[Federal Register Volume 59, Number 230 (Thursday, December 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29555]


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[Federal Register: December 1, 1994]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Administration For Children and Families

45 CFR Part 1309

RIN 0970-AB31

 

Head Start Program

AGENCY: Administration on Children, Youth and Families (ACYF), 
Administration for Children and Families (ACF).

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Administration on Children, Youth and Families is issuing 
this Notice of Proposed Rulemaking to implement a new statutory 
provision that authorizes Head Start grantees to use grant funds to 
purchase facilities in which to operate Head Start programs.

DATES: In order to be considered, comments on this proposed rule must 
be received on or before January 30, 1995.

ADDRESSES: Please address comments to the Associate Commissioner, Head 
Start Bureau, Administration for Children, Youth and Families, P.O. Box 
1182, Washington, D.C. 20013. Beginning 14 days after close of the 
comment period, comments will be available for public inspection in 
Room 2219, 330 C Street S.W., Washington, D.C. 20201, Monday through 
Friday between the hours of 9 a.m. and 4 p.m.

FOR FURTHER INFORMATION CONTACT:
Douglas Klafehn, Deputy Associate Commissioner, Head Start Bureau, 
Administration for Children, Youth and Families, P.O. Box 1182, 
Washington, D.C. 20013; (202) 205-8569.

SUPPLEMENTARY INFORMATION:

I. Program Purpose

    Head Start is authorized under the Head Start Act (42 U.S.C. 9801 
et seq.). It is a national program providing comprehensive 
developmental services primarily to low-income preschool children, age 
three to the age of compulsory school attendance, and their families. 
To help enrolled children achieve their full potential, Head Start 
programs provide comprehensive health, nutritional, educational, social 
and other services. Additionally, Head Start programs are required to 
provide for the direct participation of the parents of enrolled 
children in the development, conduct, and direction of local programs. 
Parents also receive training and education to foster their 
understanding of and involvement in the development of their children. 
In fiscal year 1993, Head Start served 720,000 children through a 
network of almost 2,000 grantees and delegate agencies.
    While Head Start is intended to serve primarily children whose 
families have incomes at or below the poverty line, or who receive 
public assistance, Head Start policy permits up to 10 percent of the 
children in local programs to be from families who do not meet these 
low-income criteria. The Act also requires that a minimum of 10 percent 
of the enrollment opportunities in each program be made available to 
children with disabilities. Such children are expected to participate 
in the full range of Head Start services and activities with their non-
disabled peers and to receive needed special education and related 
services.

II. Summary of the Proposed Regulation

    The authority for this Notice of Proposed Rulemaking (NPRM) is 
section 644(f) of the Head Start Act (42 U.S.C. 9839). Paragraph (f) 
was added by Public Law 102-401, the Head Start Improvement Act of 
1992. It directs the Secretary to establish uniform procedures for Head 
Start agencies to request approval to purchase facilities and 
authorizes grantees to apply for grant funds to purchase facilities to 
carry out Head Start programs. Additional authority is found in section 
644(c) of the Head Start Act, which mandates the Secretary to prescribe 
rules or regulations to supplement section 644(f). The ability of 
grantees to purchase facilities as discussed in this NPRM is subject to 
the availability of funds.
    The Act specifies that grantees applying to use grant funds to 
purchase facilities must submit an application which contains the 
following information: (1) A description of the site of the facility 
proposed to be purchased; (2) the plans and specifications of such 
facility; (3) information demonstrating that the proposed purchase will 
result in savings when compared to the costs that would be incurred to 
acquire the use of an alternative facility to carry out such program, 
or that the lack of alternative facilities will prevent the operation 
of the program; and (4) such other information and assurances as the 
Secretary may require.
    Since the passage of Public Law 102-401, section 644(f) of the Head 
Start Act was amended further by Public Law 103-218, the ``Technology-
Related Assistance for Individuals with Disabilities Amendment of 
1993''. This amendment provides that grantees may request approval of 
previously purchased facilities for use for Head Start programs. In 
accordance with the amendment, requests for retroactive approval can be 
for facilities purchased after December 31, 1986. In order to obtain 
approval, the grantee will be required to submit an application that 
provides the same information as prospective applicants.
    On May 18, 1994, the President signed into law the Human Services 
Amendments of 1994 (Pub. L. 103-252) which, among other actions, 
reauthorized the Head Start Act for fiscal years 1995 through 1998. 
This statute amended section 644(g) to the Head Start Act to allow the 
Secretary, under certain circumstances, to authorize the use of Head 
Start grant funds for the construction of Head Start facilities. The 
statute requires the Secretary to establish uniform procedures for Head 
Start agencies to follow in requesting approval to use Federal funds in 
such a manner. This NPRM does not include those procedures, since the 
statutory change occurred too close to the date of publication of this 
NPRM to allow their development. The construction procedures will be 
promulgated in a subsequent NPRM.
    The proposed rule:
     Specifies what information must be included in the written 
application grantees must submit to request to use grant funds to 
purchase a facility, including what must be included in the cost 
comparison which grantees must submit as part of their application;
     Requires certain measures to be taken to protect the 
Federal interest in real property purchased in whole or in part with 
grant funds;
     Requires that grantees which acquire facilities with grant 
funds obtain specified types of insurance and maintain the property 
acquired in a manner consistent with the purpose for which funds were 
provided and in compliance with applicable building codes and 
standards; and
     Includes within the definition of ``facility'' modular 
units, and requires grantees which seek funding to purchase a modular 
unit to comply with these regulations, which include provisions 
applicable only to the purchase of modular units.

III. Section by Section Discussion of the NPRM

Section 1309.2--Approval of Previously Purchased Facilities

    In Sec. 1309.2, we propose to require Head Start grantees that want 
to request retroactive approval for facilities purchased after December 
31, 1986 and before October 7, 1992 (effective date of earlier Head 
Start amendment to section 644(f) of the Head Start Act in Pub. L. 102-
401), to submit an application that conforms to the requirements of 
part 1309 and the Head Start Act.

Section 1309.3--Definitions

    Section 1309.2 provides definitions of the terms used in the 
proposed rule. Key words and phrases defined include ``facility'' 
(defined as real property or a modular unit appropriate for use by a 
grantee to carry out a Head Start program); ``purchase'' a facility 
(defined to mean buy an existing facility, either outright or through a 
mortgage); ``modular unit'' (defined as a prefabricated portable 
structure moved to a site for use by a Head Start grantee to carry out 
a Head Start program); and ``alternative facility'' (the facility with 
which the cost comparison required as part of the application is made).

Section 1309.10--Application

    This section specifies the information which grantees must provide 
in applications to use grant funds to purchase facilities. In addition 
to the statutory requirements (see section 644(f)(2) (A) through (D) of 
the Head Start Act) we propose that the grantee provide information on 
how the purchase of the facility will affect program operations in a 
number of important areas, information on renovations necessary to make 
the facility suitable for use as a Head Start program, and assurances 
of compliance with several relevant Federal statutes. We propose these 
additional requirements because the purchase of a facility will have 
implications, both fiscal and programmatic, across a large number of 
areas of concern to ACF and the grantee. The process of developing the 
application will require the grantee to think about and address the 
myriad consequences of such a significant undertaking, and the 
information required by this section will give ACF the data needed to 
thoroughly evaluate the application.
    Section 1309.10 provides that grantees must state the intended uses 
of the facility, provide assurance that the facility complies with 
licensing and code requirements and the access requirements of the 
Americans with Disabilities Act, if applicable, and section 504 of the 
Rehabilitation Act of 1973, state what renovations must be made to the 
building proposed to be purchased, and include statements on the effect 
that purchase of a facility would have on non-Federal share 
requirements, the 15 percent limitation on administrative costs, and 
the grantee's ability to collaborate with other child care, social 
services and health providers.
    Section 1309.10(g), which requires grantees claiming that a lack of 
alternative facilities would prevent operation of the program to state 
how it determined that there is a lack of alternative facilities, is 
necessary to implement section 644(f)(2)(C)(ii) of the Head Start Act. 
A showing by the grantee that the lack of alternative facilities will 
prevent operation of the program is one of the two statutory bases for 
approving a grantee's application to purchase a facility. The statement 
required by Sec. 1309.10(g) should be supported, whenever possible, by 
a letter from a licensed real estate professional in the grantee's 
service area.
    The engineer who provides the certification required under 
Sec. 1309.10(j) should refer to the Head Start Performance Standard on 
facilities' safety (45 CFR 1304.2-3(a)), which provides minimum 
physical requirements for Head Start facilities.
    With respect to the limitation on administrative costs, 
Sec. 1309.10(k) exempts one-time fees and expenses necessary to the 
purchase, such as the down payment, renovation expenses, and attorney, 
engineer, and appraiser fees, from the administrative cost limitation. 
This puts into effect a 1992 amendment to the Head Start Act which 
added the phrase ``exempt as provided in subsection (f)'' to the 
beginning of section 644(b) of the Act. We interpret the addition of 
this phrase as indicating Congress' desire that the administrative cost 
limitation not operate to bar the purchase of facilities by grantees 
which would otherwise qualify to use grant funds to purchase a facility 
under section 644(f) of the Act. Expenses related to the facility which 
arise after the purchase, such as mortgage payments and maintenance 
costs, may be subject to the 15 percent limitation on administrative 
costs found in the Act and implemented in 45 CFR part 1301. A 
determination of whether these expenses are classifiable as 
administration or program costs will depend on the facts of the 
particular situation and the rules laid out in part 1301.
    Section 1309.10(n) provides that applicants must include in their 
application an assessment of the environmental impact of the proposed 
acquisition on the human environment if it involves significant 
renovation or a significant change in land use, including substantial 
increases in traffic in the surrounding area due to the provision of 
Head Start transportation services. ACF's view is that there are 
incidental changes in land use which by their nature have no 
environmental impact and applicants should not be required to provide 
information in response to paragraph (n) in such situations. Applicants 
with questions about whether a particular effect is significant enough 
to trigger the requirement in this provision should consult ACF staff.

Section 1309.11--Cost Comparison

    Section 1309.11 details what grantees must include in the cost 
comparison part of the application. The cost comparison requires that 
the grantee submit a detailed estimate of the cost of the proposed 
facility and the cost of obtaining an alternative facility in the 
grantee's service area. All costs of purchase, including any renovation 
costs that would be necessary, must be identified, and one-time and 
ongoing costs must be separately delineated.
    The cost comparison will generally be made between the grantee's 
current facility and the facility the grantee proposes to purchase. If, 
however, the grantee has an existing facility but it is shown to the 
satisfaction of the responsible HHS official that the facility is 
inadequate to ensure the operation of a program in full compliance with 
the Head Start Performance Standards (see 45 CFR part 1304 and related 
guidance), then the cost of the proposed facility may be compared to 
the cost of an available, appropriate facility of comparable size for 
rent in the grantee's community. Without this provision grantees which 
have the use of inadequate but inexpensive (or free) facilities would 
never be able to show that they can achieve the required cost savings 
by purchasing a facility. For example, a program may be housed in a 
church basement for which the grantee pays little or no rent. The 
program must take down and put away all of its equipment every Friday 
and reassemble the equipment every Monday because the church uses the 
same space for its own needs on the weekend. In addition, the basement 
is poorly ventilated and too small for the program's needs. The 
grantee's current space costs are so low, however, that it would not be 
able to demonstrate the cost savings required by the statute if it were 
required to compare its current rent to the cost of the facility it 
proposes to purchase. In this case the grantee, upon showing to the 
satisfaction of the responsible HHS official the inadequacy of its 
current facility, may compare the cost of the proposed facility to the 
cost of rental space in the community which would be suitable for use 
as a Head Start facility.
    In the cast of a request for approval of a previously purchased 
facility, the grantee must compare the cost of the facility (including 
any renovations made since the purchase) to the cost of rental of an 
alternative facility.
    If the grantee has no facility (for example, in the cast of a 
grantee whose lease has expired) or if the grantee will operate its 
current facility after it purchases the new facility, then the 
comparison is between the proposed facility and an available, 
appropriate facility of comparable size for rent in the grantee's 
community. Substantiation of the availability and cost of appropriate 
rental properties in the grantee's service area will normally require a 
letter or other documentation from a local real estate professional.
    For facilities other than modular units, the period of the cost 
comparison is twenty years. We have chosen this period to insure 
simplicity and consistency in the preparation and review of this very 
important part of the application. In deciding on twenty years as the 
period of comparison we have taken into consideration a number of 
factors, realizing that the circumstances of every application will be 
different. These factors include the expected useful life of the 
facilities which will be purchased, the indeterminate nature of the 
Head Start grant itself, and the period of the loan most grantees will 
need to purchase a facility. The cost comparison should be based on 
present conditions and be expressed in constant dollars, without taking 
inflation into account.
    The period of cost comparison for modular units is ten years. We 
chose a shorter time period for modular units because the span of use 
for such units is generally less than for a non-modular unit facility.
    Section 1309.11(f) deals with situations in which the proposed 
facility is to be used for purposes in addition to the operation of the 
Head Start program. Shared ownership of facilities purchased with grant 
funds is prohibited but a grantee may charge for the use of a facility 
that is not needed for its operation of the Head Start program. Such 
charge for use of the facility must conform with the Office of 
Management and Budget Cost Principles.

Section 1309.20--Title

    The requirement found in Sec. 1309.20 is derived from existing 
regulations applicable to grantee purchases of real property. These are 
found in 45 CFR 74.133 and 92.31. In jurisdictions in which title to 
mortgaged property passes to the mortgage lender, the possession by the 
grantee of equitable title satisfies this section.

Section 1309.21--Recording of Federal Interest and Other Protection of 
Federal Interest

    The requirements of 45 CFR 74.134 and 92.31 on use and disposition 
of property, transfer of title, and determination of the Federal share 
of property at disposition apply to grantees using Head Start funds to 
purchase facilities. The provisions of this section supplement those 
provisions.
    The Federal government has an interest in property purchased with 
Head Start grant funds. The purpose of the requirements of this 
section, which include the requirement that grantees which purchase 
real property with grant funds file a notice of Federal interest in 
appropriate local records, is to safeguard the Federal interest in the 
property in the event that the grantee seeks to sell, lease, or 
encumber the property. The provisions of Sec. 1309.21(a), as a rule, 
would not apply to modular units which are attached to land owned by 
someone other than the grantee.
    The provisions of Sec. 1309.21(e), on notification of a default on 
the part of a grantee under a mortgage, covers both real property 
mortgages an chattel mortgages that may be obtained for the purchase of 
modular units. It sets forth provisions for protection of Federal 
interests that the mortgage agreement and the security agreement, 
whichever is applicable, must contain.

Section 1309.22--Insurance, Bonding and Maintenance

    This section, like the previous section, has as its purpose 
protection of the Federal interest in real property purchased in whole 
or in part with grant funds. The requirement that grantees which 
purchase real property obtain title and hazard insurance, and also 
maintain the property in a manner consistent with the purposes for 
which it was purchased, is reasonable and necessary to protect the 
Federal interest.

Section 1309.30--Modular Units--General

    Modular units are considered as facilities for the purpose of this 
regulation, and the purchase of a modular unit is subject to all the 
requirements of this Part. In several instances, however, the rules 
which apply to the purchase of facilities generally would not be 
appropriate to the purchase of modular units. Sections 1309.31, 
1309.32, 1309.33, and 1309.34 contain provisions applicable to the 
special circumstances of modular unit purchases.

Section 1309.31--Site Description

    The requirements of this section are in addition to the 
requirements for the site description information in Sec. 1309.10(b) of 
this part. This section requires an application for the purchase of a 
modular unit to state where the modular unit will be installed and 
whether the land on which the unit will be placed must be purchased by 
the grantee. A grantee proposing to purchase a modular unit may or may 
not own land on which to install the unit. If the grantee does not own 
the land, the application must state who owns the land, and whether an 
easement, right-of-way or rental of land is necessary to provide access 
to the modular unit.

Section 1309.32--Statement of Procurement Procedure

    In the case of the proposed purchase of a modular unit the Regional 
Office will not be able to rely on an appraisal of the property to 
satisfy itself that the purchase price of the property is fair and 
reasonable. This section requires a grantee proposing to purchase a 
modular unit to include in its application a statement describing the 
procurement procedures which will be used to purchase the modular unit, 
including the specifications to be used in making the procurement and 
assurance that the requirements in 45 CFR parts 74 and 92 have been 
met. This information will be the basis for ACF's evaluation that the 
purchase price of the modular unit is fair and reasonable.

Section 1309.33--Inspection

    Modular unit installations, unlike conventional buildings, cannot 
be adequately inspected before the purchase of the unit, because the 
unit is not moved to the site and installed until after purchase. 
Therefore, the pre-purchase inspection by a licensed engineer called 
for in Sec. 1309.10(j) cannot apply to the purchase of a modular unit. 
This section adapts the need for an inspection to the circumstances of 
a modular unit purchase by requiring an engineer's inspection within 15 
calendar days of the unit's installation and submission of the 
engineer's inspection report to HHS within 30 days of the inspection.

Section 1309.34--Costs of Installation of Modular Unit

    This section makes clear that all necessary and reasonable costs 
incurred by the grantee in connection with the installation of a 
modular unit are payable with grant funds.

Section 1309.40--Copies of Documents

    The requirement of this section that certified copies of specified 
legal documents related to the purchase of real property or the 
discharge of any debt secured by the real property be submitted to ACF 
is intended to provide the information necessary to maintain adequate 
records of the real property purchased by Head Start grantees in which 
the Federal government has an interest.

Section 1309.41--Record Retention

    The requirement that records pertinent to the purchase and debt be 
retained by the grantee for the period of its ownership plus three 
years is based on 45 CFR parts 74 and 92.

Section 1309.42--Audit of Mortgage; Five Year Appraisal

    This section includes provisions intended to provide information 
which the Federal Government will need to keep current its records on 
real property in which it has an interest.

Section 1309.43--Use of Grant Funds to Pay Fees

    This section authorizes the use of grant funds to pay the 
professional fees and related costs necessary to the purchase of real 
property, with the prior, written approval of the responsible HHS 
official.

Section 1309.44--Program Income

    This section, which requires that program income derived from 
facilities purchased with grant funds be deducted from the total 
allowable costs of the budget period in which it was produced, is based 
on 45 CFR 74.42(b) and (c) and 45 CFR 92.25(g).

Section 1309.45--Independent Analysis

    This section proposes to allow the responsible HHS official the 
option of obtaining an independent professional analysis of the cost 
comparison submitted by a grantee pursuant to Sec. 1309.11 and the 
statement under Sec. 1309.10(g) that a lack of facilities will prevent 
operation of the program.

IV. Impact Analysis

Executive Order 12866

    Executive Order 12866 requires that regulations be drafted to 
ensure that they are consistent with the priorities and principles set 
forth in the Executive Order. The Department has determined that this 
rule is consistent with these priorities and principles. This Notice of 
Proposed Rulemaking implements the statutory authority for Head Start 
grantees to apply to use grant funds to purchase facilities. Congress 
made no additional appropriation to fund this new authority, however, 
and so any money spent toward the purchase of facilities for Head Start 
programs is money that would have been spent otherwise by the program 
or other programs from the same appropriation amount.

Regulatory Flexibility Act of 1980

    The Regulatory Flexibility Act (5 U.S.C. CH. 6) requires the 
Federal government to anticipate and reduce the impact of rules and 
paperwork requirements on small businesses. For each rule with a 
``significant economic impact on a substantial number of small 
entities'' an analysis must be prepared describing the rule's impact on 
small entities. Small entities are defined by the Act to include small 
businesses, small non-profit organizations and small governmental 
entities. While these regulations would affect small entities, they 
would not affect a substantial number. For this reason, the Secretary 
certifies that this rule will not have a significant impact on 
substantial numbers of small entities.

Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1980, Public Law 96-511, all 
Departments are required to submit to the Office of Management and 
Budget (OMB) for review and approval any reporting or record-keeping 
requirement inherent in a proposed or final rule. This NPRM contains 
information collection and record-keeping requirements in 
Secs. 1309.10, 1309.40 and 1309.41 which will be submitted to OMB for 
review and approval in accordance with section 3504(h) of the Paperwork 
Reduction Act.
    Organizations and individuals desiring to submit comments on the 
information collection and recordkeeping requirements should direct 
them to the agency official designated for this purpose, whose name 
appears in this preamble, and to the Office of Information and 
Regulatory Affairs, OMB, New Executive Office Building (Room 3002), 
Washington, DC 20503, Attention: Desk Officer ACF/HHS.

List of Subjects in 45 CFR Part 1309

    Acquisition, Facilities purchase, Head start, Real property.

(Catalog of Federal Domestic Assistance Program Number 93.600, 
Project Head Start)

    Dated: May 10, 1994.
Mary Jo Bane,
Assistant Secretary for Children and Families.

    Approved: August 19, 1994.
Donna E. Shalala,
Secretary.

    For the reasons set forth in the Preamble, 45 CFR chapter XIII is 
proposed to be amended by adding part 1309 as follows:

PART 1309--HEAD START FACILITIES PURCHASE

Subpart A--General

Sec.
1309.1  Purpose and application.
1309.2  Approval of previously purchased facilities.
1309.3  Definitions.

Subpart B--Application Procedures

1309.10  Application.
1309.11  Cost comparison.

Subpart C--Protection of Federal Interest

1309.20  Title.
1309.21  Recording of Federal interest and other protection of 
Federal interest.
1309.22  Insurance, bonding, and maintenance.

Subpart D--Modular Units

1309.30  General.
1309.31  Site description.
1309.32  Statement of procurement procedure.
1309.33  Inspection.
1309.34  Costs of installation of modular unit.

Subpart E--Other Administrative Provisions

1309.40  Copies of documents.
1309.41  Record retention.
1309.42  Audit of mortgage; Five year appraisal.
1309.43  Use of grant funds to pay fees.
1309.44  Program income.
1309.45  Independent analysis.

    Authority: 42 U.S.C. 9801 et seq.

Subpart A--General


Sec. 1309.1  Purpose and application.

    This part prescribes regulations implementing section 644(f) of the 
Head Start Act, 42 U.S.C. 9801 et seq., as it applies to grantees 
operating Head Start programs under the Act. It prescribes the 
procedures for applying for Head Start grant funds to purchase 
facilities in which to operate Head Start programs, and the conditions 
under which grant funds may be awarded to purchase facilities. It also 
specifies the measures which must be taken to protect the Federal 
interest in real property purchased with Head Start grant funds.


Sec. 1309.2  Approval of previously purchased facilities.

    Head Start grantees which purchased facilities after December 31, 
1986, and before October 7, 1992, may request retroactive approval of 
the purchase by submitting an application which conforms to the 
requirements of this part and the Act. Grant funds may be used only to 
pay facility purchase costs incurred after the responsible HHS official 
grants an application for approval of a previously purchased facility.


Sec. 1309.3  Definitions.

    As used in this part,
    ACF means the Administration for Children and Families in the 
Department of Health and Human Services, and includes the Regional 
Offices.
    Acquired with grant funds means purchased in whole or in part with 
Head Start grant funds and refers to payments made with grant funds in 
satisfaction of a mortgage agreement (both principal and interest), as 
a down payment, for professional fees, for closing costs, and for any 
other costs associated with the purchase of the property that are usual 
and customary for the locality.
    Act means the Head Start Act, 42 U.S.C. section 9801, et seq.
    ACYF means the Administration on Children, Youth and Families in 
the Department of Health and Human Services.
    Alternative facility means the facility with which the grantee must 
make the cost comparison required in the application.
    Facility means real property or a modular unit appropriate for use 
by a Head Start grantee to carry out a Head Start program.
    Grant funds means Federal financial assistance received by a 
grantee from ACF to administer a Head Start program pursuant to the 
Head Start Act.
    Grantee means the local public or private non-profit agency which 
has been designated as a Head Start agency under 42 U.S.C. 9836 and 
which has been granted financial assistance by the responsible HHS 
official to operate a Head Start program.
    Modular Unit means a prefabricated portable structure moved to a 
site for use by a Head Start grantee to carry out a Head Start program.
    Purchase a facility means buy an existing facility, either outright 
or through a mortgage.
    Real Property means land, including land improvements, structures 
and appurtenances thereto, excluding movable machinery and equipment.
    Responsible HHS official means the official who is authorized to 
make the grant of financial assistance to operate a Head Start program, 
or such official's designee.
    Useful life means the period during which a facility is capable of 
being used as a Head Start facility.

Subpart B--Application Procedures


Sec. 1309.10  Application.

    A grantee which proposes to use grant funds to acquire a facility 
or requests approval of the previous purchase of a facility must submit 
a written application to the application to the responsible HHS 
official. The application must include the following information:
    (a) A legal description of the site of the proposed or previously 
purchased facility, and an explanation of the appropriateness of the 
location to the grantee's service area, including a statement of the 
effect that purchase of the facility has had and will have on the 
transportation of children to the program, on the grantee's ability to 
collaborate with other child care, social services and health 
providers, and on all other program activities and services.
    (b) Plans and specifications of the proposed or previously 
purchased facility, including information on the size and type of 
structure, the number and a description of the rooms, and the lot on 
which the building is located (including the space available for a 
playground and for parking).
    (c) The cost comparison described in Sec. 1309.11.
    (d) If renovations are necessary to make the proposed facility 
suitable for use to carry out the Head Start program, a description of 
the renovations, and the plans and specifications required by paragraph 
(b) of this section for the facility as it will be after renovations 
are complete.
    (e) The intended uses of the proposed or previously purchased 
facility, including information demonstrating that the facility will be 
used principally as a Head Start center, or a direct support facility 
for a Head Start program. (A Head Start center, or a direct support 
facility for a Head Start program means a facility used for direct Head 
Start services to children and their families, or administrative or 
other activities necessary to the conduct of the Head Start program.) 
If the facility is to be used for purposes other than the operation of 
the Head Start program, the grantee must state what portion of the 
facility is to be used for such other purposes.
    (f) Assurance that the facility complies (or will comply after 
completion of the renovations described in paragraph (d) of this 
section) with local licensing and code requirements, the access 
requirements of the Americans with Disabilities Act (ADA), if 
applicable, and section 504 of the Rehabilitation Act of 1973. The 
grantee also will assure that it has met the requirements of the Flood 
Disaster Protection Act of 1973, if applicable.
    (g) If the grantee is claiming that the lack of alternative 
facilities will prevent or would have prevented operation of the 
program, a statement of how it was determined that there is or was a 
lack of alternative facilities. If a grantee requesting approval of the 
previous purchase of a facility is unable to provide such a statement 
based on circumstances which existed at the time of the purchase, the 
grantee may use present conditions as a basis for making the 
determination.
    (h) The terms of any proposed or existing loan(s) related to the 
purchase of the facility and the repayment plans.
    (i) A statement of the effect that the purchase of the facility or 
the approval of a previous purchase of a facility would have on the 
grantee's meeting of the non-Federal share requirement of section 
640(b) of the Head Start Act, including whether the grantee is seeking 
a waiver of its non-Federal share obligation under that section of the 
Act.
    (j) Certification by a licensed engineer that the building is 
structurally sound and safe for use as a Head Start facility. If 
renovations are necessary to make the facility suitable for use to 
carry out a Head Start program, the application must include a 
certification by a licensed engineer as to the cost and technical 
appropriateness of the proposed renovation.
    (k) A statement of the effect that the purchase of a facility or 
the approval of a purchase of a facility would have on the grantee's 
ability to meet the limitation on development and administrative costs 
of section 644(b) of the Head Start Act. One-time fees and expenses 
necessary to the purchase, such as the down payment, the cost of 
necessary renovation, and fees paid to attorneys, engineers, and 
appraisers, are not subject to the limitation on administrative costs.
    (l) A proposed schedule for acquisition, renovation and occupancy 
of the facility.
    (m) Reasonable assurances that the applicant will obtain or has 
obtained, in the case of an application for the approval of a previous 
purchase of a facility, a fee simple or such other estate or interest 
in the site sufficient to assure undisturbed use and possession for the 
purpose of operating the Head Start program for the useful life of the 
facility. If the grantee proposes to purchase or has previously 
purchased a facility without also purchasing the land on which the 
facility is situated, the application must describe the easement, right 
of way or land rental it will obtain or has obtained to allow it 
sufficient access to the facility.
    (n) An assessment of the impact of the proposed acquisition on the 
human environment if it involves significant renovation or a 
significant change in land use, including substantial increases in 
traffic in the surrounding area due to the provision of Head Start 
transportation services, pursuant to section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C) and its 
implementing regulations (40 CFR parts 1500-1508), and such information 
as may be necessary to comply with the National Historic Preservation 
Act of 1966 (16 U.S.C. 470f).
    (o) Assurance that the grantee will comply with the requirements of 
the Uniform Relocation Assistance and Real Property Acquisition 
Policies Act of 1970, as amended (42 U.S.C. 4601 et seq. and 45 CFR 
part 15), and information about the costs that may be incurred due to 
compliance with this Act.
    (p) A statement of the share of the cost of purchase that will be 
paid with grant funds.
    (q) For a grantee seeking approval of a previous purchase, a 
statement of the extent to which it has attempted to comply and will be 
able to comply with the provisions of Sec. 1309.21(e) of this part.


Sec. 1309.11  Cost comparison.

    (a) A grantee proposing to purchase with grant funds or to receive 
approval for a previous purchase of a facility must submit a detailed 
estimate of the cost of the proposed facility and any necessary 
renovations, or the cost of the previously purchased facility and any 
necessary renovations, and must compare the cost of purchasing the 
proposed facility or the cost of the previously purchased facility to 
the cost of rental of an alternative facility.
    (b) All costs of purchase and ownership must be identified, 
including, but not limited to, professional fees, renovation costs, 
moving expenses, additional transportation costs, maintenance, taxes, 
insurance, and easements, rights of way or land rentals. An independent 
appraisal of the current value of the facility proposed to be purchased 
or previously purchased, made by a professional appraiser, must be 
included.
    (c) The comparison described in paragraph (a) of this section must 
compare the cost of the proposed facility to the cost of the facility 
currently used by the grantee (if one exists), except where it is shown 
to the satisfaction of the responsible HHS official that the grantee's 
existing facility is inadequate. If the grantee's current facility is 
deemed to have been inadequate by the responsible HHS official, or if 
the grantee has no current facility, or if the grantee intends to 
continue to use its current facility after it purchases the new 
facility, the alternative facility shall be a facility (or facilities) 
of comparable size, suitable for use as a Head Start facility (or which 
can be made suitable through renovation, the cost of which shall be 
included in the cost comparison), available for rent in the grantee's 
service area. In the case of an application for approval of the 
previous purchase of a facility, the cost of the present facility must 
be compared to the cost of the facility used by the grantee before 
purchase of its current facility. If the facility used by the grantee 
before the purchase of its present facility was deemed inadequate by 
the responsible HHS official, or if the grantee had no previous 
facility, of if the grantee continued to use its previous facility 
after it purchased the current facility, the alternative facility shall 
be an available, appropriate facility (or facilities) of comparable 
size that was available for rent in the grantee's service area at the 
time of its purchase of the current facility.
    (d) The grantee must separately delineate the following expenses in 
the application:
    (1) One-time costs, including, but not limited to, the down 
payment, professional fees, moving expenses, the cost of site 
preparation and installation of a modular unit, and the costs of 
necessary renovations; and
    (2) Ongoing costs, including, but not limited to, mortgage 
payments, insurance premiums, maintenance costs, and property taxes. If 
the grantee is exempt from the payment of property taxes, this fact 
must be stated.
    (e) For proposed purchases and for approvals of previously 
purchased facilities the period of the comparison is twenty years 
except that for the purchase of a modular unit the period of comparison 
is ten years. For a proposed purchase the period of comparison begins 
on the date on which the proposal is made; for approvals of previous 
purchases the period of comparison begins on the date the purchase of 
the facility took place.
    (f) If the facility is to be used for purposes in addition to the 
operation of the Head Start program, charges for use of the part of the 
facility used for such other purposes must be made by the grantee, in 
accordance with the applicable Office of Management and Budget cost 
principles.

Subpart C--Protection of Federal Interest


Sec. 1309.20  Title.

    Title to facilities acquired with grant funds vests with the 
grantee upon acquisition, subject to the provisions of this part.


Sec. 1309.21  Recording of Federal interest and other protection of 
Federal interest.

    (a) Immediately upon purchasing a facility with grant funds or 
after receiving approval of a previous facility purchase, the grantee 
shall record a Notice of Federal Interest in the appropriate official 
records for the jurisdiction in which the facility is located. The 
Notice shall include the following information:
    (1) The date of the award of grant funds for the purchase of the 
property to be used as a Head Start facility, and the address and legal 
description of the property to be purchased;
    (2) That the grant incorporated conditions which include 
restriction on the use of the property and provide for a Federal 
interest in the property;
    (3) That the property may not be used for any purpose inconsistent 
with that authorized by the Head Start Act and applicable regulations;
    (4) That the property may not be mortgaged or used as collateral, 
or sold otherwise transferred to another party, without the written 
permission of the Secretary, DHHS (or employee who has the authority to 
give this permission on behalf of DHHS);
    (5) That these grant conditions and requirements cannot be altered 
or nullified through a transfer of ownership; and
    (6) The name (including signature) and title of the person who 
completed the Notice for the grantee agency, and the date of the 
Notice.
    (b) Facilities acquired with grant funds may not be sold, leased, 
conveyed, transferred, assigned, mortgaged or in any other manner 
encumbered by the grantee except as expressly authorized in writing by 
the responsible HHS official.
    (c) Use of the facility during its useful life for other than the 
purpose for which the facility was funded, without the express written 
approval of the responsible HHS official, is prohibited.
    (d) Modular units which are purchased with grant funds and which 
are not permanently affixed to land, or which are affixed to land which 
is not owned by the grantee, must have posted in a conspicuous place 
the following notice: ``On (date), the Department of Health and Human 
Services (DHHS) awarded (grant number) to (Name of grantee). The grant 
provided Federal funds for conduct of a Head Start program, including 
purchase of this modular unit. The grant incorporated conditions which 
included restrictions on the use and disposition of this property, and 
provided for a continuing Federal interest in the property. 
Specifically, the property may not be used for any purpose other than 
the purpose for which the facility was funded, without the express 
written approval of the responsible DHHS official, or sold or 
transferred to another party without the written permission of the 
Secretary, DHHS (or employee who has the authority to give this 
permission on behalf of DHHS). These conditions are in accordance with 
the statutory provisions set forth in 42 United States Code, section 
9839; the regulatory provisions set forth in 45 CFR, part 1309, 45 CFR 
part 74 and 45 CFR part 92; and Administration for Children and 
Families grants policy.''
    (e) The grantee must provide the responsible HHS official with both 
telephonic and written notification of a default of any description on 
the part of the grantee under a real property or chattel mortgage. The 
mortgage agreement or security agreement in the case of a modular unit 
which is proposed to be purchased under a chattel mortgage, shall 
specifically allow in the case of default that ACF or its designee may 
assume the role of mortgagor or debtor and continue to make payments. 
The mortgage agreement or security agreement shall further provide 
that, in the case HHS (or its designee) chooses not to assume the role 
of mortgagor or debtor in the case of default, the mortgagee or 
creditor shall pay ACF an amount equal to the share of the sales 
proceeds otherwise due the grantee (mortgagor or debtor) times the 
Federal share of the property. Additionally, the agreement shall 
provide that the mortgagee or creditor must notify ACF at least 30 days 
prior to initiating foreclosure action. Any ACF assignment of the 
facility and mortgage responsibilities to any party, other than ACF, 
will be subject to prior approval of the mortgagee or creditor. A 
grantee seeking approval of the use of grant funds to purchase a 
previously acquired facility must attempt to comply, to the greatest 
extent possible, with the requirements of this paragraph.
    (f) Grantees must meet all of the requirements in 45 CFR parts 74 
and 92 pertaining to the purchase and disposition of real property, or 
the use and disposal of equipment, as appropriate.


Sec. 1309.22  Insurance, bonding, and maintenance.

    (a) The grantee shall obtain the following forms of insurance at 
the time of acquiring a facility or receiving approval for the previous 
purchase of a facility:
    (1) A title insurance policy which insures the fee interest in the 
facility for an amount not less than the full appraised value as 
approved by ACF, which contains an endorsement identifying ACF as a 
loss payee that will reimburse ACF is the title fails; and
    (2) An insurance policy which insures from risk of partial and 
total physical destruction the full appraised value as approved by ACF. 
The insurance policy is to be maintained for the period of time the 
facility is owned by the grantee.
    (b) The grantee shall submit copies of such insurance policies to 
ACF within five days of acquiring the facility or receiving approval 
for the previous purchase of a facility. If the grantee has not 
received the policies in time to submit copies within this period, it 
shall submit evidence that it has obtained the appropriate insurance 
policies within five days of acquiring the facility or receiving 
approval for the previous purchase of a facility, and it shall submit 
copies of the policies within five days of its receipt of them.
    (c) The grantee must maintain facilities acquired with grant funds 
in a manner consistent with the purposes for which the funds were 
provided and in compliance with State and local government property 
standards and building codes for the useful life of the facility.

Subpart D--Modular Units


Sec. 1309.30  General.

    In addition to the special requirements of Secs. 1309.31-1309.34 of 
this part, the proposed purchase or request for approval of a previous 
purchase of a modular unit is subject to all of the requirements of 
this part with the following exceptions:
    (a) Section 1309.10(j) of this part, regarding certification by a 
licensed engineer, does not apply to the proposed purchase or requests 
for approval of a previous purchase of modular units; and
    (b) Section 1309.21(a) of this part does not apply to the proposal 
or requests for approval of a previous purchase of modular units if the 
land on which the unit is installed is not owned by the grantee.


Sec. 1309.31  Site description.

    An application for the purchase or approval of a previous purchase 
of a modular unit must state specifically where the modular unit will 
be installed, and whether the land on which the modular unit will be 
installed must be purchased by the grantee. If the grantee does not 
propose to purchase land on which to install the modular unit or if the 
previously purchased modular unit is located on land not owned by the 
grantee, the application must state who owns the land on which the 
modular unit is or will be situated and describe the easement, right-
of-way or land rental it will obtain or has obtained to allow it 
sufficient access to the modular unit.


Sec. 1309.32  Statement of procurement procedure.

    (a) An application for the purchase of a modular unit must include 
a statement describing the procedures which will be used by the grantee 
to purchase the modular unit.
    (b) This statement must include a copy of the specifications for 
the unit which is proposed to be purchased and assurance that the 
grantee will comply with procurement procedures in 45 CFR parts 74 and 
92, including assurance that all transactions will be conducted in a 
manner to provide, to the maximum extent practical, open and free 
competition. A grantee requesting approval of a previous purchase of a 
modular unit also must include a copy of the specifications for its 
unit.


Sec. 1309.33  Inspection.

    Instead of the certification by a licensed engineer required by 
Sec. 1309.10(j), a grantee which purchases a modular unit with grant 
funds or receives approval of a previous purchase must have the modular 
unit inspected by a licensed engineer within 15 calendar days of its 
installation or approval of a previous purchase, and must submit to the 
responsible HHS official the engineer's inspection report within 30 
calendar days of the inspection.


Sec. 1309.34  Costs of installation of modular unit.

    Consistent with the cost principles referred to in 45 CFR part 74 
and 45 CFR part 92, all reasonable costs necessary to the installation 
of a modular unit the purchase of which has been approved by the 
responsible HHS official are payable with grant funds. Such costs 
include, but are not limited to, payments for public utility hook-ups, 
site surveys and soil investigations.

Subpart E--Other Administrative Provisions


Sec. 1309.40  Copies of documents.

    Certified copies of the deed, loan instrument, mortgage, and any 
other legal documents related to the purchase of the facility or to the 
discharge of any debt secured by the facility must be submitted to the 
responsible HHS official within ten days of their execution.


Sec. 1309.41  Record retention.

    All records pertinent to the purchase of a facility must be 
retained by the grantee for a period equal to the period of the 
grantee's ownership of the facility plus three years.


Sec. 1309.42  Audit of mortgage; Five year appraisal.

    Any audit of a grantee which has purchased a facility with grant 
funds shall include an audit of any mortgage or encumbrance on the 
facility. The audit must be supplemented by an independent appraisal of 
the value of the facility at least once every five years. Reasonable 
and necessary fees for this audit and appraisal are payable with grant 
funds.


Sec. 1309.43  Use of grant funds to pay fees.

    Consistent with the cost principles referred to in 45 CFR part 74 
and 45 CFR part 92, reasonable fees and costs associated with and 
necessary to the purchase of a facility (including reasonable and 
necessary fees and costs incurred prior to the submission of an 
application under Sec. 1309.10 of this part or prior to the purchase of 
the facility) are payable with grant funds, but require prior, written 
approval of the responsible HHS official.


Sec. 1309.44  Program income.

    Income from the sale of equipment or real property purchased in 
whole or in part with grant funds is subject to the provisions of 45 
CFR parts 74 and 92 governing such income. All other program income 
derived from a facility purchased with grant funds (including rent 
referred to in Sec. 1309.11(f) of this part) must be deducted from the 
total allowable costs of the budget period in which the income was 
produced.


Sec. 1309.45  Independent analysis.

    (a) The responsible HHS official may obtain an independent analysis 
of the cost comparison submitted by the grantee pursuant to 
Sec. 1309.11 of this part, or the statement under Sec. 1309.10(g) of 
this part, or both, if, in the judgment of the official, such an 
analysis is necessary to adequately review a proposal submitted under 
this Part.
    (b) The analysis shall be made by a qualified real estate 
professional in the community in which the property, proposed to be 
purchased is situated, and shall be in writing.
    (c) Section 1309.43 of this part applies to payment of the cost of 
the analysis.

[FR Doc. 94-29555 Filed 11-30-94; 8:45 am]
BILLING CODE 4184-01-M