2) Staggered terms for resident council governing board members 
and term limits shall be discretionary with the resident council.
    (3) Each resident council shall adopt and issue election and recall 
procedures in their by-laws.
    (4) The election procedures shall include qualifications to run for 
office, frequency of elections, procedures for recall, and term limits 
if desired.
    (5) All voting members of the resident community must be given 
sufficient notice (at least 30 days) for nomination and election. The 
notice should include a description of election procedures, eligibility 
requirements, and dates of nominations and elections.
    (b) If a resident council fails to satisfy HUD minimum standards 
for fair and frequent elections, or fails to follow its own election 
procedures as adopted, HUD shall require the HA to withdraw recognition 
of the resident council and to withhold resident services funds as well 
as funds provided in conjunction with services rendered for resident 
participation in public housing.
    (c) HAs shall monitor the resident council election process and 
shall establish a procedure to appeal any adverse decision relating to 
failure to satisfy HUD minimum standards. Such appeal shall be 
submitted to a jointly selected third-party arbitrator at the local 
level. If costs are incurred by using a third-party arbitrator, then 
such costs should be paid from the HAs resident services funds pursuant 
to Sec. 964.150.


Sec. 964.135  Resident involvement in HA management operations.

    Residents shall be involved and participate in the overall policy 
development and direction of Public Housing operations.
    (a) Resident management corporations (RMCs) may contract with HAs 
to perform one or more management functions provided the resident 
entity has received sufficient training and/or has staff with the 
necessary expertise to perform the management functions and provided 
the RMC meets bonding and licensing requirements.
    (b) Residents shall be actively involved in a HA's decision-making 
process and give advice on matters such as modernization, security, 
maintenance, resident screening and selection, and recreation.
    (c) While a HA has responsibility for management operations, it 
shall ensure strong resident participation in all issues and facets of 
its operations through the duly elected resident councils at public 
housing developments, and with jurisdiction-wide resident councils.
    (d) A HA shall work in partnership with the duly elected resident 
councils.
    (e) HAs, upon request from the duly elected resident council, shall 
ensure that the duly elected resident council officers as defined in 
subpart B of this part, and other residents in the development are 
fully trained and involved in developing and implementing Federal 
programs including but not limited to Comprehensive Improvement 
Assistance Program (CIAP), Comprehensive Grant Program, Urban 
Revitalization Demonstration, Drug Elimination, and FIC.
    (f) HAs shall involve resident council officers and other 
interested residents at the development through education and direct 
participation in all phases of the budgetary process.
    (g) Resident council officers shall be encouraged to become 
involved in the resident screening and selection process for 
prospective residents at the development. Those selected to perform 
resident screening and selection functions must be trained by the HA in 
resident screening and selection and must sign a legal document 
committing to confidentiality.


Sec. 964.140  Resident training.

    (a) Resident training opportunities. HUD encourages a partnership 
between the residents, the HA and HUD, as well as with the public and 
non-profit sectors to provide training opportunities for public housing 
residents. The categories in which training could occur include, but 
are not limited to:
    (1) Community organization and leadership training;
    (2) Organizational development training for Resident Management 
Corporations and duly elected Resident Councils;
    (3) Public housing policies, programs, rights and responsibilities 
training; and
    (4) Business entrepreneurial training, planning and job skills.
    (b) Local training resources. HUD encourages the use of local 
training resources to ensure the ongoing accessibility and availability 
of persons to provide training and technical assistance. Possible 
training resources may include:
    (1) Resident organizations;
    (2) Housing authorities;
    (3) Local community colleges, vocational schools; and
    (4) HUD and other Federal agencies and other local public, private 
and non-profit organizations.


Sec. 964.145  Conflict of interest.

    Resident council officers can not serve as contractors or employees 
if they are in policy making or supervisory positions at the HA.


Sec. 964.150  Funding tenant participation.

    (a) Funding duly elected resident councils and jurisdiction wide 
resident councils. (1) The HA shall provide funds it receives for this 
purpose to the duly elected resident council at each development and/or 
those jurisdiction-wide councils eligible to receive the resident 
portion of the tenant services account to use for resident 
participation activities. This shall be an addition to the Performance 
Funding System (PFS), as provided by 24 CFR part 990, to permit HAs to 
fund $25 per unit per year for units represented by duly elected 
resident councils for resident services, subject to the availability of 
appropriations. Of this amount, $15 per unit per year would be provided 
to fund tenant participation activities under subpart B of this part 
for duly elected resident councils and/or jurisdiction-wide councils 
and $10 per unit per year would be used by the HA to pay for costs 
incurred in carrying out tenant participation activities under subpart 
B of this part, including the expenses for conducting elections, 
recalls or arbitration required under Sec. 964.130 in subpart B. This 
will guarantee the resources necessary to create a bona fide 
partnership among the duly elected resident councils, the HA and HUD. 
Where both local and jurisdiction-wide councils exist, the distribution 
will be agreed upon by the HA and the respective councils.
    (2) If funds are available through appropriations, the HA must 
provide tenant services funding to the duly elected resident councils 
regardless of the HA's financial status. The resident council funds 
shall not be impacted or restricted by the HA financial status and all 
said funds must be used for the purpose set forth in subparts B and C 
of this part.
    (3) The HA and the duly elected resident council at each 
development and/or those jurisdiction-wide councils shall collaborate 
on how the funds will be distributed for tenant participation 
activities. If disputes regarding funding decisions arise between the 
parties, the matter shall be referred to the Field Office for 
intervention. HUD Field Office shall require the parties to undertake 
further negotiations to resolve the dispute. If no resolution is 
achieved within 90 days from the date of the Field Office intervention, 
the Field Office shall refer the matter to HUD Headquarters for final 
resolution.
    (b) Stipends. (1) HUD encourages HAs to provide stipends to 
resident council officers who serve as volunteers in their public 
housing developments. The amount of the stipend, up to $200 per month/
per officer, shall be decided locally by the resident council and the 
HA. Subject to appropriations, the stipends will be funded from the 
resident council's portion of the operating subsidy funding for 
resident council expenses ($15.00 per unit per year).
    (2) Pursuant to Sec. 913.106, stipends are not to be construed as 
salaries and should not be included as income for calculation of rents, 
and are not subject to conflict of interest requirements.
    (3) Funding provided by a HA to a duly elected resident council may 
be made only under a written agreement between the HA and a resident 
council, which includes a resident council budget and assurance that 
all resident council expenditures will not contravene provisions of law 
and will promote serviceability, efficiency, economy and stability in 
the operation of the local development. The agreement must require the 
local resident council to account to the HA for the use of the funds 
and permit the HA to inspect and audit the resident council's financial 
records related to the agreement.

Subpart C--Tenant Opportunities Program


Sec. 964.200  General.

    (a) The Tenant Opportunities Program (TOP) provides technical 
assistance for various activities, including but not limited to 
resident management, for resident councils/resident management 
corporations as authorized by Section 20 of the U.S. Housing Act of 
1937. The TOP provides opportunities for resident organizations to 
improve living conditions and resident satisfaction in public housing 
communities.
    (b) This subpart establishes the policies, procedures and 
requirements for participating in the TOP with respect to applications 
for funding for programs identified in this subpart.
    (c) This subpart contains the policies, procedures and requirements 
for the resident management program as authorized by section 20 of the 
U.S. Housing Act of 1937.


Sec. 964.205  Eligibility.

    (a) Resident councils/resident management corporations. Any 
eligible resident council/resident management corporation as defined in 
subpart B of this part is eligible to participate in a program 
administered under this subpart.
    (b) Activities. Activities to be funded and carried out by an 
eligible resident council or resident management corporation, as 
defined in subpart B of this part, must improve the living conditions 
and public housing operations and may include any combination of, but 
are not limited to, the following:
    (1) Resident capacity building. (i) Training Board members in 
community organizing, Board development, and leadership training;
    (ii) Determining the feasibility of resident management enablement 
for a specific project or projects; and
    (iii) Assisting in the actual creation of an RMC, such as 
consulting and legal assistance to incorporate, preparing by-laws and 
drafting a corporate charter.
    (2) Resident management. (i) Training residents, as potential 
employees of an RMC, in skills directly related to the operation, 
management, maintenance and financial systems of a project;
    (ii) Training of residents with respect to fair housing 
requirements; and
    (iii) Gaining assistance in negotiating management contracts, and 
designing a long-range planning system.
    (3) Resident management business development. (i) Training related 
to resident-owned business development and technical assistance for job 
training and placement in RMC developments;
    (ii) Technical assistance and training in resident managed business 
development through:
    (A) Feasibility and market studies;
    (B) Development of business plans;
    (C) Outreach activities; and
    (D) Innovative financing methods including revolving loan funds; 
and
    (iii) Legal advice in establishing a resident managed business 
entity.
    (4) Social support needs (such as self-sufficiency and youth 
initiatives). (i) Feasibility studies to determine training and social 
services needs;
    (ii) Training in management-related trade skills, computer skills, 
etc;
    (iii) Management-related employment training and counseling;
    (iv) Coordination of support services;
    (v) Training for programs such as child care, early childhood 
development, parent involvement, volunteer services, parenting skills, 
before and after school programs;
    (vi) Training programs on health, nutrition and safety;
    (vii) Workshops for youth services, child abuse and neglect 
prevention, tutorial services, in partnership with community-based 
organizations such as local Boys and Girls Clubs, YMCA/YWCA, Boy/Girl 
Scouts, Campfire and Big Brother/Big Sisters, etc. Other HUD programs 
such as the Youth Sports Program and the Public Housing Drug 
Elimination Programs also provide funding in these areas;
    (viii) Training in the development of strategies to successfully 
implement a youth program. For example, assessing the needs and 
problems of the youth, improving youth initiatives that are currently 
active, and training youth, housing authority staff, resident 
management corporations and resident councils on youth initiatives and 
program activities; and
    (5) Homeownership Opportunity. Determining feasibility for 
homeownership by residents, including assessing the feasibility of 
other housing (including HUD owned or held single or multi-family) 
affordable for purchase by residents.
    (6) General. (i) Required training on HUD regulations and policies 
governing the operation of low-income public housing including 
contracting/procurement regulations, financial management, capacity 
building to develop the necessary skills to assume management 
responsibilities at the project and property management;
    (ii) Purchasing hardware, i.e., computers and software, office 
furnishings and supplies, in connection with business development. 
Every effort must be made to acquire donated or discounted hardware;
    (iii) Training in accessing other funding sources; and
    (iv) Hiring trainers or other experts (RCs/RMCs must ensure that 
this training is provided by a qualified housing management specialist, 
a community organizer, the HA, or other sources knowledgeable about the 
program).


Sec. 964.210  Notice of funding availability.

    A Notice of Funding Availability shall be published periodically in 
the Federal Register containing the amounts of funds available, funding 
criteria, where to obtain and submit applications, and the deadline for 
submissions.


Sec. 964.215  Grant agreement.

    (a) General. HUD shall enter into a grant agreement with the 
recipient of a technical assistance grant which defines the legal 
framework for the relationship between HUD and a resident council or 
resident management corporation for the proposed funding.
    (b) Term of grant agreement. A grant shall be for a term of three 
to five years (3-5 years), and renewable at the expiration of the term.


Sec. 964.220  Technical assistance.

    (a) Financial assistance. HUD will provide financial assistance, to 
the extent available, to resident councils or resident management 
corporations for technical assistance and training to further the 
activities under this subpart.
    (b) Requirements for a management specialist. If a resident council 
or resident management corporation seeks to manage a development, it 
must select, in consultation with the HA, a qualified housing 
management specialist to assist in determining the feasibility of, and 
to help establish, a resident management corporation and to provide 
training and other duties in connection with the daily operations of 
the project.


Sec. 964.225  Resident management requirements.

    The following requirements apply when a HA and its residents are 
interested in providing for resident performance of several management 
functions in one or more projects.
    (a) Resident management corporation responsibilities. Resident 
councils interested in contracting with a HA must establish a resident 
management corporation that meets the requirements for such a 
corporation, as specified in subpart B. The RMC and its employees must 
demonstrate their ability and skill to perform in the particular areas 
of management pursuant to the management contract.
    (b) HA responsibilities. HAs shall give full and serious 
consideration to resident management corporations seeking to enter into 
a management contract with the HA. A HA shall enter into good-faith 
negotiations with a corporation seeking to contract to provide 
management services.
    (c) Duty to bargain in good faith. If a HA refuses to negotiate 
with a resident management corporation in good faith or, after 
negotiations, refuses to enter into a contract, the corporation may 
file an informal appeal with HUD, setting out the circumstances and 
providing copies of relevant materials evidencing the corporation's 
efforts to negotiate a contract. HUD shall require the HA to respond 
with a report stating the HA's reasons for rejecting the corporation's 
contract offer or for refusing to negotiate. Thereafter, HUD shall 
require the parties (with or without direct HUD participation) to 
undertake or to resume negotiations on a contract providing for 
resident management, and shall take such other actions as are necessary 
to resolve the conflicts between the parties. If no resolution is 
achieved within 90 days from the date HUD required the parties to 
undertake or resume such negotiations, HUD shall serve notice on both 
parties that administrative remedies have been exhausted (except that, 
pursuant to mutual agreement of the parties, the time for negotiations 
may be extended by no more than an additional 30 days).
    (d) Management contract. A management contract between the HA and a 
resident management corporation is required for property management. 
The HA and the resident management corporation may agree to the 
performance by the corporation of any or all management functions for 
which the HA is responsible to HUD under the ACC and any other 
functions not inconsistent with the ACC and applicable state and local 
laws, regulations and licensing requirements.
    (e) Procurement requirements. The management contract shall be 
treated as a contracting out of services, and must be subject to any 
provision of a collective bargaining agreement regarding the 
contracting out of services to which the HA is subject. Provisions on 
competitive bidding and requirements of prior written HUD approval of 
contracts contained in the ACC do not apply to the decision of a HA to 
contract with a RMC.
    (f) Rights of families; operation of project. If a resident 
management corporation is approved by the tenant organization 
representing one or more buildings or an area of row houses that are 
part of a public housing project for purposes of part 941 of this 
chapter, the resident management program may not, as determined by the 
HA, interfere with the rights of other residents of such project or 
harm the efficient operation of such project.
    (g) Comprehensive improvement assistance with RMCs. (1) The HA may 
enter into a contract with the RMC to provide comprehensive improvement 
assistance under part 968 of this chapter to modernize a project 
managed by the RMC.
    (2) The HA shall not retain, for any administrative or other 
reason, any portion of the comprehensive improvement assistance 
provided, unless the PHA and the RMC provide otherwise by contract.
    (3) In assessing the modernization needs of its projects under 24 
CFR part 968, or other grant mechanisms established by the Housing and 
Community Development Act of 1987, the HAs must consult with the tenant 
management corporation regarding any project managed by the 
corporation, in order to determine the modernization needs and 
preferences of resident-managed projects. Evidence of this required 
consultation must be included with a HA's initial submission to HUD.
    (h) Prohibited activities. A HA may not contract for assumption by 
the resident management corporation of the HA's underlying 
responsibilities to HUD under the ACC.
    (i) Bonding and insurance. Before assuming any management 
responsibility under its contract, the RMC must provide fidelity 
bonding and insurance, or equivalent protection that is adequate (as 
determined by HUD and the HA) to protect HUD and the HA against loss, 
theft, embezzlement, or fraudulent acts on the part of the resident 
management corporation or its employees.
    (j) Waiver of HUD requirements. Upon the joint request of a 
resident management corporation and the HA, HUD may waive any 
requirement that HUD has established and that is not required by law, 
if HUD determines, after consultation with the resident management 
corporation and the HA, that the requirement unnecessarily increases 
the costs to the project or restricts the income of the project; and 
that the waiver would be consistent with the management contract and 
any applicable collective bargaining agreement. Any waiver granted to a 
resident management corporation under this section will apply as well 
to the HA to the extent the waiver affects the HA's remaining 
responsibilities relating to the resident management corporation's 
project.
    (k) Monitoring of RMC performance. The HA must review periodically 
(but not less than annually) the management corporation's performance 
to ensure that it complies with all applicable requirements and meets 
agreed-upon standards of performance. (The method of review and 
criteria used to judge performance should be specified in the 
management contract.)


Sec. 964.230  Audit and administrative requirements.

    (a) TOP grant recipients. The HUD Inspector General, the 
Comptroller General of the United States, or any duly authorized 
representative shall have access to all records required to be retained 
by this subpart or by any agreement with HUD for the purpose of audit 
or other examinations.
    (1) Grant recipients must comply with the requirements of OMB 
Circulars A-110 and A-122, as applicable.
    (2) A final audit shall be required of the financial statements 
made pursuant to this subpart by a Certified Public Accountant (CPA), 
in accordance with generally accepted government audit standards. A 
written report of the audit must be forwarded to HUD within 60 days of 
issuance.
    (b) Resident management corporations. Resident management 
corporations who have entered into a contract with a HA with respect to 
management of a development(s) must comply with the requirements of OMB 
Circulars A-110 and A-122, as applicable. Resident management 
corporations managing a development(s) must be audited annually by a 
licensed certified public accountant, designated by the corporation, in 
accordance with generally accepted government audit standards. A 
written report of each audit must be forwarded to HUD and the HA within 
30 days of issuance. These requirements are in addition to any other 
Federal law or other requirement that would apply to the availability 
and audit of books and records of resident management corporations 
under this part.

Subpart D--Family Investment Centers (FIC) Program


Sec. 964.300  General.

    The Family Investment Centers Program provides families living in 
public housing with better access to educational and employment 
opportunities by:
    (a) Developing facilities in or near public housing for training 
and support services;
    (b) Mobilizing public and private resources to expand and improve 
the delivery of such services;
    (c) Providing funding for such essential training and support 
services that cannot otherwise be funded; and
    (d) Improving the capacity of management to assess the training and 
service needs of families, coordinate the provision of training and 
services that meet such needs, and ensure the long-term provision of 
such training and services. FIC provides funding to HAs to access 
educational, housing, or other social service programs to assist public 
housing residents toward self-sufficiency.


Sec. 964.305  Eligibility.

    (a) Public Housing Authorities. HAs may apply to establish one or 
more FICs for more than one public housing development.
    (b) FIC Activities. Activities that may be funded and carried out 
by eligible HAs, as defined in Sec. 964.305(a) and Sec. 964.310(a) may 
include:
    (1) The renovation, conversion, or combination of vacant dwelling 
units in a HA development to create common areas to accommodate the 
provision of supportive services;
    (2) The renovation of existing common areas in a HA development to 
accommodate the provision of supportive services;
    (3) The acquisition, construction or renovation of facilities 
located near the premises of one or more HA developments to accommodate 
the provision of supportive services;
    (4) The provision of not more than 15 percent of the total cost of 
supportive services (which may be provided directly to eligible 
residents by the HA or by contract or lease through other appropriate 
agencies or providers), but only if the HA demonstrates that:
    (i) The supportive services are appropriate to improve the access 
of eligible residents to employment and educational opportunities; and
    (ii) The HA has made diligent efforts to use or obtain other 
available resources to fund or provide such services; and
    (5) The employment of service coordinators.
    (c) Follow up. A HA must demonstrate a firm commitment of 
assistance from one or more sources ensuring that supportive services 
will be provided for not less than one year following the completion of 
activities.
    (d) Environmental Review. Any environmental impact regarding 
eligible activities will be addressed through an environmental review 
of that activity as required by 24 CFR part 50, including the 
applicable related laws and authorities under Sec. 50.4, to be 
completed by HUD, to ensure that any environmental impact will be 
addressed before assistance is provided to the HA. Grantees will be 
expected to adhere to all assurances applicable to environmental 
concerns.


Sec. 964.308  Supportive services requirements.

    HAs shall provide new or significantly expanded services essential 
to providing families in public housing with better access to 
educational and employment opportunities to achieve self-sufficiency 
and independence. HAs applying for funds to provide supportive services 
must demonstrate that the services will be provided at a higher level 
than currently provided. Supportive services may include:
    (a) Child care, of a type that provides sufficient hours of 
operation and serves appropriate ages as needed to facilitate parental 
access to education and job opportunities;
    (b) Employment training and counseling (e.g., job training, 
preparation and counseling, job development and placement, and follow-
up assistance after job placement);
    (c) Computer skills training;
    (d) Education (e.g., remedial education, literacy training, 
completion of secondary or post-secondary education, and assistance in 
the attainment of certificates of high school equivalency);
    (e) Business entrepreneurial training and counseling;
    (f) Transportation, as necessary to enable any participating family 
member to receive available services or to commute to his or her place 
of employment;
    (g) Personal welfare (e.g., substance/alcohol abuse treatment and 
counseling, self-development counseling, etc.);
    (h) Supportive Health Care Services (e.g., outreach and referral 
services); and
    (i) Any other services and resources, including case management, 
that are determined to be appropriate in assisting eligible residents.


Sec. 964.310  Audit/compliance requirements.

    HAs cannot have serious unaddressed, outstanding Inspector General 
audit findings or fair housing and equal opportunity monitoring review 
findings or Field Office management review findings. In addition, the 
HA must be in compliance with civil rights laws and equal opportunity 
requirements. A HA will be considered to be in compliance if:
    (a) As a result of formal administrative proceedings, there are no 
outstanding findings of noncompliance with civil rights laws unless the 
HA is operating in compliance with a HUD-approved compliance agreement 
designed to correct the area(s) of noncompliance;
    (b) There is no adjudication of a civil rights violation in a civil 
action brought against it by a private individual, unless the HA 
demonstrates that it is operating in compliance with a court order, or 
implementing a HUD-approved resident selection and assignment plan or 
compliance agreement, designed to correct the area(s) of noncompliance;
    (c) There is no deferral of Federal funding based upon civil rights 
violations;
    (d) HUD has not deferred application processing by HUD under Title 
VI of the Civil Rights Act of 1964, the Attorney General's Guidelines 
(28 CFR 50.3) and HUD's Title VI regulations (24 CFR 1.8) and 
procedures (HUD Handbook 8040.1) [HAs only] or under Section 504 of the 
Rehabilitation Act of 1973 and HUD regulations (24 CFR 8.57) [HAs and 
IHAs];
    (e) There is no pending civil rights suit brought against the HA by 
the Department of Justice; and
    (f) There is no unresolved charge of discrimination against the HA 
issued by the Secretary under Section 810(g) of the Fair Housing Act, 
as implemented by 24 CFR 103.400.


Sec. 964.315  HAs role in activities under this part.

    The HAs shall develop a process that assures that RC/RMC 
representatives and residents are fully briefed and have an opportunity 
to comment on the proposed content of the HA's application for funding. 
The HA shall give full and fair consideration to the comments and 
concerns of the residents. The process shall include:
    (a) Informing residents of the selected developments regarding the 
preparation of the application, and providing for residents to assist 
in the development of the application.
    (b) Once a draft application has been prepared, the HA shall make a 
copy available for reading in the management office; provide copies of 
the draft to any resident organization representing the residents of 
the development(s) involved; and provide adequate opportunity for 
comment by the residents of the development and their representative 
organizations prior to making the application final.
    (c) After HUD approval of a grant, notify the duly elected resident 
organization and if none exists, notify the residents of the 
development of the approval of the grant; provide notification of the 
availability of the HUD-approved implementation schedule in the 
management office for reading; and develop a system to facilitate a 
regular resident role in all aspects of program implementation.


Sec. 964.320  HUD Policy on training, employment, contracting and 
subcontracting of public housing residents.

    In accordance with Section 3 of the Housing and Urban Development 
Act of 1968 and the implementing regulations at 24 CFR part 135, HAs, 
their contractors and subcontractors shall make 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 Section 3 covered assistance (as 
this term is defined in 24 CFR 135.7) and to give Section 3 business 
concerns the contracting opportunities generated by Section 3 covered 
assistance. Training, employment and contracting opportunities 
connected with programs funded under the FIC and TOP are covered by 
Section 3.


Sec. 964.325  Notice of funding availability.

    A Notice of Funding Availability will be published periodically in 
the Federal Register containing the amounts of funds available, funding 
criteria, where to obtain and submit applications, the deadline for the 
submissions, and further explanation of the selection criteria.


Sec. 964.330  Grant set-aside assistance.

    The Department may make available five percent (5%) of any amounts 
available in each fiscal year (subsequent to the first funding cycle) 
available to eligible HAs to supplement grants previously awarded under 
this program. These supplemental grants would be awarded if the HA 
demonstrates that the funds cannot otherwise be obtained and are needed 
to maintain adequate levels of services to residents.


Sec. 964.335  Grant agreement.

    (a) General. HUD will enter into a grant agreement with the 
recipients of a Family Investment Centers grant which defines the legal 
framework for the relationship between HUD and a HA.
    (b) Term of grant agreement. A grant will be for a term of three to 
five years depending upon the tasks undertaken, as defined under this 
subpart.


Sec. 964.340  Resident compensation.

    Residents employed to provide services or renovation or conversion 
work funded under this program shall be paid at a rate not less than 
the highest of:
    (a) The minimum wage that would be applicable to the employees 
under the Fair Labor Standards Act of 1938 (FLSA), if section 6(a)(1) 
of the FLSA applied to the resident and if the resident were not exempt 
under section 13 of the FLSA;
    (b) The State or local minimum wage for the most nearly comparable 
covered employment; or
    (c) The prevailing rate of pay for persons employed in similar 
public occupations by the same employer.


Sec. 964.345  Treatment of income.

    Program participation shall begin on the first day the resident 
enters training or begins to receive services. Furthermore, the 
earnings of and benefits to any HA resident resulting from 
participation in the FIC program shall not be considered as income in 
computing the resident's total annual income that is used to determine 
the resident rental payment during:
    (a) The period that the resident participates in the program; and
    (b) The period that begins with the commencement of employment of 
the resident in the first job acquired by the resident after completion 
of the program that is not funded by assistance under the 1937 Act, and 
ends on the earlier of:
    (1) The date the resident ceases to continue employment without 
good cause; or
    (2) The expiration of the 18-month period beginning on the date of 
commencement of employment in the first job not funded by assistance 
under this program. (See Sec. 913.106, Annual Income.) This provision 
does not apply to residents participating in the Family Self-
Sufficiency Program who are utilizing the escrow account.


Sec. 964.350  Administrative requirements.

    The HUD Inspector General, the Comptroller General of the United 
States, or any duly authorized representative shall have access to all 
records required to be retained by this subpart or by any agreements 
with HUD for the purpose of audit or other examinations.
    (a) Each HA receiving a grant shall submit to HUD an annual 
progress report, participant evaluation and assessment data and other 
information, as needed, regarding the effectiveness of FIC in achieving 
self-sufficiency.
    (b) The policies, guidelines, and requirements of OMB Circular Nos. 
A-110 and A-122 are applicable with respect to the acceptance and use 
of assistance by private nonprofit organizations.

PART 990--ANNUAL CONTRIBUTIONS FOR OPERATING SUBSIDY

    9. The authority citation for part 990 continues to read as 
follows:

    Authority: 42 U.S.C. 1437g and 3535(d).

    10. In Sec. 990.108, new paragraphs (f) and (g) are added, to read 
as follows:


Sec. 990.108  Other costs.

* * * * *
    (f) Funding for Resident Council expenses. In accordance with the 
provisions of 24 CFR part 964 and procedures determined by HUD, each HA 
shall include in the operating subsidy eligibility calculation, $25 per 
unit per year (subject to appropriations) for each unit represented by 
a duly elected resident council in support of the duly elected resident 
council's activities. Of this amount, $15 per unit per year shall fund 
resident participation activities of the duly elected resident council 
and/or jurisdiction-wide councils, including but not limited to 
stipends. Ten dollars per unit per year shall fund HA costs incurred in 
carrying out resident participation activities.
    (g) Funding for Resident Council office space. If there is no 
community or rental space available, and HUD has approved the use of a 
vacant rental unit for Resident Council office space, the unit will be 
eligible for operating subsidy (subject to appropriations) at the rate 
of the AEL for the number of months the unit is devoted to such use.
* * * * *
    11. A new subpart D, consisting of Secs. 990.401 through 990.405, 
is added to read as follows:

Subpart D--Resident Management Corporations Operating Subsidy

Sec.
990.401  Calculation of operating subsidy.
990.402  Calculation of total income and preparation of operating 
budget.
990.403  Adjustments to total income.
990.404  Retention of excess revenues.
990.405  Use of retained revenues.

Subpart D--Resident Management Corporations Operating Subsidy


Sec. 990.401  Calculation of operating subsidy.

    Operating subsidy will be calculated separately for any project 
managed by a resident management corporation. This subsidy computation 
will be the same as the separate computation made for the balance of 
the projects in the PHA in accordance with this part, with the 
following exceptions:
    (a) The project managed by a resident management corporation will 
have an Allowable Expense Level based on the actual expenses for the 
project in the fiscal year immediately preceding management under this 
subpart. These expenditures will include the project's share of any 
expenses which are overhead or centralized HA expenditures. The 
expenses must represent a normal year's expenditures for the project, 
and must exclude all expenditures which are not normal fiscal year 
expenditures as to amount or as to the purpose for which expended. 
Documentation of this expense level must be presented with the project 
budget and approved by HUD. Any project expenditures funded from a 
source of income other than operating subsidies or income generated by 
the locally owned public housing program will be excluded from the 
subsidy calculation. For budget years after the first budget year under 
management by the resident management corporation, the Allowable 
Expense Level will be calculated as it is for all other projects in 
accordance with Sec. 990.105(e)(5).
    (b) The resident management corporation project will estimate 
dwelling rental income based on the rent roll of the project 
immediately preceding the assumption of management responsibility under 
this subpart, increased by the estimate of inflation of tenant income 
used in calculating PFS subsidy.
    (c) The resident management corporation will exclude, from its 
estimate of other income, any increased income directly generated by 
activities by the corporation or facilities operated by the 
corporation.
    (d) Any reduction in the subsidy of a HA that occurs as a result of 
fraud, waste, or mismanagement by the HA shall not affect the subsidy 
calculation for the resident management corporation project.


Sec. 990.402  Calculation of total income and preparation of operating 
budget.

    (a) Subject to Sec. 990.403, the amount of funds provided by a HA 
to a project managed by a resident management corporation under this 
subpart may not be reduced during the three-year period beginning on 
February 5, 1988 or on such later date as a resident management 
corporation first assumes management responsibility for the project.
    (b) For purposes of determining the amount of funds provided to a 
project under Sec. 990.402(a) of this section, the provision of 
technical assistance by the HA to the resident management corporation 
will not be included.
    (c) The resident management corporation and the HA must submit a 
separate operating budget, including the calculation of operating 
subsidy eligibility in accordance with Sec. 990.401, for the project 
managed by a resident management corporation to HUD for approval. This 
budget will reflect all project expenditures and will identify which 
expenditures are related to the responsibilities of the resident 
management corporation and which are related to the functions which 
will continue to be performed by the HA.
    (d) Each project or part of a project that is operating in 
accordance with the ACC amendment relating to this subpart and in 
accordance with a contract vesting maintenance responsibilities in the 
resident management corporation will have transferred, into a sub-
account of the operating reserve of the host HA, an operating reserve. 
Where all maintenance responsibilities for the resident-managed project 
are the responsibility of the corporation, the amount of the reserve 
made available to projects under this subpart will be the per unit cost 
amount available to the HA operating reserve, exclusive of all 
inventories, prepaids and receivables (at the end of the HA fiscal year 
preceding implementation), multiplied by the number of units in the 
project operated in accordance with the provisions of this subpart. 
Where some, but not all, maintenance responsibilities are vested in the 
resident management corporation, the contract may provide for an 
appropriately reduced portion of the operating reserve to be 
transferred into the corporation's sub-account.
    (e) The use of the reserve will be subject to all administrative 
procedures applicable to the conventionally owned public housing 
program. Any expenditure of funds from the reserve will be for eligible 
expenditures which are incorporated into an operating budget subject to 
approval by HUD.
    (f) Investment of funds held in the reserve will be in accordance 
with the provisions of Chapter 4 of the Financial Management Handbook, 
7476.1 REV.1 and interest generated will be included in the calculation 
of operating subsidy in accordance with this part.


Sec. 990.403  Adjustments to total income.

    (a) Operating subsidy calculated in accordance with Sec. 964.401 of 
this chapter will reflect changes in inflation, utility rates and 
consumption, and changes in the number of units in the resident 
management project.
    (b) In addition to the amount of income derived from the project 
(from sources such as rents and charges) and the operating subsidy 
calculated in accordance with Sec. 990.401 of this subpart, the 
contract may specify that income be provided to the project from other 
sources of income of the HA.
    (c) The following conditions may not affect the amounts to be 
provided to a project managed by a resident management corporation 
under this subpart:
    (1) Any reduction in the total income of a HA that occurs as a 
result of fraud, waste, or mismanagement by the HA.
    (2) Any change in the total income of a HA that occurs as a result 
of project-specific characteristics that are not shared by the project 
managed by the corporation under this subpart.


Sec. 990.404  Retention of excess revenues.

    (a) Any income generated by a resident management corporation that 
exceeds the income estimated for the income category involved as 
specified in the RMC's management contract must be excluded in 
subsequent years in calculating:
    (1) The operating subsidy provided to a HA under part 990, subpart 
A.
    (2) The funds provided by the HA to the resident management 
corporation.
    (b) The management contract must specify the amount of income 
expected to be derived from the project (from sources such as rents and 
charges) and the amount of income to be provided to the project from 
the other sources of income of the HA (such as operating subsidy under 
part 990, subpart A, interest income, administrative fees, and rents). 
These income estimates must be calculated consistent with HUD's 
administrative instructions. Income estimates may provide for proration 
of anticipated project income between the corporation and the PHA, 
based upon the management and other project-associated responsibilities 
(if any) that are to be retained by the PHA under the contract.


Sec. 990.405  Use of retained revenues.

    Any revenues retained by a resident management corporation under 
Sec. 990.404 of this subpart may only be used for purposes of improving 
the maintenance and operation of the project, establishing businesses 
enterprises that employ residents of public housing, or acquiring 
additional dwelling units for lower income families. Units acquired by 
the resident management corporation will not be eligible for payment of 
operating subsidy.

    Dated: August 18, 1994.
Joseph Shuldiner,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 94-20655 Filed 8-23-94; 8:45 am]
BILLING CODE 4210-33-P