[Federal Register Volume 60, Number 68 (Monday, April 10, 1995)]
[Rules and Regulations]
[Pages 18174-18291]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8346]




[[Page 18173]]

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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 Parts 905 and 950



Indian Housing Program: Amendments; Final Rule

  Federal Register / Vol. 60, No. 68 / Monday, April 10, 1995 / Rules 
and Regulations   
[[Page 18174]] 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Public and Indian Housing

24 CFR Parts 905 and 950

[Docket No. R-95-1742; FR-3646-F-02]
RIN 2577-AB43


Indian Housing Program: Amendments

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

ACTION: Final rule.

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SUMMARY: This final rule adds a new part 950 to HUD's regulations. New 
part 950 contains the Indian Housing consolidated regulations that were 
previously set forth in 24 CFR part 905. In addition to moving the 
Indian Housing consolidated regulations from part 905 to part 950, the 
final rule amends a number of the Indian Housing consolidated 
regulations to simplify program processes, reduce the number of 
regulatory requirements, and provide more flexibility to local tribal 
and Indian housing authority officials in the administration of the 
Indian Housing program.

EFFECTIVE DATE: May 10, 1995.

FOR FURTHER INFORMATION CONTACT: Dominic Nessi, Director, Office of 
Native American Programs, Public and Indian Housing, Room 4140, 
Department of Housing and Urban Development, 451 Seventh Street SW, 
Washington, DC 20410, telephone (202) 755-0032. Hearing- or speech-
impaired persons may use the TDD number (202) 708-0850. (These are not 
toll-free numbers.)

SUPPLEMENTARY INFORMATION:

I. Paperwork Burden

    The information collection requirements contained in this final 
rule have been submitted to the Office of Management and Budget (OMB) 
for review. These information collection requirements are not effective 
until such time that OMB grants its approval. The approval number will 
be published in the Federal Register through separate notice.

II. Background

    On August 1, 1994 (59 FR 39072), HUD published a proposed rule that 
would add a new part 950 to title 24 of the Code of Federal Regulations 
to contain the Indian Housing consolidated regulations. The proposed 
rule would also make simplifying amendments to these regulations, in 
order to accomplish the primary goal of giving Indian Housing 
Authorities (IHAs) greater discretion and responsibility in 
administering their programs. The preamble to the proposed rule 
described HUD's consultation with its six Native American Program Area 
Offices, the National American Indian Housing Council, regional IHA 
associations, and other IHA representatives. The preamble also 
described HUD's four-year trend to provide IHAs with administrative 
flexibility through regulatory revisions (59 FR 39072).
    Consistent with the principles of Executive Order 12866, HUD has 
reviewed the existing Indian Housing regulations and the public 
comments received on the proposed rule, and with this final rule 
modifies the regulations to make them more effective, consistent, 
understandable, and sensible.

III. Comments on the August 1, 1994 Proposed Rule

    HUD solicited public comments on the proposed rule amending the 
Indian Housing program. By the expiration of the public comment period 
on September 30, 1994, HUD had received 15 comments, all from IHAs and 
tribal leaders. This final rule contains several changes to the 
proposed rule in response to these comments, as further described in 
the following section, which summarizes the comments according to their 
relevant subparts and provides HUD's responses to those comments.

A. Subpart A--General

1. Applicability and Scope (Sec. 950.101)
    One commenter stated that Sec. 950.101(a)(1) should expressly 
acknowledge that this rule applies to operations and funds arising from 
HUD programs. The current language states that HUD provides financial 
assistance (funds) to IHAs for the development and operation 
(operation) of low-income housing projects in Indian areas. This part 
is applicable to such projects developed or operated by an IHA in an 
Indian area. HUD was unclear what additional language was requested and 
believes that the current language adequately addresses the comment.
2. Definitions (Sec. 950.102)
    One commenter requested that the definition of Allowable Utilities 
Consumption Level (AUCL) and Heating Degree Days (HDD) should be 
adjusted. The commenter requested that Cooling Degree Days be added, as 
HDD is irrelevant to Indian country.
    Section 508 of the Cranston-Gonzalez National Affordable Housing 
Act (Pub. L. 101-625, approved November 28, 1990) directed HUD to 
incorporate into the Performance Funding System (PFS) a methodology to 
adjust utility consumption to account for Cooling Degree Days that was 
the same as the methodology used to account for Heating Degree Days. 
The impetus for this legislation was that IHAs in the sunbelt that had 
to pay higher utility bills for air conditioning during hot summers 
wanted an adjustment in their PFS payments to account for the increased 
utility consumption. HUD published a proposed rule, and based on the 
comments received, HUD implemented an approach to greatly simplify the 
PFS by dropping all heating and cooling degree day adjustments. The 
final rule implementing this action was published in the Federal 
Register on October 13, 1994 (59 FR 51852). Additional information on 
this change can be found in the preamble of that rule.
    There were a number of comments concerning the definitions of 
Adjusted Income and Annual Income. These suggestions included an 
increase in deductions, lowering the 30 percent rule, counting only the 
income from the head of household, counting only the income of head of 
household and spouse, and using net income rather than gross income. 
Also, a commenter requested that both child care and travel expenses be 
eligible deductions.
    HUD appreciates the many comments received on the definition of 
Adjusted Income and Annual Income. In response to the comment to allow 
both travel and child care as deductions, section 103(a)(2) of the 
Housing and Community Development Act of 1992 (Pub. L. 102-550, 
approved October 28, 1992) amended section 3(b)(5) of the United States 
Housing Act of 1937 (42 U.S.C. 1437 et seq.) to allow for both 
deductions. HUD implemented this change by PIH Notice 93-23 dated May 
19, 1993. The proposed rule included this revision, and the same 
language appears in this final rule. With regard to the other comments 
on Adjusted Income and Income, these terms are defined in the United 
States Housing Act of 1937. Section 3(b)(4) of that Act defines 
``income'' as ``income from all sources of each member of the 
household.'' Section 3(b)(5) contains the statutory definition of 
``adjusted income.'' The Office of Native American Programs is 
developing a legislation package for the program, and it will carefully 
review all comments as it prepares this proposal.
    One commenter stated that the definition of disposition should 
exclude references to real estate, since the IHAs do not transfer any 
interest in the ``real [[Page 18175]] estate.'' The commenter stated 
that the most that IHAs transfer by a quit claim deed is the remaining 
portion of the leasehold interest in the underlying land, together with 
the improvements. HUD agrees with the comment as it relates to trust 
and allotted land. However, there are many cases in Indian areas in 
which interest in the real estate is transferred. Due to these 
situations, HUD has not changed the definition.
    One commenter requested that the tribal government and not HUD 
define low-income family based on a determination of tribal median 
income and adjustments to income due to family size, construction 
costs, or other local variations. Another commenter stated that IHAs 
should be able to establish their own income limits based on the 
tribes' economies, not on the local communities.
    The definitions of low- and very low-income are found in the United 
States Housing Act of 1937. By statute, the definition of very low-
income is tied to ``50 per centum of median family income'' for an 
area, and the definition of low-income is tied to ``80 per centum of 
the median family income'' for the area (42 U.S.C. 1427a). As required 
by statute, the meaning of the term ``area'' is affected by whether the 
local median family income is less than the respective State's 
nonmetropolitan median family income. In addition, the statute provides 
for adjustments to income limits for areas with unusually high or low 
incomes in relation to housing costs. Income limits are published 
annually by HUD. If an IHA or tribe feels that the median income for 
its area is not appropriate, they should contact the local HUD Office 
to obtain information on how to proceed with a request for a change.
3. Applicability of Civil Rights Requirements (Sec. 950.115).
    A commenter stated that the civil rights quotation in 
Sec. 950.115(a) in the proposed rule is misleading and the definition 
should additionally explain that these equal protection and due process 
rights do not apply if they violate customs, traditions, and practices 
of the tribe. HUD agrees with this comment and has adjusted the 
definition in the final rule to include this statement.
    A commenter suggested that HUD should strike the reference to 
handbooks in Sec. 950.115(a)(3) of the proposed rule. This commenter 
also requested that the reference to Title VI, the Fair Housing Act, 
and the Americans with Disabilities Act in Sec. 950.115(b) of the 
proposed rule be removed if they are not applicable to IHAs established 
by exercise of a tribe's power of self-government. HUD agrees with both 
of these comments. HUD has removed the reference to handbooks and the 
language regarding the nonapplicability of those statutes in this 
section.
4. Displacement, Relocation, and Acquisition (Sec. 950.117)
    One commenter stated that upon the request of a resident, an IHA 
should be allowed to relocate a resident temporarily to his or her 
traditional home even if it is not decent, safe, and sanitary, and the 
family should be eligible for relocation assistance. HUD agrees with 
this comment and has revised the language in Sec. 950.117(b) for 
temporary relocation.
    A commenter stated that in Sec. 950.117(c)(2), the word 
``comparable'' should be removed since it is subject to many 
interpretations, and that the IHA should be allowed to use any 
available Indian housing unit as a replacement. The commenter also 
requested that HUD add the following language: ``Houses that do not 
meet Section 8 fair market rent would be allowed for comparable housing 
units.'' HUD is unable to eliminate the term ``comparable'' in this 
section of the rule. This term is defined in the Uniform Relocation 
Assistance and Real Property Acquisition Policies Act of 1970 (URA) (42 
U.S.C. 4601-4605), as amended. The use of ``comparable'' is also 
required by the Department of Transportation's government-wide rule 
implementing the URA (49 CFR part 24). The 1987 amendments to the URA 
specify that the Federal agencies covered by the URA no longer have 
independent statutory authority to promulgate their own separate URA 
regulations, and in implementing the URA they must follow the 
regulations published by the lead agency, which is the Department of 
Transportation.
5. Compliance With Other Federal Requirements (Sec. 950.120)
    Multiple commenters suggested that the wage rate requirements of 
the Davis-Bacon Act (Sec. 950.120(c)) should be waived for Indian 
housing. However, the applicability of the Davis-Bacon Act to Indian 
housing is required under Section 12 of the United States Housing Act 
of 1937, as amended, and is not subject to waiver by HUD.
6. Establishment of IHAs by Tribal Ordinance (Sec. 950.126).
    Several commenters agreed with Sec. 950.126(b) of the proposed 
rule, which allows a tribe to determine the form of ordinance. However, 
one commenter objected to leaving ordinance terms and wording up to 
tribes. Another commenter felt that HUD was leaving the ordinance up to 
the tribe, and therefore approval by the Department of Interior (DOI) 
should not be necessary. As stated previously, the intent of the 
revised regulation is to provide greater flexibility and control to 
IHAs and tribes in the administration of housing programs. This is the 
reason for allowing tribes the ability to determine the form of 
ordinance that is applicable for its area. However, HUD agrees with the 
comment regarding DOI approval and has removed the language regarding 
the need for such approval.
    A commenter stated that Sec. 950.126(d) of the proposed rule should 
be revised to require only those documents that demonstrate that an 
authority has been properly established. HUD agrees with this comment 
and has revised this section accordingly.
7. IHA Commissioners Who Are Tenants or Homebuyers (Sec. 950.130)
    One commenter stated that they agreed that the change in the rule 
that explains the role of a commissioner when he or she faces a 
decision that affects them personally is an excellent idea. HUD 
appreciates the comment regarding this section.
8. Administrative Capability (Sec. 950.135)
    One commenter agreed that the Administrative Capability Assessment 
(ACA) should be used with other tools to evaluate the need for 
technical assistance. Two commenters stated that there should be 
another appeal level, and one commenter requested that all appeals 
should go to HUD Headquarters. One commenter stated that the reference 
to HUD handbooks and other program requirements should be deleted since 
these do not constitute statutory or regulatory authority that is 
binding on the IHAs. One commenter stated that sanctions should be 
clearly defined in Sec. 950.135(f)(2), and limitation on appeals should 
be eliminated from Sec. 950.135(g)(2).
    HUD agrees with the comment suggesting the removal of the handbook 
references in this section and has revised this section in the final 
rule. In response to the comments on the appeal process, HUD finds that 
the current appeal process will provide IHAs with the ability to appeal 
any decision regarding funding. All other appeals will not affect any 
funding. Furthermore, without limits to the appeal process, HUD would 
not be able to initiate corrective action when it finds a serious 
deficiency. [[Page 18176]] 

B. Subpart B--Procurement

1. General Comments.
    Several commenters suggested minor changes in wording throughout 
the subpart to improve the readability and clarity of the language. For 
the most part, HUD agrees with these comments and has incorporated the 
suggested wording.
2. Procurement Standards (Sec. 950.160)
    One commenter wrote that the $25,000 limit on small purchases 
created additional costs for IHAs. Since the publication of the 
proposed rule on August 1, 1994, Federal procurement regulations have 
increased the small purchase limit to $100,000. HUD has adjusted this 
section accordingly.
    Another commenter wrote that HUD should allow open market purchases 
from petty cash for commonly used supplies or purchases of less than 
$500. Such purchases are allowed within existing regulations that are 
not changed by this rule.
3. Methods of Procurement (Sec. 950.165)
    One commenter suggested the addition of language in Sec. 950.165(c) 
that specifically states that an IHA may reject all proposals for 
soundly documented reasons and has the right to waive certain 
irregularities. General procurement methods currently allow these 
practices, and therefore they have not been added to this rule.
4. Other Requirements Applicable to Development Contracts 
(Sec. 950.170)
    One commenter suggested that the bonding alternative allowing a 25 
percent letter of credit should be deleted. HUD disagrees with this 
suggestion. Each of the options for surety other than 100 percent 
performance and payment bonds are included in the rule to enable IHAs 
to assist small or disadvantaged contractors that have the ability to 
perform but do not have the resources to pay for a performance and 
payment bond. IHAs have the option but are not obligated to use this 
option in their procurement.
    Another commenter suggested that the rule should clarify that 
performance and payment surety continue through a contract's warranty 
period. The term of the surety is contained in individual contract 
provisions, and therefore HUD does not believe it should be added to 
this rule.
5. Indian Preference Requirements (Sec. 950.175)
    HUD received a general comment that the revised Indian preference 
requirements are not simplified from the previous rule. In these 
revised regulations, HUD has tried to accomplish two objectives. The 
first objective was to make the Indian Preference requirements less 
prescriptive, enabling IHAs and their tribes to determine the best 
methods for providing Indian preference in their programs. The second 
objective was to make HUD's Indian preference requirements identical 
across its programs to remove confusion for participating tribes. HUD 
is also revising the Indian Community Development Block Grant and 
Indian HOME program regulations to mirror the Indian Housing 
regulations. HUD believes it has met both these objectives but is 
receptive to any additional suggestions that would improve the Indian 
preference requirements.
6. Insurance (Sec. 950.190)
    One commenter suggested that this section is unnecessarily complex 
and long. The contents of this section provide the basic requirements 
for insurance coverage, however, and therefore HUD has decided not to 
make any reductions at this time.

C. Subpart C--Development

1. General Comments
    Several commenters suggested minor changes throughout the subpart 
to improve the readability and clarity of the language. For the most 
part, HUD agrees with these comments and has incorporated the suggested 
wording.
2. Allocation (Sec. 950.205)
    One commenter suggested the conversion of the allocation method 
from a competitive nature to a formula funding. This commenter wrote 
that this would enable IHAs to better anticipate funding, thereby 
allowing for better long-range planning. HUD is investigating the 
potential for formula funding for development allocations; however, a 
change to a formula funding basis may require statutory authority.
3. Eligibility (Sec. 950.207)
    In response to general comments on clarity within the rule, HUD has 
added a new section that specifies the eligibility requirements to 
apply for new Indian Housing development. Included in this section are 
performance thresholds not previously specified in the regulation but 
relied upon by HUD in determining eligibility.
4. Authority for Proceeding Without HUD Approval (Sec. 950.210)
    Several commenters suggested that the rule would provide HUD great 
latitude in requiring an IHA to obtain HUD approval of processing 
steps. In reviewing this section, HUD agrees that its wording is too 
broad and not fully consistent with administrative capability remedies 
contained in Sec. 950.135. Accordingly, HUD has clarified this section 
to require HUD to follow the provisions of Sec. 950.135 in its 
determination of performance deficiencies and remedies. Additionally, 
HUD has removed the examples of performance deficiencies.
    This final rule consolidates time constraints on development in 
this section from throughout Subpart C. In response to several 
comments, the time constraints contained in the regulation are: (1) 24 
months from program reservation to construction start, (2) 30 months 
from program reservation before HUD can recapture funds, and (3) six 
years from program reservation to closeout of development.
5. Production Methods (Sec. 950.215)
    HUD received several comments that questioned the clarity of the 
production method descriptions. Upon review, HUD has determined that 
descriptions of production methods are more appropriately contained in 
program guides or handbooks. Accordingly, HUD has deleted the brief 
descriptions of production methods in this section.
    Several comments were received concerning the definition of an IHA 
attachable asset required as security for force account construction 
approval and the need for IHAs to provide such security. Attachable 
assets are those assets that are unencumbered by restrictions on their 
use and that can be liquidated to pay for any overruns in the 
development of the project. HUD has reevaluated the risk associated 
with force account construction and has modified the surety 
requirements in this final rule. The final rule (Sec. 950.215(b)) 
allows Area Offices of Native American Programs (Area ONAPs) to approve 
the force account method without requiring the tribe or IHA to provide 
specific security to cover excess costs if the IHA agrees to construct 
the project in small stages with additional HUD oversight.
6. Total Development Cost (Sec. 950.220)
    One commenter suggested that the $1,500 Mutual Help contribution 
and development funded counseling should be deleted from the program. 
However, the $1,500 Mutual Help contribution is required by the 
statute. HUD has modified the counseling provision to make it optional 
for IHAs.
    One commenter suggested that the rule should include a detailed 
description of how total development [[Page 18177]] cost (TDC) 
standards are computed. By statute, HUD is required to establish TDC 
standards using two national cost indices, which are multiplied by 1.6 
for elevator type structures and 1.75 for nonelevator structures. Total 
development cost standard requirements are published periodically in a 
departmental notice. HUD believes that such a notice is the appropriate 
vehicle for conveying TDC requirements, and therefore HUD has not 
adopted this suggestion.
    One commenter suggested that the rule should require all projects 
to be funded at the full TDC standard. The TDC standard establishes the 
maximum allowable cost for a development and is not intended to provide 
a prescribed amount required to develop a project. Accordingly, HUD has 
not adopted this comment.
    One commenter suggested that the rule should require HUD Area ONAPs 
to obtain the input of tribes in the determination of the adequacy of 
TDC areas. The TDC notice provides for IHAs to request a HUD assessment 
of the adequacy of TDC areas within their jurisdiction. HUD believes 
that this provision of the notice serves to obtain tribal input. 
Therefore, HUD has not adopted this suggestion.
    HUD has significantly reduced Sec. 950.220 of the proposed rule by 
deleting process items that are included in periodic TDC Notices, the 
discussion of the program reservation, and HUD cost review 
requirements. Additionally, HUD has rewritten the resident training and 
insurance subsections, and has added a separate subsection that 
includes the exception of donations and off-site water and sanitation 
facility infrastructure costs from the TDC calculation. HUD has 
modified the 30 month for construction cost and moved it to 
Sec. 950.207.
7. Application (Sec. 950.225)
    To provide greater clarity in section titles, the Application 
section has been divided, with items involving program reservation and 
annual contributions contract (ACC) execution moved to a new section 
950.227. HUD has deleted from the rule process activities that are 
included in the annual Notice of Funding Availability. HUD has also 
added a new paragraph (c), which clarifies the criteria under which HUD 
may approve new units for state-created IHAs.
8. Program Reservation and ACC Execution (Sec. 950.227)
    HUD received several comments supporting the elimination of the 3 
percent limitation on initial planning funds.
    One commenter suggested that the limitation on planning funds was 
too vague. Upon review, HUD has determined that since such limitations 
are included in the ACC, they are unnecessary in this rule.
    To further clarify the change to a grant program, HUD has changed 
the term ``program reservation'' to ``development grant approval'' 
throughout the rule.
    To streamline the development process, HUD has modified subpart C 
to remove the two-step process for executing the ACC for development. 
This final rule provides for execution of the ACC (or amendment) in the 
full amount of the grant upon approval of the grant. Amendments to the 
ACC would only be required if the character of the development were 
changed by the IHA.
    This final rule also adds a new section 950.229 to address the 
process for establishing limits on the IHA's ability to incur 
obligations under the ACC. This section consolidates requirements for 
submittal of development cost budgets and contains the existing 
provision for comprehensive housing plans.
9. Project Coordination (Sec. 950.230)
    One commenter suggested that HUD should participate in project 
planning in order to provide technical assistance if requested by the 
IHA. The current wording does not prohibit HUD staff from participating 
in planning activities if the IHA requests, and HUD has sufficient 
staff resources available to provide such assistance. The decision to 
provide voluntary technical assistance is a joint decision of the IHA 
and HUD. HUD does not find that additional clarifying language is 
needed.
10. Site Selection Criteria (Sec. 950.235)
    HUD received several comments supporting the removal of the one 
acre limitation on site size. One commenter objected to prohibiting the 
cost of access roads as a project expense. With the exception of off-
site water and sanitary facility infrastructure that Congress includes 
in Indian Housing appropriations, infrastructure development outside 
the boundaries of the IHA site(s) are not eligible project expenses. In 
the case of off-site access roads, Congress provides funding through 
the Bureau of Indian Affairs (BIA) to construct off-site roads. 
Accordingly, HUD has retained the restrictions on off-site access roads 
in this rule.
11. Types of Interest in Land (Sec. 950.240)
    Several commenters objected to the requirement for HUD approval of 
the form of lease. Because of the period of affordability requirements 
contained in the statute and in the ACC, HUD has a continuing interest 
in the availability of dwelling units for occupancy by eligible 
participants. It is in HUD's best interest to assure that the 
provisions contained in site leases provide sufficient protection for 
the government in this area. Therefore, HUD has retained the 
requirement for a HUD approved form of lease.
    Another commenter objected to allowing leases of unrestricted fee 
simple land in lieu of outright purchase. In most instances, an IHA 
will prefer to purchase fee simple land instead of entering into a 
long-term lease. However, prohibiting leasing of unrestricted fee 
simple property would, according to HUD, unduly restrict IHA options in 
securing building sites.
    Another commenter suggested that HUD allow tribes to build off 
tribal lands. There is no specific prohibition against an IHA using 
non-tribal sites. IHAs must operate within the jurisdiction of the 
tribe, which is generally within the tribe's reservation boundaries. If 
the IHA wishes to use sites not within the jurisdiction of the tribe 
that are subject to property taxes, they must obtain the cooperation of 
the taxing body.
12. Environment (Sec. 950.247)
    The Multifamily Housing Property Disposition Reform Act of 1994 
(Pub. L. 103-233, approved April 11, 1994) provided for tribes or local 
governments to assume the responsibilities for environmental 
assessments of public and Indian housing sites. To implement this 
requirement, HUD is revising its environmental review regulations at 24 
CFR part 58 to include the Indian Housing program. HUD is also adding a 
new section 950.247, Environment, in this rule to provide for local 
completion of the environmental assessment.
13. Site Approval (Sec. 950.250)
    HUD has decided to remove Sec. 950.250(b)(3) from the final rule. 
This section had required IHA cooperation to enable HUD to complete the 
environmental assessment. Under the final rule, the tribe or local 
governing body will complete the environmental assessment.
    One commenter suggested that there may be unnecessary duplication 
in the review of sites, and that HUD and the BIA should adopt a single 
environmental assessment procedure. [[Page 18178]] HUD and the BIA have 
made continuing efforts to coordinate environmental review procedures 
to minimize duplication of efforts. With the transfer of environmental 
review responsibility, the tribe or local government will work with the 
BIA in this regard.
    One commenter suggested that sites should be inspected only when 
the IHA deems it appropriate. HUD finds that it is impossible to 
approve a site for inclusion in a development without first making an 
on-site visit to determine the suitability for development. 
Accordingly, HUD has not adopted this suggestion.
    Another commenter suggested that environmental reviews should be 
limited to sites larger than 10 acres. The National Environmental 
Policy Act of 1969 (42 U.S.C. 4332) requires an environmental 
assessment for any development action regardless of the size of the 
site.
14. Design Criteria (Sec. 950.255)
    HUD received a number of comments objecting to requiring newly 
constructed Indian housing units to comply with specific building 
codes. This requirement is not new. Due to the investment of public 
funds and the long-term association between HUD and the IHA during the 
operating period, HUD finds that it is necessary to require minimum 
building standards. National building codes, such as the Uniform 
Building Code or the Uniform Plumbing Code, provide minimum standards 
for such development. HUD encourages tribes to develop and adopt 
building codes that reflect the needs of their areas. In the absence of 
adopted tribal codes, IHAs must rely on local, state, or national 
codes.
    HUD has added a new subsection to specify that the IHA must perform 
a life cycle cost analysis in the IHA's selection of utility 
combinations.
15. IHA Development Program (Sec. 950.260)
    Several commenters stated that HUD's suggestion in the proposed 
rule (Sec. 950.260(a)(2)) that a development program should be 
submitted within 18 months of program reservation date was 
inappropriate since IHAs rely on schedules prepared at the project 
coordination meeting to reach development program submission. HUD 
agrees with these comments and has removed the subsection containing 
this suggestion.
    In response to general comments for further streamlining of the 
process, and in order to recognize program evolution to a grant basis, 
HUD has removed the requirement for a development program from the 
rule. In its place, HUD has specified the documents that are actually 
required prior to the IHA proceeding with final planning, bid/proposal 
solicitation, and construction start. These documents include a 
development cost budget reflecting the anticipated cost of constructing 
the project, certifications of compliance with program requirements, 
and project characteristics that were previously gleaned from the 
development program documents (Sec. 950.260(a) of the final rule).
16. Construction and Inspections (Sec. 950.265)
    One commenter suggested replacing the term ``program requirements'' 
with ``all ACC, statutory, and regulatory requirements.'' HUD agrees 
and has made the modification.
    Several commenters suggested that HUD should not monitor project 
construction if it was unwilling to perform project inspections. 
Congress has charged HUD with the oversight of appropriated funds. To 
properly perform this duty, HUD must monitor IHA compliance with all 
ACC, statutory, and regulatory requirements of the program, including 
the IHA's administration of its construction contracts.
    Several commenters suggested that HUD should either do away with 
the 30 month requirement for reaching construction start or reduce the 
time to 24 months. The final rule has consolidated in Sec. 950.210 all 
references to this 30 month period. HUD has changed the wording of the 
30 month requirement to more closely follow the language of the 
statute, which limits HUD's ability to cancel a project before the end 
of the 30 month period. HUD has also adopted the suggestion that 
construction start should occur within 24 months after the program 
reservation date, and has added language that requires HUD, subject to 
the availability of resources, to provide technical assistance to an 
IHA that has not reached construction start within the 24 month time-
frame.
    In response to numerous suggestions for overall streamlining of the 
rule, HUD has rewritten this section to simplify the requirements.
17. Correcting Deficiencies (Sec. 950.280)
    HUD received a number of comments suggesting that HUD should be 
required to fund the correction of any design or construction 
deficiencies. HUD does not agree that it is obligated to fund the 
correction of all design or construction deficiencies. Under program 
requirements, IHAs are required to have in place adequate systems to 
assure new developments are properly designed and constructed. As HUD 
attempts to remove its controls over IHA decisionmaking by conveying 
the authority to manage its developments, it would be inconsistent not 
to convey the responsibility to adequately manage those developments, 
as well. HUD does maintain the option of funding design or construction 
deficiency corrections when it believes it is appropriate to provide 
such funding.
    One commenter suggested that the requirement for HUD approval to 
spend existing funds to correct design or construction deficiencies 
should be deleted. HUD agrees that, along with the responsibility to 
assure such corrections are made, the rule should provide the authority 
to spend existing funds appropriately, including remaining project 
development funds, operating receipts, or other funds available to the 
IHA. Therefore, HUD has removed the requirement for its prior approval.
18. Fiscal Closeout (Sec. 950.285)
    HUD has added language to this section emphasizing the importance 
of completing development grants in a timely manner. Under the limited 
oversight procedures now in effect for Indian Housing development, it 
is critical that grants be completed and the accounts audited as soon 
as possible after the date of full availability (DOFA).
19. Reformulation
    HUD received several comments suggesting that a new section be 
added authorizing IHAs to reformulate project funds at any time for any 
purpose without prior HUD approval. HUD provides funds to an IHA to 
develop a specified project. Consistent with other grant programs, if 
an IHA wishes to redirect project funds, a program modification must be 
proposed and approved before such reformulation can proceed. HUD has 
delegated the authority to approve reformulations to its Area ONAPs, 
which will expedite processing of requests by IHAs.

D. Subpart D--Operation

1. Admission Policies (Sec. 950.301)
    One commenter stated that Sec. 950.301(a)(2)(iii) of the proposed 
rule needs to be strengthened to read ``participants or the physical, 
financial or environmental aspects of the project'' to help deal with 
applicants with a history of nonpayment or unit damage. Each IHA has 
the ability to develop admission policies that address the needs in its 
area. HUD's goal is to provide greater discretion to the IHAs 
[[Page 18179]] administering the housing program. Therefore, HUD does 
not feel that these additional regulatory requirements should be added 
for all IHAs. However, each IHA is encouraged to develop admissions 
policies to address individual needs, such as the ability to deal with 
applicants with a history of nonpayment or unit damage.
    A commenter stated that the proposed language ``for not less than 
70 percent of the units'' in Sec. 950.301(a)(2)(iv) is a marked change 
from the earlier draft figure of 30 percent of the units. The commenter 
stated that the 30 percent figure seems high enough considering that 
others have been on the waiting list for years. The language in the 
current Indian housing regulation states that only 10 percent of non-
Federal preference holders are eligible for admission in a given year. 
Section 501 of the National Affordable Housing Act amended the 
percentage to allow for 30 percent of non-Federal preference holders to 
be eligible for admission. The language in the proposed rule stated 
that the IHA shall develop tenant and homebuyer selection criteria 
designed: ``(iv) For not less than 70 percent of the units made 
available for occupancy in a given fiscal year, to give a preference in 
the selection of participants who at the time they are seeking housing 
assistance, are involuntary displaced, living in substandard housing, 
or paying more than 50 percent of family income for rent'' (Federal 
preference).
    In the final rule, HUD will handle differently the issue of 
counting Federal preferences. The final rule on Preferences for 
Admission to Assisted Housing, published in the Federal Register on 
July 18, 1994 (59 FR 36616) revised the tenant selection preference 
provisions. The rule implements a statutory change that decreases the 
number of families that must be admitted on the basis of qualifying for 
a Federal selection preference, and specifically authorizes the 
adoption of local selection preferences by IHAs to be used in admitting 
some applicants. Because of several comments regarding how to count 
admissions, the language in the final rule frames the ``counting'' of 
admissions in terms of a limit on the number of ``local preference'' 
admissions that can be made during a one-year period. Only 30 percent 
of annual admissions may be families selected on the basis of local 
preference. Under that rule, a family that qualifies for a ``Federal 
preference'' is not precluded from being admitted on the basis of its 
``local preference,'' but the admission would be counted against the 
IHA's local preference limit, and the selection is made without regard 
to that Federal preference. A more detailed discussion of these 
preferences can be found in the preamble to that final rule. Changing 
the percentage would require Congress changing the statute.
    Another commenter recommended that the language in 
Sec. 950.301(a)(2)(iv) ``at the time they are seeking housing 
assistance'' be changed to ``at the time an appropriate housing unit 
becomes available for their use,'' since these two events could occur 
at different times. It would be difficult to justify attaching a 
Federal preference to an applicant and then carrying that applicant for 
several months until a unit becomes available, if the applicant had 
found decent, safe, sanitary, and affordable housing in the interim.
    The reference to which this commenter refers has been revised in 
the final rule regarding Preferences for Admission to Assisted Housing 
(59 FR 36616, July 18, 1994). That rule amended Sec. 905.301, and 
included a section on verification of preference at Sec. 905.304(c)(3). 
HUD believes that rule addresses the commenter's concern regarding the 
timing of applicant verification.
    Another commenter stated that admission requirements continue to 
get too complex and difficult to administer. The commenter stated that 
the final rule regarding Preferences for Admission to Assisted Housing 
was clear, but that additional clarification is needed. HUD understands 
the concern of this commenter and has tried to simplify the regulation 
while implementing statutory provisions for admission.
    One commenter stated that income limits should be abolished. 
Another commenter requested that HUD reduce the definitional age for an 
elderly person from 62 to 55. However, the provisions for admission of 
low-income families and the age definition for an elderly person are 
statutory, and therefore HUD cannot change them in this rule. HUD will 
consider both of these comments as HUD develops its legislative 
proposal for Indian housing.
2. Initial Determination, Verification, and Reexamination of Family 
Income and Composition (Sec. 950.315)
    One commenter stated that recertifications should only be done once 
for elderly. Another commenter stated that recertification of 
participants should be every three years. However, the United States 
Housing Act of 1937 states that reviews of family income shall be made 
at least annually. Amending this provision would require a statutory 
change.
3. Total Tenant Payment--Rental and Turnkey III Programs (Sec. 950.325)
    Many commenters objected to the 30 percent of monthly adjusted 
income provision in Sec. 950.325(a)(i) of the proposed rule. Both 
tribes and IHAs submitted resolutions objecting to this provision. 
Commenters stated that this provision causes an unreasonable burden on 
tenants and does not provide an incentive to seek gainful employment. 
One commenter stated that the rule promotes dependency on the Federal 
Government for welfare assistance and destroys the initiative for self-
sufficiency. Several commenters objected that automatically charging 30 
percent, regardless of the quality of the unit, would have a 
discriminatory effect, in that it perpetuates poverty, is a 
disincentive for viable employment, and penalizes tribal members who 
are struggling to achieve economic sufficiency.
    Many commenters requested a change in the total tenant payment from 
30 percent to 20 percent. Some commenters requested that the percentage 
be lowered for the elderly only. Another commenter requested that a 
flat rent be charged or the IHA be allowed to charge minimum rents. 
Another commenter requested that no rent be charged for welfare 
families.
    One commenter stated that Sec. 950.325(a) should be changed to read 
as follows: ``Total tenant payment shall be the highest of the 
following, up to the IHA's established ceiling rent (calculated using 
local income levels, rents, and economic conditions) rounded to the 
nearest dollar.''
    Many commenters recommended a change to the current ceiling rent 
policy. These commenters further stated that IHAs should be allowed to 
establish ceiling rates using local economic conditions to provide 
housing for the working poor at reasonable rates. Another commenter 
requested that ceiling rents be based on fair market rents for the 
particular reservation or a rent ceiling equal to the administrative 
fee for Mutual Help housing. The commenter stated that this would not 
conflict with the United States Housing Act of 1937, as the Mutual Help 
administrative fee generally represents the average monthly amount of 
debt service and operating expenses attributed to a dwelling unit.
    HUD received many comments on the definitions of adjusted income 
and annual income. Several commenters stated that rent should be 
calculated based on net income; deductions should be changed to be 
comparable to IRS deductions because of the cost of living 
[[Page 18180]] increases; medical deductions should apply to everyone 
and there should be a secondary wage earner deduction; child support 
payments should be deducted from the person paying; elderly families 
should have a deduction of $2,500; only one income should be used when 
calculating rent; more deductions should be given for child care; 
deductions should be allowed for child support; an inflation factor 
should be built into the deductions; no raises in payments if income 
increases; and deductions should be provided for investments.
    HUD understands that the 30 percent rule and the definition of 
annual and adjusted income are of major concern in the Indian housing 
rental program. The United States Housing Act of 1937 establishes the 
amount of payment for rental housing and defines the term ``income'' 
and ``adjusted income.'' Therefore, without a statutory change, HUD 
cannot address any of these requested changes. As indicated in other 
parts of this preamble, HUD is considering other regulatory changes for 
the public and Indian housing programs, and is preparing a legislative 
proposal for the Indian housing program. HUD will consider all of the 
comments above as it develops the proposal.
4. Rent and Homebuyer Payment Collection Policy (Sec. 950.335)
    A commenter stated that payment and collection policies should 
comply with ACC, statutory, and regulatory requirements, and not HUD 
guidelines. HUD agrees with this comment and has revised the language 
in this section of the final rule.
5. Grievance Procedures and Leases (Sec. 950.340)
    A commenter stated that (a)(iii) of the proposed rule should be 
struck, or HUD should at least explain that such a party may be an 
official or employee of the IHA. The reference from the commenter was 
incorrect, and therefore HUD is unable to determine the nature of the 
commenter's concerns. HUD would like to note that the language in 
Sec. 950.340(a)(1) is statutory.
    A commenter stated that Sec. 950.340(a)(3)(ii) should be changed. 
The basic elements of due process should recognize Indian Civil Rights 
Act (ICRA) exceptions for tribal customs and practices. HUD finds it 
unnecessary to amend the rule to recognize exceptions from the Indian 
Civil Rights Act (ICRA) (25 U.S.C. 1301-1303), because the rule 
currently states in Sec. 950.340(a)(1) that each IHA shall adopt 
grievance procedures that are appropriate to local circumstances and 
that comply with the ICRA, if applicable.
    A commenter stated that the phrase ``related to the termination'' 
in Sec. 950.340(a) and (b) should be changed to ``used'' in the 
termination or eviction. HUD could not locate this phrase in subsection 
(a). HUD is unable to change the wording in subsection (b)(6) because 
it is a statutory requirement.
    One commenter stated that this section attempts to give HUD the 
authority to determine whether tribal and state termination or eviction 
procedures provide the basic elements of due process. The commenter 
continued that since HUD has no authority over tribal sovereignty 
rights to determine its own eviction and termination procedures, this 
section should be removed from the rule. However, HUD's ability to 
determine the basic elements of due process is statutory, and therefore 
this section remains unchanged.
    A commenter found a typographical error in Sec. 950.340(b)(6) in 
the proposed rule. The provision should read ``Specify that with 
respect to any notice.'' HUD has corrected the typographical error in 
the final rule.
6. Fire Safety (Sec. 950.346)
    A commenter recommended that this section be revised to change 
references to ``hard-wire smoke detectors'' to ``hard-wire with battery 
back-up smoke detectors,'' and that this section should reflect the 
need for fire extinguishers in each unit. The commenter indicated that 
many Mutual Help homes have only battery operated smoke detectors, and 
that many of them are inoperable. The commenter stated that IHAs should 
be allowed to receive funding to bring such units up to code.
    HUD received a second comment regarding the benefits of a 
residential range top suppression system that is capable of detecting a 
cooking grease fire originating on the range top, extinguishing the 
fire, and preventing reignition. The commenter provided sample 
specifications for the product for inclusion in the rule. The Fire 
Administration Authorization Act of 1992 (the Act) (Pub. L. 102-522, 
approved October 26, 1992) established applicable Federal standards for 
fire safety, and these standards are reflected in this rule. HUD 
considers it appropriate to reflect the minimum Federal requirements 
mandated by the Act and does not plan to establish more stringent 
requirements in this rule. To the extent that the State, tribal, or 
local jurisdiction in which the units are located has more stringent 
fire prevention and control standards, the more stringent State, 
tribal, or local standards will govern. Further, HUD wishes to point 
out that funding is available under both the CIAP and CGP programs for 
fire safety needs. Under the competitive CIAP application process, work 
items related to fire safety are prioritized for funding along with 
emergency work items.

E. Subpart E--Mutual Help Homeownership Opportunity Program

1. Scope and Applicability (Sec. 950.401)
    One commenter asked what regulations exist for Mutual Help (MH) 
units placed under ACC before March 9, 1976. There are no regulations 
for the MH units placed under ACC prior to March 9, 1976. The document 
governing that program is the Mutual Help and Occupancy (MHO) 
Agreement.
2. Special Provisions for Development of an MH Project (Sec. 950.413)
    One commenter stated that paragraph (d) in this section of the 
proposed rule should be revised since it allows HUD to decide not to 
proceed with the development of a MH project. The commenter stated that 
this provision is inconsistent with the goal of the rule--HUD is giving 
IHAs greater responsibility, yet it is still reserving control and 
discretion as to how IHAs carry out the housing program. In response to 
this comment, HUD has removed this entire section. The provisions of 
Sec. 950.135, Administrative capability, will apply prior to an action 
that would result in cancellation of a development by HUD, and the IHA 
would be involved and given every opportunity to respond and appeal if 
necessary.
3. Selection of MH Homebuyers (Sec. 950.416)
    One commenter requested that the Federal preference mentioned in 
Sec. 950.416(d) be removed from this section because IHAs should select 
homebuyers with the ability to meet the obligations of the program, and 
Federal preference is in conflict with the ability to meet homebuyer 
obligations. However, as the commenter recognized, the Federal 
preference is a statutory requirement that HUD is unable to remove at 
this time. As mentioned previously in this preamble, the Office of 
Native American Programs is developing a legislative proposal and will 
consider this comment at that time.
    One commenter requested that HUD revise Sec. 950.416(e) on 
principal residency to emphasize that the determination of whether the 
home is necessary for the family's livelihood or [[Page 18181]] for 
cultural preservation be solely that of the IHA. In response to this 
comment, HUD has changed the wording on the principal residency as 
requested.
    One commenter asked HUD to streamline this section and handle many 
of these requirements in a handbook or by Board policy. HUD has 
reviewed this section and streamlined where possible; however, many of 
the requirements in this section are statutorily based and therefore 
HUD cannot change them.
    One commenter requested the inclusion of a discretionary preference 
that the local IHA would apply to handle unique situations in their 
area. On July 18, 1994 (59 FR 36616), HUD published a final rule in the 
Federal Register on Preferences for Admission to Assisted Housing. That 
rule specifically authorizes the adoption of local selection 
preferences by housing authorities in admitting some applicants. This 
rule permits IHAs to adopt preferences that respond to local housing 
needs and priorities after conducting public hearings. See 
Secs. 950.301 and 950.303 of this final rule.
4. MH Contribution (Sec. 950.419)
    One commenter suggested that the MH contribution requirement should 
be at the option of the IHA. Another commenter requested that land cost 
be determined individually by each tribe through an appraisal with a 
cap of $2500. The requirement for a MH contribution of at least $1500 
is statutory, and therefore HUD cannot remove the requirement from the 
rule. In response to these comments, however, HUD has revised this 
section to reflect the statutory requirement that the MH contribution 
be at least $1500, rather than a maximum of $1500, to allow for 
additional MH contributions by the homebuyer.
    One commenter requested that a subsequent homebuyer be given credit 
for land donated by the tribe. HUD has recently provided guidance to 
the Area ONAPs that clarifies this section of the rule. A subsequent 
homebuyer can be given credit for a land contribution by a tribe and 
not be required to provide an additional MH contribution.
5. Inspections, Responsibility for Items Covered by Warranty 
(Sec. 950.425)
    One commenter recommended that Secs. 950.425(a) (1) and (2) be 
revised to clarify that latent defects would be covered even after the 
warranty period. In response to this comment, HUD has streamlined this 
section, and this issue is now covered under the development section 
(Sec. 950.270(a)), in which HUD believes the language is clearer.
6. Homebuyer Payments--Post-1976 Projects (Sec. 950.426)
    One commenter requested that the percentage of income used for 
determining homebuyer payments be changed from 15 percent to 12 
percent. Another commenter requested that the percentage for elderly be 
changed to 10 percent. Another commenter stated that MH should have 
fixed payments, which would eliminate the need for recertification. The 
requirement to charge MH participants 15 to 25 percent of income is 
statutory, and HUD cannot change it through regulation. However, as 
mentioned above, HUD's Office of Native American Programs will consider 
these comments when it develops its legislative proposal for Native 
American Programs.
7. Maintenance, Utilities, and Use of Home (Sec. 950.428)
    HUD received two comments regarding Sec. 950.428(c) on inspections. 
One commenter requested that HUD eliminate the need for inspections. 
Another commenter stated that inspections should be based on the amount 
of equity in a homebuyer's account. In response to these comments, HUD 
has changed the requirement in the final rule for MH inspections. The 
language in the final rule states that the IHA shall conduct 
inspections of each home on a schedule developed by the IHA that 
ensures that the home is maintained in a decent, safe, and sanitary 
condition.
    One commenter requested that the language in Sec. 950.428(d) of the 
proposed rule be revised since the correction of warranty items is not 
the same as providing maintenance, and the two concepts should be 
distinct. HUD agrees, and in response to this comment HUD has revised 
this language.
    HUD received two comments on Sec. 950.428(g). One commenter stated 
that an IHA should be able to use Monthly Equity Payments Account 
(MEPA) funds for improvements without a waiver. Another commenter 
stated that the IHA, not HUD, should determine how MEPA funds can be 
used. This rule does not require an IHA to obtain approval or a waiver 
from HUD in order to allow a homebuyer to use MEPA funds for 
betterments and additions. The IHA also has the ability to determine 
whether the homebuyer needs to replenish the MEPA. Therefore, HUD has 
made no changes.
8. Operating Subsidy (Sec. 950.434)
    One commenter requested a change in the operating subsidy for 
collection losses so that the IHA could have funds in advance to repair 
vacant units because of the lack of reserves. While HUD never intended 
to provide funds for needed repairs to a vacant unit after the repairs 
were completed, that was often the case due to the budget process and 
the need for the IHA to follow through on all collection efforts prior 
to receiving funds. HUD has modified the language in the final rule and 
will provide additional guidance on the process to the Area ONAPs so 
that funds can be provided to the IHA as soon as possible.
    Two commenters requested additional subsidy in the MH program. One 
commenter requested operating subsidy for units converted for self-
sufficiency or anti-drug programs. Another requested subsidy to pay for 
administrative costs involved with using the MEPA for low-income 
housing purposes. However, HUD finds that the administrative charge in 
the MH program should be used to cover the minimal costs associated 
with the programs mentioned above.
    One commenter requested that operating subsidy be provided for 
counseling in the rental program and that all subsidy be provided at 
100 percent. HUD provides operating subsidy for the rental program 
through the Performance Funding System, and the IHA can budget for 
staff to provide counseling in the rental program if the budget can 
support this service. HUD recognizes the difficulty that IHAs 
experience when subsidy is provided at less than 100 percent. However, 
the amount of subsidy is subject to annual congressional 
appropriations, and therefore HUD is unable to guarantee funding at 100 
percent.
    Several commenters requested that HUD take into account logistical 
concerns and IHA size when developing a formula for counseling and 
training funds. HUD agrees with the comments and will take these 
factors into account when developing the plan for providing operating 
subsidy funding for counseling and training. HUD will consult IHAs 
prior to implementation.
9. Homebuyer Reserves and Accounts (Sec. 950.437)
    Several commenters stated their support for the change to use MEPA 
funds for low-income housing purposes. HUD received several other 
comments on this regulatory change. One commenter suggested that the 
use of MEPA in Sec. 950.437(b)(2)(ii) should be limited based on home 
inspections. This commenter stated that if there are maintenance items 
that need to be addressed, the IHA should not be allowed to use the 
MEPA. Another [[Page 18182]] commenter requested that the IHA be able 
to use MEPA funds for alternative types of housing aimed at middle-
income Indian families. Another commenter requested more independence 
from HUD rules in Sec. 950.437(b), but this commenter provided no 
additional information. HUD also received comments requesting 
clarification of the requirements for resident notification, eligible 
uses, and developing a formula for the percentage that can be used, as 
well as a request to change the definition of MEPA.
    HUD appreciates the comments received on this major regulatory 
change. HUD developed this section of the proposed rule based on public 
comment during the Native American consultation process in order to 
give flexibility to IHAs that wish to use the MEPA. IHAs will be 
required to obtain approval for use of the MEPA and to maintain a 
sufficient reserve of equity for homebuyers in need of maintenance. 
Hopefully, this will address the concerns of the commenters regarding 
which IHAs will be eligible to use the MEPA for other low-income 
housing purposes.
    With regard to the comment on expanding the use of the MEPA to 
middle-income families, HUD has determined that the use of MEPA funds 
must be limited to low-income housing purposes as long as the 
development is under the Annual Contributions Contract.
    HUD plans to address many of the issues such as eligible uses in 
ONAP guidebooks. In streamlining the regulation, HUD found that it was 
best to handle policy questions in this way. It is also HUD's goal to 
give IHAs the ability to make decisions on the amount of MEPA available 
for use and the amount needed for homebuyer maintenance if they permit 
homebuyers to use the reserve.
    One commenter stated that IHAs should not be required to pay 
interest on MEPA accounts if the funds are being used for other low-
income housing purposes. The commenter requested clarification on how 
the IHA would earn or pay interest to homebuyers. The current Mutual 
Help and Occupancy Agreement between the IHA and the homebuyer states 
that interest on equity accounts will be provided annually. Due to this 
provision, HUD has not changed the regulation as requested.
    One commenter requested that the first $5,000 of MH equity be used 
as a nonrefundable downpayment. HUD believes that a requirement for a 
downpayment other than the $1,500 MH contribution would violate the 
intent of the United States Housing Act of 1937.
    One commenter requested that HUD retain the Voluntary Equity 
Payment Account (VEPA). However, HUD removed the requirement for the 
VEPA to streamline the MH program. IHAs had indicated that the account 
was seldom used. If an IHA wants to continue to use a voluntary 
account, they have the ability to do so. However, without a VEPA, a 
homebuyer could continue to make additional monthly payments that would 
be deposited in the Monthly Equity Payment Account and be used to pay 
off a home in a shorter period of time, similar to the current VEPA.
10. Purchase of Home (Sec. 950.440).
    Several commenters indicated that they supported the change that 
allows the IHA to establish the purchase price schedule. One commenter 
requested national uniformity based on development cost. Another 
commenter requested clarification on whether the new regulations 
regarding purchase price would apply to existing homes. In response to 
the comments received, HUD will implement the provisions of 
Sec. 950.440(b) of the proposed rule, which provides for the IHA to set 
the purchase price for initial and subsequent homebuyers, in the final 
rule. In response to whether the rule is retroactive, the IHA can 
implement the changes in the final rule for current homebuyers with 
their consent. The current MHO Agreement may differ on several topics. 
Since this is the contract between the homebuyer and the IHA, homebuyer 
consent would be required.
    HUD received several other comments regarding Sec. 950.440. One 
commenter requested that an IHA be allowed to convey a unit and still 
perform modernization after that unit is conveyed, if prior to 
conveyance that unit was on a comprehensive improvement assistance 
program (CIAP) or 5 year Comp Grant comprehensive plan. Another 
commenter requested that IHAs be allowed to perform only emergency work 
on a paid-off unit if there was a repayment plan for the delinquency. 
Another commenter stated that they agree with the changes, but they are 
concerned about the operating cost once the unit is paid off.
    In response to these comments, HUD's Office of General Counsel 
(OGC) was asked to review the issue once more. OGC stated that they 
believe that the statute can be read to allow modernization work to be 
done on units, title to which have been conveyed, but which were 
approved for modernization funding prior to conveyance. However, once 
conveyed, the unit is not eligible for future assistance. The language 
in the regulations at 950.440 and 950.602 will be revised accordingly. 
In response to the comment that IHAs be allowed to perform only 
emergency work on a paid-off unit if there is a repayment plan for a 
delinquency, HUD believes that modernization may be required, either by 
statute or regulation, for these units, and therefore HUD has not 
changed the language in the rule. However, the IHA does have the 
ability to determine its priorities with respect to modernization work 
for all units and could limit the work to emergency items. In response 
to the comment regarding operating costs, until a unit is conveyed, the 
homebuyer is responsible for monthly payments in accordance with the 
Mutual Help and Occupancy Agreement. Therefore, the administration 
charge should still be collected to cover operating costs until the 
unit is conveyed.
    One commenter requested that zero interest be applied to rental, 
Turnkey III, and Old Mutual Help. HUD issued guidance in Notice PIH 91-
29, dated June 18, 1991, which provides for zero interest in the Old 
Mutual Help Program. HUD has also modified the Turnkey III rule at 
Sec. 950.525 to provide for zero interest. It is not necessary to 
change the interest in the rental program, since all debt relating to 
the rental program has been forgiven through the loan forgiveness 
legislation, and since tenants are not charged interest with their 
housing payments.
    One commenter requested that Sec. 940.440(e)(6) be changed to allow 
an IHA to use proceeds from the sale for middle-income families. 
Recently, HUD's Office of General Counsel stated that there are no 
statutory restrictions that would prohibit the amendment of an 
Administrative Use Agreement to allow proceeds from the sale of 
homeownership units to be used for other housing purposes, including 
purposes other than for lower income housing. However, any proceeds of 
sale must still be used in connection with low- and very low-income 
persons. Therefore, HUD has not changed the language in the rule.
11. Termination of MHO Agreement (Sec. 950.446)
    One commenter stated that Sec. 950.446(f)(3) suggests that the IHA 
is the entity that evicts. This commenter recommended that this section 
should instead indicate that the IHA initiates an eviction action. HUD 
agrees with this comment and has made the change. [[Page 18183]] 
12. Succession (Sec. 950.449)
    One commenter stated that this is perhaps the most important and 
significant change to the Indian Housing regulations. Another commenter 
supported this change and stated it was in agreement with the IHA. 
Another commenter stated that ``at the very least, there should be a 
provision that provides that the designation of a successor by the 
homebuyer must be approved by tribal government.'' Although HUD 
supports tribal involvement in the program, HUD believes that the 
homebuyer should determine the successor to their unit whenever 
possible, subject to any restrictions by the tribe on succession to the 
land.
13. Conversion (Secs. 950.445 and 950.458)
    HUD received several comments on the conversion process. One 
commenter requested that the requirement for an actual development cost 
certificate (ADCC) be eliminated, since this is a lengthy process and 
holds up conversions. Another commenter requested that HUD eliminate 
the requirement that a conversion application be in a form required by 
HUD. Another commenter requested that the MH contribution not be 
required in a conversion and that the lease process should not hold up 
a conversion. There was a general comment that HUD does not allow 
conversion.
    In response to these comments, HUD has eliminated the need for an 
ADCC prior to conversion and the requirement that the conversion 
package be in a form required by HUD. HUD has not changed the 
requirement for a MH contribution, since it is a statutory requirement 
for every MH unit. However, the contribution can be in the form of 
land. HUD encourages the use of the conversion process whenever it is 
beneficial for an IHA. If an IHA is having difficulty with the 
conversion process, it should contact the Office of Native American 
Programs in Washington, D.C., at the address specified in the ``For 
Further Information Contact'' section, above.

F. Subpart F--Self-Help Development in the Mutual Help Homeownership 
Opportunity Program

    HUD received no comments on this subpart. However, HUD has made 
additional revisions in the final rule to streamline this program.

G. Subpart G--Turnkey III Program

    HUD only received one comment on the Turnkey III subpart of the 
rule. This commenter requested that a zero interest rate apply to this 
program, as it does with Mutual Help Homeownership Opportunity Program. 
HUD had made this change in the proposed rule at Sec. 950.525, and this 
change is included in this final rule.
    Due to the fact that there are currently only 18 IHAs managing the 
Turnkey III Program, and in response to general public support for 
additional streamlining of the entire regulation, HUD has attempted to 
further reduce the regulatory requirements of this program.

H. Subpart H--Lead-Based Paint Poisoning Prevention

    With this final rule, HUD makes no changes to the existing 
regulations for lead-based paint poisoning prevention, other than to 
move them from part 905 to new part 950. However, HUD is republishing 
the existing regulations in this rule in an effort to consolidate all 
the Indian housing regulations.

I. Subpart I--Modernization

1. Comprehensive Improvement Assistance Program and Comprehensive Grant 
Program
    HUD received many comments regarding the changes proposed for the 
Comprehensive Improvement Assistance Program (CIAP) and Comprehensive 
Grant Program (CGP). The comments were overwhelmingly supportive of 
HUD's efforts to simplify the programs. Many of the changes requested 
on CGP were implemented in the Public and Indian Housing Amendments to 
the CGP final rule, which was published in the Federal Register on 
August 30, 1994 (59 FR 44810).
    One commenter indicated that CIAP should be an entitlement based on 
age and number of units, and that the formula must take into account 
small IHAs. However, the United States Housing Act of 1937 specifically 
provides for two different modernization programs based on housing 
authority size: a formula funded program for those with 250 or more 
units, and a discretionary application program for those with fewer 
than 250 units. Therefore, HUD could not implement this recommendation 
without a legislative amendment.
    Another commenter recommended that CIAP have a five-year plan, like 
CGP. However, as stated above, funding of a CIAP is made through a 
competitive application process that does not allow forecasting funding 
availability for future years, as does the CGP. Although HUD encourages 
IHAs to plan for modernization needs, a five-year plan would not serve 
the same purpose as in the CGP.
    One commenter indicated that CIAP funds for IHAs should be a 
separate set-aside from Public Housing. Currently, there is only one 
appropriation for Public and Indian Housing. Therefore, implementing 
this recommendation would require a legislative change.
    A commenter suggested that the process of moving CIAP/CGP funds to 
resident organizations should be in regulations. However, HUD finds 
that regulating a process for transferring funds to resident 
organizations would decrease local flexibility, and therefore HUD has 
not implemented this recommendation.
2. Special requirements for Turnkey III and Mutual Help developments 
(Sec. 950.602)
    Many commenters made recommendations regarding this section of 
Subpart I and a cross reference in the Mutual Help Homeownership 
Opportunity Program, Subpart E, Sec. 950.440. Both references discuss 
the use of modernization funds for paid-off and conveyed units. In the 
final CGP rule (published in the Federal Register on August 30, 1994 
(59 FR 44810)), HUD removed the regulatory prohibition against 
modernizing Mutual Help units that are paid off but not conveyed. The 
preamble to that rule stated:

    The Department believes that the only regulatory restrictions on 
the modernization of paid-off Mutual Help units should be that: 
title has not been conveyed to the homebuyer; where the homebuyer 
has a delinquency at the end of the amortization period, non-
emergency modernization work shall not be done until all 
delinquencies are repaid; and, the units shall be identified in the 
Comprehensive Plan (including the Physical Needs Assessments and 
Five-Year Action Plan). The prohibition against performing 
modernization work on conveyed units is based on a determination by 
the Department's Office of General Counsel that statutory authority 
for the expenditure of modernization funds is limited to existing 
public housing units. Once title is conveyed and the unit is no 
longer covered by the ACC, the unit is no longer a public housing 
unit and there is no legal authority for the expenditure of 
modernization funds provided under section 14 of the Act. IHAs that 
wish to modernize conveyed Mutual Help units must obtain funding 
from another source; e.g., proceeds from the sale of homeownership 
units or Bureau of Indian Affairs Housing Improvement Program funds.

(59 FR 44811).
    A group of IHAs consolidated their comments and offered two 
alternative recommendations for this rule's provisions on conveyed 
units at [[Page 18184]] Sec. Sec. 950.602 and 950.440. They recommended 
that IHAs be allowed to convey a unit and still perform modernization 
after the unit is conveyed, if prior to conveyance the work was in an 
approved CIAP application or CGP Five-Year Plan, and the work is done 
within five years. Alternatively, they recommended that IHAs have the 
option to delay conveyance for up to five years to conduct 
modernization, but only with the written consent of the homebuyer.
    Another IHA commented that conveyed units should be eligible for 
modernization work. The IHA argued that first priority should go to 
homebuyers who have shown good faith by paying for their homes and now 
have the deeds to the homes, and not to those who, because of a 
delinquent status, have not received their conveyance documents. The 
IHA recommended that in the renovation of paid-off units, IHAs should 
have the discretion to decide which units to modernize, whether the 
unit has been conveyed or not.
    Two IHAs recommended that HUD allow old Mutual Help and Turnkey III 
units that have been conveyed to be brought back into the programs for 
the purpose of comprehensive modernization. The IHAs considered the 
proposed change to be unfair to homebuyers in paid-off units that were 
not included in the Comprehensive Plans because paid-off units were 
ineligible under the original regulation. Many of those units were 
conveyed before the proposed rule was published, which provided that 
units that are paid off but not conveyed are eligible for 
modernization. The IHAs argued that the conveyed units deserve the same 
consideration and have the same physical improvement needs, such as 
handicapped accessibility, lead-based paint testing, and meeting 
current codes.
    As discussed in the preamble language for Subpart E, the Office of 
General Counsel (OGC) has advised that the statute can be read to allow 
modernization work to be done on units, title to which have been 
conveyed, but which were approved for modernization funding prior to 
conveyance. Therefore, HUD has revised the rule in response to the 
comments submitted on this issue. Although title can be conveyed once 
the unit has been approved for modernization funding, OGC recommends 
that IHAs delay conveyance until modernization work is completed on a 
Mutual Help unit.
    In response to the comments requesting that modernization be 
eligible for a Mutual Help unit that has been conveyed but not approved 
for modernization funding prior to conveyance, the prohibition is based 
on the determination that statutory authority for the expenditure of 
funds is limited to existing public housing units. Once title is 
conveyed and the unit is no longer owned by an IHA and covered by the 
ACC, the unit is no longer a public housing unit, and there is no legal 
authority for the expenditure of modernization funds provided under 
section 14 of the United States Housing Act of 1937.
    Two commenters recommended that when units become paid off, the 
operating costs should be charged to the Comprehensive Grant Program. 
Another commenter recommended that the rule be revised to specify 
clearly that during the period after a unit becomes paid off, until it 
is modernized and title is conveyed, the homebuyer is responsible for 
the administration charge. In response to the first two comments, the 
United States Housing Act of 1937 requires that the homebuyer make 
monthly payments of at least an administration charge to cover monthly 
operating expenses on the dwelling. The second commenter was correct in 
the statement that the administration charge shall be made by a 
homebuyer until conveyance. HUD has included language to clarify this 
requirement in Sec. 950.440 of the rule.
3. Contracting Requirements (CIAP) (Sec. 950.642) and Conduct of 
Modernization Activities (CGP) (Sec. 950.681)
    One commenter stated that in order to assist new contractors in 
getting established an IHA should be allowed to give preference to new 
contractors and pay their licensing and bonding fees. A change to the 
contracting requirements would conflict with 24 CFR part 85, which 
contains the government-wide administrative requirements for grants. 
Paying licensing and bonding fees would give an unfair advantage to new 
contractors and would not provide fair and open competition as required 
by Part 85.
4. Eligible Costs (Sec. 950.666)
    One commenter agreed with the increase from 10 percent to 20 
percent in the cost limitation on management improvements in 
Sec. 950.666(m)(2), but indicated that the cost limitation on 
administrative costs should also be increased from 7 percent to 10 
percent. HUD appreciates the comment in support of the change in the 
cost limitation for management improvement. The cost limitation on 
administrative costs was increased from 7 percent to 10 percent of the 
annual grant in the CGP final rule published in the Federal Register on 
August 30, 1994 (59 FR 44810), and effective September 29, 1994. That 
change is also reflected in this rule.
    One commenter stated that the proposed rule is too restrictive with 
respect to room additions needed for handicapped accessibility. Three 
commenters recommended that the rule include additions to the living 
space in a dwelling unit as an eligible work item under CGP and CIAP. 
HUD implemented this recommendation for the CGP final rule cited above 
at Sec. 905.666(c). That rule provides that ``[a]dditional dwelling 
space may be added to existing units.'' A similar change has been made 
in this CIAP final rule at Sec. 950.615(b).
5. Allocation of Assistance (Sec. 950.669)
    A regional association of IHAs commended the proposed rule for 
allowing IHAs to hold public hearings earlier in the year using the 
prior year's formula amount for planning purposes. HUD appreciates the 
comment in support of this change.
6. Comprehensive Plan (Including Five-Year Action Plan) (Sec. 950.672).
    One commenter anticipated a problem with unrealistically raising 
expectations by consulting with the residents on all five years of the 
Comprehensive Plan. The commenter recommended limiting resident 
participation to years when funds are available. However, section 14 of 
the United States Housing Act of 1937 requires that residents affected 
by the planned activities be given the opportunity to review and 
provide their input. This rule (Sec. 950.672(b)(5)) requires that at 
the annual Public Hearing the IHA present ``information on the 
Comprehensive Plan/Annual Submission and the status of prior approved 
programs.''
7. HUD Review and Approval of Comprehensive Plan (Including Five-Year 
Action Plan) (Sec. 950.675).
    One commenter wanted to be able to maintain flexibility to move 
work items between years of the CGP Action Plan and have the ability to 
switch line items within the original scope of work. HUD has included 
the ability to undertake any of the work identified in any of the other 
four years of the latest approved Five-Year Action Plan, current Annual 
Statement, or previously approved CIAP budgets in Sec. 950.675(c) of 
the CGP final rule cited above. [[Page 18185]] 

J. Subpart J--Operating Subsidy

1. General Comments.
    One commenter requested that the calculation for the PFS be changed 
because it is too complicated. Another commenter stated that the PFS 
should be designed specifically for IHAs. This commenter suggested that 
HUD should initiate a national study on PFS and how to redesign it. HUD 
recognizes the concerns regarding the PFS and how it relates to the 
Indian Housing program. However, any change in the PFS would require 
statutory and/or regulatory changes. At this time, HUD is studying the 
entire Indian Housing program. In this process, HUD will address any 
recommendation for change in this area.
    Another commenter stated that IHAs should be provided with 
additional subsidy to cover the costs of implementing part 85. However, 
the PFS is designed to cover administrative costs of a well-managed 
IHA. In the Mutual Help program, the administration charge is used to 
cover an IHA's administrative expenses. There are no additional 
congressional appropriations to cover these costs, and therefore HUD 
cannot change the rule to accommodate this request.
2. Other Costs (Sec. 950.720).
    A commenter stated that additional operating subsidy should be 
provided for user fees for the Mutual Help program. Section 122(c) of 
the Housing and Community Development Act of 1992 amended Section 203 
of the Indian Housing Act of 1988 (Pub. L. 100-358, approved June 29, 
1988) to provide user fees to municipalities specifically for each 
rental housing unit. The amendment did not include Mutual Help, and a 
legislative change would be necessary to provide this funding.
3. Operating Reserves (Sec. 950.740)
    One commenter requested that HUD maintain the requirement for a 
maximum operating reserve in the rental program. However, HUD is making 
efforts to streamline regulations and give control of project 
operations to IHAs. This includes the determination by an IHA of the 
amount of reserves needed for efficient program operation. For that 
reason, HUD has eliminated the requirement for the maximum operating 
reserve in both the rental and Turnkey III programs.
4. Operating Budget Submission and Approval (Sec. 950.745)
    A commenter recommended that HUD revise the Handbook early in 
Fiscal Year (FY) 1995 to implement the budget submission change. On 
October 4, 1994, HUD issued HUD Notice 94-72, which implemented the 
revised procedures regarding operating budget submission. HUD has also 
modified this rule slightly to reflect the budget submission changes.

K. Subpart K--Energy Audits, Energy Conservation Measures, and Utility 
Allowances General Changes

1. General Comment
    HUD received a comment suggesting that this entire section should 
be simplified, and it should reflect less HUD reviews and approvals. In 
response to this comment, HUD has reviewed the section and streamlined 
when possible. HUD has also removed many of the reviews and approvals 
mentioned by the commenter.
2. Energy Performance Contracts (Sec. 950.825)
    One commenter requested that the word ``shall'' in the following 
sentence of Sec. 950.825(a) be removed: ``Energy performance 
contracting shall be conducted using one of the following methods of 
procurement * * *.'' However, removal of the word ``shall'' would 
eliminate the need to conduct energy audits. HUD finds that its 
policies in this section support national energy conservation goals, 
and the elimination of the audits would not meet HUD's goals of 
reducing energy consumption or operating costs.

L. Subpart L--Operation of Projects After Expiration of Initial ACC 
Term

    With this final rule, HUD makes no changes to the existing 
regulations for the operation of projects after the expiration of the 
initial ACC term, other than to move them from part 905 to new part 
950. However, HUD is republishing the existing regulations in this rule 
in an effort to consolidate all the Indian housing regulations.

M. Subpart M--Disposition or Demolition of Projects

    HUD received no comments on this subpart. HUD had taken steps to 
streamline this subpart in the proposed rule, and has made no 
additional changes in this final rule.

N. Subpart N--Miscellaneous

    Subpart N was incorporated into subpart J (Sec. 950.772) of the 
final rule.

O. Subpart O--Resident Participation and Opportunities General 
Provisions

    A final rule for the Public and Indian Housing Amendment to the 
Tenant Participation and Tenant Opportunities in Public and Indian 
Housing was published in the Federal Register on August 24, 1994 (59 FR 
43622). With today's final rule, HUD makes no changes to the Resident 
Participation and Opportunities regulations, other than to move them 
from part 905 to new part 950. However, HUD is republishing the 
existing regulations in today's rule in an effort to consolidate all 
the Indian housing regulations.

P. Subpart P--Section 5(h) Homeownership Program

A final rule for the Section 5(h) Homeownership Program for Public and 
Indian Housing was published in the Federal Register on November 10, 
1994 (59 FR 56354). With today's final rule, HUD makes no changes to 
the Section 5(h) Homeownership regulations for Indian housing, other 
than to move them from part 905 to new part 950. However, HUD is 
republishing the existing regulations in today's rule in an effort to 
consolidate all the Indian housing regulations.

Q. Subpart R--Family Self-Sufficiency

    HUD received no comments on this subpart. As stated in the proposed 
rule, HUD made very few changes to the regulation implementing the FSS 
program because the current regulation reflects the statutory 
provisions of section 23 of the United States Housing Act of 1937. HUD 
has revised the final rule to eliminate definitions that are included 
in Sec. 950.102.

IV. Other Matters

Finding of No Significant Impact

    At the time of the development of the proposed rule, a Finding of 
No Significant Impact with respect to the environment was made in 
accordance with HUD regulations at 24 CFR part 50 that implement 
section 102(2)(C) of the National Environmental Policy Act of 1969 (42 
U.S.C. 4332). The Finding of No Significant Impact remains applicable 
to this final rule and is available for public inspection and copying 
during regular business hours (7:30 a.m. to 5:00 p.m. weekdays) in the 
Office of the Rules Docket Clerk, Room 10272, 451 Seventh Street, S.W., 
Washington, D.C. 20410.

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 
makes a number of amendments to the Indian Housing Consolidated Program 
regulations to simplify program [[Page 18186]] processes, reduce the 
number of regulatory requirements, and to provide more flexibility to 
local tribal and Indian housing authority officials in the 
administration of the Indian Housing program.

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.

Executive Order 12606, the Family

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

Regulatory Agenda

    This rule was listed as sequence number 1894 in HUD's Semiannual 
Regulatory Agenda published on November 14, 1994 (59 FR 57632, 57638) 
in accordance with Executive Order 12866 and the Regulatory Flexibility 
Act.

Catalog of Domestic Assistance

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

List of Subjects

24 CFR Part 905

    Aged, Energy conservation, Grant programs--housing and community 
development, Grant programs--Indians, Indians, Homeownership, 
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 950

    Aged, Grant programs--housing and community development, Grant 
programs--Indians, Disability, Homeownership, Indians, Low and moderate 
income housing, Public housing, Reporting and recordkeeping 
requirements.

    Accordingly, and under the authority of 42 U.S.C. 3535(d), title 24 
of the Code of Federal Regulations is amended as follows:

PART 905--[REMOVED AND RESERVED]

    1. Part 905 is removed and reserved.
    2. Part 950 is added to read as follows:

PART 950--INDIAN HOUSING PROGRAMS

Subpart A--General

Sec.
950.101  Applicability and scope.
950.102  definitions.
950.110  Assistance from Indian Health Service and Bureau of Indian 
Affairs.
950.115  Applicability of civil rights requirements.
950.117  Displacement, relocation, and acquisition.
950.120  Compliance with other Federal requirements.
950.125  Establishment of IHAs pursuant to State law.
950.126  Establishment of IHAs by tribal ordinance.
950.130  IHA Commissioners who are tenants or homebuyers.
950.135  Administrative capability.

Subpart B--Procurement

950.160  Procurement standards.
950.165  Methods of procurement.
950.170  Other requirements applicable to development contracts.
950.172  Wage rates.
950.175  Indian preference requirements.
950.190  Insurance.
950.195  Lead-based paint liability insurance coverage.

Subpart C--Development

950.200  Roles and responsibilities of Federal agencies.
950.205  Allocation.
950.207  Eligibility.
950.210  Authority for proceeding without HUD approval.
950.215  Production methods.
950.220  Total development cost.
950.225  Application.
950.227  Initial development grant approval and ACC execution.
950.229  Expenditure of funds.
950.231  Project coordination.
950.235  Site selection criteria.
950.240  Types of interest in land.
950.245  Appraisals.
950.247  Environment.
950.250  Site approval.
950.255  Design criteria.
950.260  Construction stage development cost budget and 
certifications.
950.265  Construction and inspections.
950.270  Construction completion and settlement.
950.275  Warranty inspections and enforcement.
950.280  Correcting deficiencies.
950.285  Fiscal closeout.

Subpart D--Operation

950.301  Admission policies.
950.303  Selection preferences.
950.304  Federal preferences: general.
950.305  Federal preferences: involuntary displacement.
950.306  Federal preference: substandard housing.
950.307  Federal preference: rent burden.
950.308  Exemption from eligibility requirements for police officers 
and other security personnel.
950.310  Restrictions on assistance to noncitizens.
950.315  Initial determination, verification, and reexamination of 
family income and composition.
950.320  Determination of rents and homebuyer payments.
950.325  Total tenant payment--Rental and Turnkey III programs.
950.335  Rent and homebuyer payment collection policy.
950.340  Grievance procedures and leases.
950.345  Maintenance and improvements.
950.346  Fire safety.
950.360  IHA employment practices.

Subpart E--Mutual Help Homeownership Opportunity Program

950.401  Scope and applicability.
950.416  Selection of MH homebuyers.
950.419  MH contribution.
950.422  Commencement of occupancy.
950.425  Inspections, responsibility for items covered by warranty.
950.426  Homebuyer payments before March 9, 1976.
950.427  Homebuyer payments for projects under ACC on or after March 
9, 1976.
950.428  Maintenance, utilities, and use of home.
950.431  Operating reserve.
950.432  Operating budget submission and approval.
950.434  Operating subsidy.
950.437  Homebuyer reserves and accounts.
950.440  Purchase of home.
950.443  IHA homeownership financing.
950.446  Termination of MHO Agreement.
950.449  Succession.
950.452  Miscellaneous.
950.453  Counseling of homebuyers.
950.455  Conversion of rental projects.
950.458  Conversion of Mutual Help projects to rental program.

Subpart F--Self-Help Development in the Mutual Help Homeownership 
Opportunity Program

950.470  Purpose and applicability.
950.475  Basic requirements.
950.480  Self-Help agreement.
950.485  Application.
950.490  Development program.
950.495  Default of Self-Help agreement.

Subpart G--Turnkey III Program

950.501  Introduction.
950.503  Conversion of Turnkey III developments. [[Page 18187]] 
950.505  Eligibility and selection of Turnkey III homebuyers.
950.507  Homebuyer Ownership Opportunity Agreements (HOOA).
950.509  Responsibilities of homebuyer.
950.511  Homebuyers' association (HBA).
950.512  Homeowners' association (HOA).
950.513  Break-even amount and application of monthly payments.
950.515  Monthly operating expense.
950.517  Earned Home Payments Account (EHPA).
950.519  Nonroutine Maintenance Reserve (NRMR).
950.521  Operating reserve.
950.523  Operating subsidy.
950.525  Purchase price and methods of purchase.
950.529  Termination of Homebuyer Ownership Opportunity Agreement.

Subpart H--Lead-Based Paint Poisoning Prevention

950.551  Purpose and applicability.
950.553  Testing and abatement applicable to development.
950.555  Testing and abatement applicable to modernization.
950.560  Notification.
950.565  Maintenance obligation; defective paint surfaces.
950.570  Procedures involving EBLs.
950.575  Compliance with tribal, State, and local laws.
950.580  Monitoring and enforcement.
950.585  Insurance coverage.

Subpart I--Modernization Program General Provisions

950.600  Purpose and applicability.
950.601  Allocation of funds under section 14.
950.602  Special requirements for Turnkey III and Mutual Help 
developments.
950.603  Modernization and energy conservation standards.

Comprehensive Improvement Assistance Program (For IHAs That Own or 
Operate Fewer than 250 Indian Housing Units)

950.609  Purpose.
950.615  Eligible costs.
950.618  Procedures for obtaining approval of a modernization 
program.
950.624  Resident and homebuyer participation.
950.635  Initiation of modernization activities.
950.639  Fund requisitions.
950.642  Contracting requirements.
950.645  On-site inspections.
950.648  Budget revisions.
950.651  Progress reports.
950.654  HUD review of IHA performance.
950.657  Fiscal closeout.

Comprehensive Grant Program (For IHAs That Own or Operate 250 or More 
Indian Housing Units)

950.660  Purpose.
906.666  Eligible costs.
950.667  Reserve for emergencies and disasters.
950.669  Allocation of assistance.
950.672  Comprehensive Plan (including Five-Year Action Plan).
950.675  HUD review and approval of Comprehensive Plan (including 
action plan).
950.678  Annual Submission of activities and expenditures.
950.681  Conduct of modernization activities.
950.684  IHA Performance and Evaluation Report.
950.687  HUD review of IHA performance.

Subpart  J--Operating Subsidy

950.701  Purpose and applicability.
950.705  Determination of amount of operating subsidy under PFS.
950.710  Computation of Allowable Expense Level.
950.715  Computation of Utilities Expense Level.
950.720  Other costs.
950.725  Projected operating income level.
950.730  Adjustments.
950.735  Transition funding for excessive high-cost IHAs.
950.740  Operating reserves.
950.745  Operating budget submission and approval.
950.750  Payment procedure for operating subsidy under PFS.
950.755  Payments of operating subsidy conditioned upon 
reexamination of income of families in occupancy.
950.760  Determining actual occupancy percentage.
950.770  Comprehensive Occupancy Plan (COP) requirements.
950.772  Financial management systems, monitoring and reporting.
950.774  Operating subsidy eligibility for projects owned by IHAs in 
Alaska.

Subpart K--Energy Audits, Energy Conservation Measures, and Utility 
Allowances

950.801  Purpose and applicability.

Energy Audits and Energy Conservation Measures

950.805  Requirements for energy audits.
950.810  Order of funding.
950.812  Funding.
950.815  Energy conservation equipment and practices.
950.822  Compliance schedule.
950.825  Energy performance contracts.

Individual Metering of Utilities

950.840  Individually metered utilities.
950.842  Benefit/cost analysis.
950.844  Funding.
950.845  Order of conversion.
950.846  Actions affecting residents.
950.849  Waivers for similar projects.
950.850  Reevaluations of mastermeter systems.

Resident Utility Allowances

950.860  Applicability.
950.865  Establishment of utility allowances by IHAs.
950.867  Categories for establishment of allowances.
950.869  Period for which allowances are established.
950.870  Standards for allowances for utilities.
950.872  Surcharges for excess consumption of IHA-furnished 
utilities.
950.874  Review and revision of allowances.
950.876  Individual relief.

Subpart L--Operation of Projects After Expiration of Initial ACC Term

950.901  Purpose and applicability.
950.903  Continuing eligibility for operating subsidy; ACC 
extension.
950.905  ACC extension in absence of current operating subsidy.
950.907  HUD approval of disposition or demolition.

Subpart M--Disposition or Demolition of Projects

950.921  Purpose and applicability.
950.923  General requirements for HUD approval of disposition or 
demolition.
950.925  Resident organization opportunity to purchase.
950.927  Specific criteria for HUD approval of disposition requests.
950.928  Specific criteria for HUD approval of demolition requests.
950.931  IHA application for HUD approval.
950.933  Use of proceeds.
950.935  Replacement housing plan.

Subpart N--[Reserved]

Subpart O--Resident Participation and Opportunities General Provisions

950.960  Purpose.
950.961  Applicability and scope.
950.962  Definitions.
950.963  HUD's role in activities under this subpart.
950.964  Resident participation requirements.
950.965  Funding resident participation.

Tenant Opportunities Program

950.966  General.
950.967  Eligible TOP activities.
950.968  Technical assistance.
950.969  Resident management requirements.
950.970  Management specialist.
950.971  Operating subsidy, preparation of operating budget, 
operating reserves, and retention of excess revenues.
950.972  TOP Audit and administrative requirements.

Family Investment Centers (FIC) Program

950.980  General.
950.982  Eligibility.
950.983  FIC activities.
950.984  IHA role in activities under this part.
950.985  HUD Policy on training, employment, contracting, and 
subcontracting of Indian housing residents.
950.986  Grant set-aside assistance.
950.987  Resident compensation.
950.988  Administrative requirements.

Subpart P--Section 5(h) Homeownership Program

950.1001  Purpose.
950.1002  Applicability.
950.1003  General authority for sale.
950.1004  Fundamental criteria for HUD approval. [[Page 18188]] 
950.1005  Resident consultation and involvement.
950.1006  Property that may be sold.
950.1007  Methods of sale and ownership.
950.1008  Purchaser eligibility and selection.
950.1009  Counseling, training, and technical assistance.
950.1010  Nonpurchasing residents.
950.1011  Nonroutine maintenance reserve.
950.1012  Purchase prices and financing.
950.1013  Protection against fraud and abuse.
950.1014  Limitation on resale profit.
950.1015  Use of sale proceeds.
950.1016  Replacement housing.
950.1017  Records, reports, and audits.
950.1018  Submission and review of homeownership plan.
950.1019  HUD approval and IHA-HUD implementing agreement.
950.1020  Content of homeownership plan.
950.1021  Supporting documentation.

Subpart Q--[Reserved]

Subpart R--Family Self-Sufficiency

950.3001  Purpose, scope, and applicability.
950.3002  Program objectives.
950.3003  Definitions.
950.3004  Basic requirements of the FSS program.
950.3011  Action Plan.
950.3012  Program Coordinating Committee (PCC).
950.3013  FSS family selection procedures.
950.3014  On-site facilities.
950.3020  Program implementation.
950.3021  Administrative fees.
950.3022  Contract of participation.
950.3024  Total tenant payment and increases in family income.
950.3025  FSS account.
950.3030  Reporting.

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

Subpart A--General


Sec. 950.101  Applicability and scope.

    (a) General. (1) Under title II of the United States Housing Act of 
1937, as added by the Indian Housing Act of 1988 (42 U.S.C. 1437aa, et 
seq.), the Department of Housing and Urban Development (HUD) provides 
financial and technical assistance to Indian Housing Authorities 
(IHAs), for the development and operation of low-income housing 
projects in Indian areas. This part is applicable to such projects 
developed or operated by an IHA in an Indian area, as defined in 
Sec. 950.102.
    (2) If assistance under this part is not available to a low-income 
family because the family desires housing in an area within which no 
IHA is authorized to provide housing, or if for any other reason a 
family desires housing assistance other than under this part, a family 
may seek housing assistance under other HUD programs. (See 24 CFR part 
203, chapter VIII of this title, as well as the remainder of chapter IX 
of this title.)
    (b) Other HUD regulations and requirements. The provisions of this 
part are a complete statement of HUD regulations affecting the 
development and operation of low-income housing by IHAs except as 
supplemented by parts in other chapters of this title that are 
referenced in this part.


Sec. 950.102  Definitions.

    Act. The United States Housing Act of 1937 (42 U.S.C. 1437-1440).
    Action plan. A plan of the actions to be funded by an IHA over a 
period of five years (including an IHA's proposed allocation of its 
modernization funds to a reserve established under Sec. 950.666(a)(3)) 
to make the necessary physical and management improvements identified 
in the IHA's comprehensive plan under subpart I of this part. The plan 
shall be based upon HUD's and the IHA's best estimates of the funding 
reasonably expected to become available over the next five-year period. 
The action plan is updated annually to reflect a rolling five-year 
base.
    Adjusted income. Annual income less the following allowances, 
determined in accordance with HUD instructions:
    (1) $480 for each dependent;
    (2) $400 for any elderly family;
    (3) For any family that is not an elderly family but has a 
handicapped or disabled member other than the head of household or 
spouse, handicapped assistance expenses in excess of three percent of 
annual income, but this allowance may not exceed the employment income 
received by family members who are 18 years of age or older as a result 
of the assistance to the handicapped or disabled person;
    (4) For any elderly family--
    (i) That has no handicapped assistance expenses (as defined in 
paragraph 3 of this definition), an allowance for medical expenses (as 
defined in this section) equal to the amount by which the medical 
expenses exceed three percent of annual income;
    (ii) That has handicapped assistance expenses greater than or equal 
to three percent of annual income, an allowance for handicapped 
assistance expenses computed in accordance with paragraph (3) of this 
definition, plus an allowance for medical expenses that is equal to the 
family's medical expenses; and
    (iii) That has handicapped assistance expenses that are less than 
three percent of annual income, an allowance for combined handicapped 
assistance expenses and medical expenses that is equal to the amount by 
which the sum of these expenses exceeds three percent of annual income;
    (5) Child care expenses, as defined in this section; and
    (6) Excessive travel expenses, not to exceed $25 per family per 
week, for employment- or education-related travel.
    Administration charge. In Mutual Help projects, the amount budgeted 
per-unit per-month for operating expense, exclusive of the cost of HUD-
approved expenditures for which operating subsidy is being provided in 
accordance with Sec. 950.434 (see Sec. 950.427(b)).
    Allowable expense level. In rental projects, the per-unit per-month 
dollar amount of expenses (excluding utilities and expenses allowed 
under Sec. 950.720) computed in accordance with Sec. 950.710, which is 
used to compute the amount of operating subsidy.
    Allowable utilities consumption level (AUCL). In rental projects, 
the amount of utilities expected to be consumed per-unit per-month by 
the IHA during the requested budget year, which is equal to the average 
amount consumed per-unit per-month during the rolling base period.
    Annual contributions contract (ACC). A contract under the Act 
between HUD and the IHA containing the terms and conditions under which 
HUD assists the IHA in providing decent, safe, and sanitary housing for 
low-income families. The ACC shall be in a form prescribed by HUD under 
which HUD agrees to provide assistance in the development, 
modernization, and/or operation of a low-income housing project under 
the Act, and the IHA agrees to develop, modernize, and operate the 
project in compliance with all provisions of the ACC and the Act, and 
all HUD regulations and implementing requirements and procedures.
    Annual income. Annual income is the anticipated total income from 
all sources received by the family head and spouse (even if temporarily 
absent) and by each additional member of the family, including all net 
income derived from assets, for the 12-month period following the 
effective date of the initial determination or reexamination of income, 
exclusive of certain types of income as provided in paragraph (2) of 
this definition.
    (1) Annual income includes, but is not limited to:
    (i) The full amount, before any payroll deductions, of wages and 
salaries, overtime pay, commissions, fees, tips and bonuses, and other 
compensation for personal services;
    (ii) The net income from operation of a business or profession. 
Expenditures [[Page 18189]] for business expansion or amortization of 
capital indebtedness shall not be used as deductions in determining net 
income. An allowance for depreciation of assets used in a business or 
profession may be deducted, based on straight line depreciation, as 
provided in Internal Revenue Service regulations. Any withdrawal of 
cash or assets from the operation of a business or profession will be 
included in income, except to the extent the withdrawal is 
reimbursement of cash or assets invested in the operation by the 
family;
    (iii) Interest, dividends, and other net income of any kind from 
real or personal property. Expenditures for amortization of capital 
indebtedness shall not be used as deductions in determining net income. 
An allowance for depreciation is permitted only as authorized in 
paragraph (1)(ii) of this definition. Any withdrawal of cash or assets 
from an investment will be included in income, except to the extent the 
withdrawal is reimbursement of cash or assets invested by the family. 
Where the family has net family assets in excess of $5,000, annual 
income shall include the greater of the actual income derived from all 
net family assets or a percentage of the value of such assets based on 
the current passbook savings rate as determined by HUD;
    (iv) The full amount of periodic payments received from social 
security, annuities, insurance policies, retirement funds, pensions, 
disability, or death benefits and other similar types of periodic 
receipts, including a lump-sum payment for the delayed start of a 
periodic payment (but see paragraph (2)(xii) of this definition);
    (v) Payments in lieu of earnings, such as unemployment and 
disability compensation, worker's compensation, and severance pay (but 
see paragraph (2)(iii) of this definition);
    (vi) Welfare assistance. If the welfare assistance payment includes 
an amount specifically designated for shelter and utilities that is 
subject to adjustment by the welfare assistance agency in accordance 
with the actual cost of shelter and utilities, the amount of welfare 
assistance income to be included as income shall consist of:
    (A) The amount of the allowance or grant exclusive of the amount 
specifically designated for shelter or utilities; plus
    (B) The maximum amount that the welfare assistance agency could, in 
fact, allow the family for shelter and utilities. If the family's 
welfare assistance is ratably reduced from the standard of need by 
applying a percentage, the amount calculated under paragraph (1)(vi)(B) 
of this definition shall be the amount resulting from one application 
of the percentage;
    (vii) Periodic and determinable allowances, such as alimony and 
child support payments, and regular contributions or gifts received 
from persons not residing in the dwelling; and
    (viii) All regular pay, special pay, and allowances of a member of 
the Armed Forces (but see paragraph (2)(vii) of this definition).
    (2) Annual income does not include the following:
    (i) Income from employment of children (including foster children) 
under the age of 18 years;
    (ii) Payments received for the care of foster children;
    (iii) Lump-sum additions to family assets, such as inheritances, 
insurance payments (including payments under health and accident 
insurance and worker's compensation), capital gains, and settlement for 
personal or property losses (but see paragraph (1)(v) of this 
definition);
    (iv) Amounts received by the family that are specifically for, or 
in reimbursement of, the cost of medical expenses for any family 
member;
    (v) Income of a live-in aide;
    (vi) Amounts of educational scholarships paid directly to the 
student or to the educational institution, and amounts paid by the 
Government to a veteran, for use in meeting the costs of tuition, fees, 
books, equipment, materials, supplies, transportation, and 
miscellaneous personal expenses of the student. Any amount of such 
scholarship or payment to a veteran that is made available for 
subsistence is to be included in income;
    (vii) The special pay to a family member serving in the Armed 
Forces who is exposed to hostile fire;
    (viii) (A) Amounts received under training programs funded by HUD;
    (B) Amounts received by a disabled person that are disregarded for 
a limited time for purposes of Supplemental Security Income eligibility 
and benefits because they are set aside for use under a Plan for 
Achieving Self-Support (PASS);
    (C) Amounts received by a participant in other publicly assisted 
programs that are specifically for or in reimbursement of out-of-pocket 
expenses incurred (special equipment, clothing, transportation, child 
care, etc.) and that are made solely to allow participation in a 
specific program; or
    (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.
    (ix) Temporary, nonrecurring, or sporadic income (including gifts);
    (x) For all initial determinations and reexaminations of income 
carried out on or after April 23, 1993, reparation payments paid by a 
foreign government pursuant to claims filed under the laws of that 
government by persons who were persecuted during the Nazi era;
    (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 United States 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 paragraph (2)(xi) of this definition, 
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 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 United States 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;
    (xii) Any amounts that would be eligible for exclusion under 
section 1613(a)(7) of the Social Security Act (deferred periodic 
payments received in a lump sum from SSI and social security); or
    (xiii) Amounts specifically excluded by any other Federal statute 
from consideration as income for purposes of determining eligibility or 
benefits under a category of assistance programs that includes 
assistance under the United States Housing Act of 1937. A notice is 
published from time to time in the Federal Register and distributed to 
IHAs identifying the benefits that [[Page 18190]] qualify for this 
exclusion. Updates will be published and distributed when necessary.
    (3) If it is not feasible to anticipate a level of income over a 
12-month period, the income anticipated for a shorter period may be 
annualized subject to a redetermination at the end of the shorter 
period.
    (4) Any family receiving the reparation payments referred to in 
paragraph (2)(x) of this definition that has been requested to repay 
assistance under this part as a result of receipt of such payments 
shall not be required to make further repayments on or after April 23, 
1993.
    Annual Statement. A work statement covering the first year of the 
Five-Year Action Plan and setting forth the major work categories and 
costs by development or IHA-wide for the current Federal Fiscal Year 
(FFY) grant, as well as a summary of costs by development account and 
implementation schedules for obligation and expenditure of the funds.
    Annual Submission. A collective term for all documents that the IHA 
shall submit to HUD for review and approval before accessing the 
current FFY grant funds. Such documents include the Annual Statement, 
Work Statements for years two through five of the Five-Year Action 
Plan, local government statement, IHA Board Resolution, materials 
demonstrating the partnership process, and any other documents as 
prescribed by HUD.
    Applicable surface. All intact and nonintact interior and exterior 
painted surfaces of a residential structure.
    Area Office of Native American Programs (ONAP). The HUD Offices in 
Chicago (Eastern/Woodlands), Oklahoma City (Southern Plains), Denver 
(Northern Plains), Phoenix (Southwest), Seattle (Northwest), and 
Anchorage (Alaska), which have been delegated authority to administer 
programs under the United States Housing Act of 1937 for the areas in 
which the IHAs are located.
    Base year. The IHA's fiscal year immediately preceding its first 
fiscal year under the performance funding system (PFS).
    Base year expense level. The expense level (excluding utilities, 
audits, and certain other items) for the year, computed as provided in 
Sec. 950.710(a).
    Benefit/cost analysis. For purposes of subpart K of this part, a 
direct comparison of the present worth of any savings generated by a 
given system during the expected useful life of the system or the 
estimated remaining life of the project, whichever is the shortest 
number of years, to the cost of the change.
    BIA. The Bureau of Indian Affairs in the Department of the 
Interior.
    Checkmeter. A device for measuring utility consumption of each 
individual dwelling unit where the utility service is supplied through 
a mastermeter system. The IHA pays the utility supplier on the basis of 
the mastermeter readings and uses the checkmeters to determine whether 
and to what extent utility consumption of each dwelling unit is in 
excess of the allowance for IHA-furnished utilities, established in 
accordance with subpart K of this part.
    Chewable surface. All chewable protruding painted surfaces up to 
five feet from the floor or ground, that are readily accessible to 
children under seven years of age, such as protruding corners, 
windowsills and frames, doors and frames, and other protruding 
woodwork.
    Chief executive officer (CEO). The CEO of a unit of general local 
government means the elected official or the legally designated 
official who has the primary responsibility for the conduct of that 
entity's governmental affairs.
    Child. A member of the family, other than the family head or a 
spouse, who is under 18 years of age.
    Child care expenses. Amounts anticipated to be paid by the family 
for the care of children under 13 years of age during the period for 
which annual income is computed, but only where such care is necessary 
to enable a family member to be gainfully employed or to further his or 
her education only to the extent such amounts are not reimbursed. The 
amount deducted shall reflect reasonable charges for child care, and, 
in the case of child care necessary to permit employment, the amount 
deducted shall not exceed the amount of income received from such 
employment.
    Citizen. A citizen or national of the United States.
    Common property. The nondwelling structures and equipment, common 
areas, community facilities, and in some cases certain component parts 
of dwelling structures, that are contained in the development. It also 
may include common property as defined in a cooperative form of 
ownership, as determined by the IHA.
    Comprehensive grant number. A grant number that is unique to each 
work statement (under subpart I of this part) covering the improvements 
to one or more existing Indian housing projects.
    Comprehensive Plan. A plan prepared by an IHA, and approved by HUD, 
under the Comprehensive Grant Program setting forth all of the physical 
and management improvement needs of the IHA and its Indian housing 
developments, indicating the relative urgency of needs, and including 
the IHA's action plan, cost estimates, and required local government 
and IHA certifications. The Comprehensive Plan may be revised, as 
necessary, but shall be revised at least every sixth year. (See subpart 
I of this part.)
    Cooperation agreement. An agreement between an IHA and a local 
governing (taxing) body that assures exemption from real and personal 
property taxes and provides for payments in lieu of taxes by the IHA, 
and that provides for cooperation with respect to the development and 
operation of low-income housing owned by the IHA.
    Current budget year. The IHA fiscal year in which the IHA is 
operating.
    Defective lead-based paint surface. Paint on applicable surfaces 
having a lead content of greater than or equal to 1 mg/cm2, that is 
cracking, scaling, chipping, peeling, or loose.
    Defective paint surface. Paint on applicable surfaces that is 
cracking, scaling, chipping, peeling, or loose.
    Demolition. The razing in whole, or in part, of one or more 
permanent buildings of an Indian housing project.
    Dependent. A member of the family household (excluding foster 
children) other than the family head or spouse, who is under 18 years 
of age, or is a disabled person or handicapped person, or is a full-
time student.
    Deprogramming. Removal from the IHA's inventory under the ACC, 
pursuant to the IHA's formal request and HUD's approval, of a dwelling 
unit no longer used for dwelling purposes or a nondwelling structure or 
a unit used for nondwelling purposes that the IHA has determined will 
no longer be used for IHA purposes.
    Development. Any or all undertakings necessary for planning, land 
acquisition, demolition, construction, or equipment, in connection with 
a low-income housing project.
    Development grant. The grant that provides IHAs, in response to an 
application for housing, funds to enable the IHA to plan and construct 
either rental or mutual help housing. The development grant is for a 
fixed amount of funding and ends when the housing development is 
through the warranty period (normally six years from initial 
development grant approval).
    Disabled person. A person who is under a disability as defined in 
section 223 of the Social Security Act (42 U.S.C. 423), or who has a 
developmental disability as defined in section 102(7) of the 
Developmental Disabilities [[Page 18191]] Assistance and Bill of Rights 
Act (42 U.S.C. 6001(7)).
    Displaced person. A person displaced by governmental action, or a 
person whose dwelling has been extensively damaged or destroyed as a 
result of a disaster declared or otherwise formally recognized under 
Federal disaster relief laws.
    Disposition. The conveyance or other transfer by the IHA, by sale 
or other transaction, of any interest in the real estate of an Indian 
housing project, excluding transfers of property described in 
Sec. 950.921(b)(1)(i) through (vii).
    Earned home payments account (EHPA). In the Turnkey III program 
(subpart G of this part), this account is established and maintained 
pursuant to Sec. 950.517 by the IHA based on a portion of the 
homebuyer's required monthly payment. The EHPA should equal the IHA's 
estimate of the monthly cost for routine maintenance of the home.
    Elderly family. A family whose head or spouse (or sole member) is 
an elderly, disabled, or handicapped person, as defined in this 
section. It may include two or more elderly, disabled, or handicapped 
persons living together, or one or more of these persons living with 
one or more live-in aides, as defined in this section.
    Elderly person. A person who is at least 62 years of age.
    Elevated blood lead level or EBL. Excessive absorption of lead, 
that is, a confirmed concentration of lead in whole blood of 25 ug/dl 
(micrograms of lead per deciliter of whole blood) or greater.
    Emergency modernization (CIAP). A type of modernization program for 
a development that is limited to physical work items of an emergency 
nature, posing an immediate threat to the health or safety of residents 
or related to fire safety, which shall be corrected within one year of 
CIAP funding approval.
    Emergency work. Physical work items of an emergency nature, posing 
an immediate threat to the health or safety of residents, which shall 
be completed within one year of funding. Under the Comprehensive Grant 
program, management improvements are not eligible as emergency work, 
and therefore shall be covered by the Comprehensive Plan (including the 
action plan), before the IHA may carry them out. (See subpart I of this 
part.)
    Energy audit. A process carried out in accordance with subpart K of 
this part, that identifies and specifies the energy and cost savings 
that are estimated to result from installing or accomplishing an energy 
conservation measure.
    Energy conservation measures (ECMs). Physical improvements or 
modifications that, if undertaken for a building or facility, or its 
equipment, are likely to reduce the cost of energy in an amount 
sufficient to recover the installation costs in a period no longer than 
the useful life of the measure. (See subpart K of this part.)
    Evidence of citizenship or eligible immigration status. The 
documents which must be submitted to evidence citizenship or eligible 
immigration status (see Sec. 950.310(e)).
    Family. Family includes but is not limited to:
    (1) An elderly family or single person as defined in this part;
    (2) The remaining member of a tenant family; and
    (3) A displaced person.
    Family project. Any project assisted under section 9 of the Act (42 
U.S.C. 1437g) that is not an elderly project. For this purpose, an 
elderly project is one that was designated for occupancy by the elderly 
at its inception (and has retained that character) or, although not so 
designated, for which the IHA gives preference in tenant selection 
(with HUD approval) for all units in the project to elderly families. A 
building within a mixed-use project that meets these qualifications 
shall, for purposes of this definition, be excluded from any family 
project, as shall zero bedroom units.
    Federally recognized tribe. Any Indian tribe, band, nation, or 
other organized group or community, including any Alaska Native village 
or regional corporation or village as defined in or established 
pursuant to the Alaska Native Claims Settlement Act, that is recognized 
as eligible for the special programs and services provided by the 
United States to Indians because of their status as Indians.
    FFY. Federal Fiscal Year (starting with October 1, and ending with 
September 30, and designated by the calendar year in which it ends).
    Force account labor. Labor directly employed by the IHA on either a 
permanent or a temporary basis.
    Formula. The formula prescribed by HUD to be used in the 
Performance Funding System to estimate the cost of operating an average 
unit in an IHA's inventory. (See subpart J of this part.)
    Formula expense level. The per-unit per-month dollar amount of 
expenses (excluding utilities and audits) computed under the formula, 
in accordance with Sec. 950.710.
    Full-time student. A person who is carrying a subject load that is 
considered full-time for day students under the standards and practices 
of the educational institution attended. An educational institution 
includes a vocational school with a diploma or certificate program, as 
well as an institution offering a college degree.
    Fungibility. Fungibility is a concept that permits an IHA to 
substitute any work item from the latest approved Five-Year Action Plan 
to any previously approved CIAP budget or CGP Annual Statement and to 
move work items among approved budgets without prior HUD approval.
    Handicapped assistance expenses. Reasonable expenses that are 
anticipated, during the period for which annual income is computed, for 
attendant care and auxiliary apparatus for a handicapped or disabled 
family member and that are necessary to enable a family member 
(including the handicapped or disabled member) to be employed, provided 
that the expenses are neither paid to a member of the family nor 
reimbursed by an outside source.
    Hard costs. The physical improvement costs in development accounts 
1450 through 1475 of the Low-Rent Housing Accounting Handbook, 7510.1, 
as revised, that include: Account 1450 Site Improvements; Account 1460 
Dwelling Structures; Account 1465.1 Dwelling Equipment--Nonexpendable; 
Account 1470 Nondwelling Structures; and Account 1475 Nondwelling 
Equipment.
    Head of household. The adult member of the family who is the head 
of the household for purposes of determining income eligibility and 
rent.
    High risk. See 24 CFR 85.12 and Sec. 950.135.
    Homebuyer. The member or members of a low-income family who have 
executed a homebuyer agreement with the IHA and who have not yet 
achieved homeownership.
    Homebuyer agreement. A Mutual Help and Occupancy Agreement or a 
Turnkey III Homebuyer's Ownership Opportunity Agreement.
    Homebuyer Association. In the Turnkey III program this means an 
incorporated organization (as defined in Sec. 950.511) composed of all 
of the families who are entitled to occupancy pursuant to a Homebuyer 
Ownership Opportunity Agreement or who are homeowners.
    Homeowner. A former homebuyer who has achieved ownership of his or 
her home and acquired title to the home.
    HUD. The Department of Housing and Urban Development.
    IHA homeownership financing. IHA financing for purchase of a home 
by an eligible homebuyer who gives the IHA [[Page 18192]] a promissory 
note and mortgage for the balance of the purchase price.
    IHS. The Indian Health Service in the Department of Health and 
Human Services.
    Indian. Any person recognized as being an Indian or Alaska Native 
by an Indian tribe, the Federal Government, or any State.
    Indian area. The area within which an Indian Housing Authority is 
authorized to provide low-income housing.
    Indian Housing Authority (IHA). An entity that is authorized to 
engage in or assist in the development or operation of low-income 
housing for Indians that is established either:
    (1) By exercise of the power of self-government of an Indian tribe 
independent of State law; or
    (2) By operation of State law providing specifically for housing 
authorities for Indians, including regional housing authorities in the 
State of Alaska.
    Indian tribe. Any tribe, band, pueblo, group, community, or nation 
of Indians or Alaska Natives.
    INS. The U.S. Immigration and Naturalization Service.
    Interdepartmental agreement. The agreement among HUD, the 
Department of Health and Human Services, the Department of Interior, 
and other appropriate agencies, concerning assistance to projects 
developed and operated under the Act.
    Latent defect. A design or construction deficiency that could not 
reasonably have been foreseen by the IHA or the Office of Native 
American Programs.
    Lead-based paint. A paint surface, whether or not defective, 
identified as having a lead content greater than or equal to 1.0 mg/
cm2, or .5 percent by weight.
    Live-in aide. A person who resides with an elderly, disabled, or 
handicapped person or persons and who:
    (1) Is determined by the IHA to be essential to the care and well-
being of the person(s);
    (2) Is not obligated for support of the person(s); and
    (3) Would not be living in the unit except to provide necessary 
supportive services. (See definition of annual income for treatment of 
a live-in aide's income.)
    Local inflation factor. The weighted average percentage increase in 
local government wages and salaries for the area in which the IHA is 
located and non-wage expenses based upon the implicit price deflator 
for State and local government purchases of goods and services. This 
weighted average percentage will be supplied by HUD. HUD anticipates 
that it will update the local inflation factor each year.
    Low-income family. A family whose annual income does not exceed 80 
percent of the median income for the area, as determined by HUD with 
adjustments for smaller and larger families. HUD may establish income 
limits higher or lower than 80 percent of the median income for an 
Indian area on the basis of its finding that such variations are 
necessary because of the prevailing levels of construction costs or 
unusually high or low family incomes.
    Management improvement plan. A document developed by the IHA in 
accordance with Sec. 950.135 that specifies the actions to be taken, 
including timetables, to correct deficiencies identified as a result of 
a management assessment.
    Mastermeter system. A utility distribution system in which an IHA 
is supplied utility service by a utility supplier through a meter or 
meters and the IHA then distributes the utility to its tenants.
    Medical expenses. Those medical expenses, including medical 
insurance premiums, that are anticipated during the period for which 
annual income is computed, and that are not covered by insurance.
    MH Contribution. Land, labor, cash, materials, or equipment--or a 
combination of these--contributed toward the development cost of a 
project in accordance with a homebuyer's MHO Agreement, credit for 
which is to be used toward purchase of a home.
    MH Program. The Mutual Help Homeownership Opportunity Program.
    MHO Agreement. A Mutual Help and Occupancy Agreement between an IHA 
and a homebuyer.
    Mixed family. A family whose members include those with citizenship 
or eligible immigration status, and those without citizenship or 
eligible immigration status.
    Modernization capability. An IHA has modernization capability for 
CIAP if it is capable of effectively carrying out the proposed 
modernization improvements. Where an IHA does not have a funded 
modernization program in progress, HUD will determine whether the IHA 
has a reasonable prospect of acquiring modernization capability through 
hiring staff or contracting for assistance. (See Sec. 950.135.)
    Modernization funds. Funds derived from an allocation of budget 
authority for the purpose of funding physical and management 
improvements.
    Modernization program. An IHA's program for carrying out 
modernization, as set forth in the approved CIAP budget for 
modernization funds. (See subpart I (CIAP) of this part.)
    Modernization project. The improvement of one or more existing 
Indian housing developments under a new number designated for that 
modernization program (CIAP). For each modernization project, HUD and 
the IHA shall enter into an ACC amendment, requiring low-income use of 
the housing for not less than 20 years from the date of the ACC 
amendment (subject to sale of homeownership units in accordance with 
the terms of the ACC).
    Monthly adjusted income. One twelfth of adjusted income.
    Monthly Equity Payments Account (MEPA). A homebuyer account in the 
Mutual Help Homeownership Opportunity program credited with the amount 
by which each required monthly payment exceeds the administration 
charge.
    Monthly income. One twelfth of annual income.
    National. A person who owes permanent allegiance to the United 
States, for example, as a result of birth in a United States territory 
or possession.
    Near elderly family. A family whose head or spouse (or sole member) 
is at least 50 years of age but below the age of 62 years.
    Net family assets. Net cash value after deducting reasonable costs 
that would be incurred in disposing of real property, savings, stocks, 
bonds, and other forms of capital investment, excluding interests in 
Indian trust land and excluding equity accounts in HUD homeownership 
programs. The value of necessary items of personal property such as 
furniture and automobiles are excluded, and, in the case of a family in 
which any member is actively engaged in a business or farming 
operation, the assets that are a part of the business or farming 
operation are excluded. In cases where a trust fund, such as individual 
Indian monies held by the BIA, has been established and the trust is 
not revocable by, or under the control of, any member of the family or 
household, the value of the trust fund will not be considered an asset 
so long as the fund continues to be held in trust. In determining net 
family assets, IHAs shall include the value of any business or family 
assets disposed of by an applicant or tenant for less than fair market 
value (including a disposition in trust, but not in a foreclosure or 
bankruptcy sale) during the two years preceding the date of application 
for the [[Page 18193]] program or reexamination, as applicable, in 
excess of the consideration received therefor. In the case of a 
disposition as part of a separation or divorce settlement, the 
disposition will not be considered to be for less than fair market 
value if the applicant or tenant receives important consideration not 
measurable in dollar terms.
    Noncitizen. A person who is neither a citizen nor national of the 
United States.
    Nonroutine maintenance. (1) For purposes of the Turnkey III Program 
(Nonroutine Maintenance Reserve), nonroutine maintenance refers to 
infrequent and costly items of maintenance and replacement, including 
dwelling equipment such as a range or refrigerator, or major components 
such as heating or plumbing systems or a roof. Specifically excluded 
are maintenance expenses attributable to homebuyer negligence or to 
defective materials or workmanship.
    (2) For purposes of the CIAP and Comprehensive Grant Modernization 
Programs under subpart I of this part and the applicability of wage 
rates, nonroutine maintenance refers to work items that ordinarily 
would be performed on a regular basis in the course of upkeep of a 
property, but have become substantial in scope because they have been 
put off, and that involve expenditures that would otherwise materially 
distort the level trend of maintenance expenses. Replacement of 
equipment and materials rendered unsatisfactory because of normal wear 
and tear by items of substantially the same kind does qualify, but 
reconstruction, substantial improvement in the quality or kind of 
original equipment and materials, or remodeling that alters the nature 
or type of housing units does not qualify.
    NRMR. The nonroutine maintenance reserve account in the Turnkey III 
program established and maintained in accordance with Sec. 950.519.
    Office of Native American Programs (ONAP). The Office of HUD that 
has been delegated authority to administer programs under this part.
    Operating budget. The IHA's operating budget (HUD form 52564) and 
all related documents, required by HUD to be submitted pursuant to the 
ACC.
    Operating subsidy. Annual contributions for IHA operations made by 
HUD under the authority of section 9 of the Act. (See subpart J of this 
part with respect to rental projects. See also Sec. 950.434 (Mutual 
Help Operating Subsidy) and Sec. 950.523 (Turnkey III Operating 
Subsidy).)
    Other income. Income to the IHA other than dwelling rental income 
and income from investments, except that, for purposes of determining 
operating subsidy eligibility, the following items are excluded: Grants 
and gifts for operations, other than for utility expenses, received 
from Federal, State, and local governments, individuals or private 
organizations; amounts charged to tenants for repairs for which the IHA 
incurs an offsetting expense; and legal fees in connection with 
eviction proceedings, when those fees are lawfully charged to tenants.
    Other modernization (modernization other than emergency). A type of 
modernization program under the Comprehensive Improvement Assistance 
Program (CIAP) for a development that includes one or more physical 
work items, where HUD determines that the physical improvements are 
necessary and sufficient to extend substantially the useful life of the 
development, and/or one or more management work items (including 
planning costs), and/or testing, professional risk assessments, interim 
containment, and abatement of lead-based paint.
    Partnership process. A specific and ongoing process that is 
designed to ensure that residents, resident groups, and the IHA work in 
a cooperative and collaborative manner to develop, implement and 
monitor the CIAP or Comprehensive Grant Program. At a minimum, an IHA 
shall ensure that the partnership process incorporates full resident 
participation in each of the required program components.
    Pay-back period. The number of years required to accumulate net 
savings to equal the cost of an energy conservation measure.
    Performance funding system (PFS). The standards, policies, and 
procedures established by HUD for determining the amount of operating 
subsidy an IHA is eligible to receive for its owned rental projects, 
based on the costs of operating a comparable well-managed project.
    PILOT. Payment in lieu of taxes. Includes all payments made by an 
IHA to the local governing body (or other taxing jurisdiction) for the 
provision of certain municipal services, including that portion of 
payments in lieu of taxes that is to be applied as a reimbursement of 
payments of off-site utilities. The amount charged is determined by the 
cooperation agreement, which is generally defined as 10 percent of 
shelter rent. Shelter rent is defined as dwelling rentals less total 
utility expenses.
    Program reservation. A written notification by HUD to an IHA, that 
is not a legal obligation, but that expresses HUD's determination, 
subject to fulfillment by an IHA of all legal and administrative 
requirements within a stated time, that HUD will enter into a new or 
amended ACC covering the stated number of housing units, or such other 
number as is consistent with funding reserved by HUD for the project.
    Project. Housing developed, acquired, or assisted by an IHA under 
the Act, and the improvement of this housing.
    Project for elderly families. A rental project or portion of a 
rental project assisted under the United States Housing Act of 1937 
that was designated for occupancy by the elderly at its inception (and 
that has retained that character) or, although not so designated, for 
which the IHA gives preference in tenant selection (with HUD approval) 
for all units in the project, or for a portion of the units in the 
project, to elderly families.
    Project units. All dwelling units of an IHA's projects. Projected 
operating income level. The per-unit per-month dollar amount of 
dwelling rental income plus nondwelling income, computed as provided in 
Sec. 950.725.
    Reasonable cost. Total unfunded hard cost needs for a development 
that do not exceed 90 percent of the computed total development cost 
limit for a new development with the same structure type and number and 
size of units in the market area.
    Requested budget year. The budget year (fiscal year) of an IHA 
following the current budget year.
    Resident groups. Democratically elected resident groups such as 
IHA-wide resident groups, area-wide resident groups, single development 
resident groups, or resident management corporations (RMCs).
    Retail service. Purchase of utility service by IHA tenants directly 
from the utility supplier.
    Rolling base period. The 36-month period that ends 12 months before 
the beginning of the IHA requested budget year, which is used to 
determine the allowable utilities consumption level used to compute the 
utilities expense level.
    Section 214. Section 214 of the Housing and Community Development 
Act of 1980, as amended (42 U.S.C. 1436a). Section 214 restricts HUD 
from making financial assistance available for noncitizens unless they 
meet one of the categories of eligible immigration status specified in 
Section 214.
    Section 214 covered programs. Programs to which the restrictions 
imposed by Section 214 apply are programs that make available financial 
[[Page 18194]] assistance pursuant to the United States Housing Act of 
1937 (42 U.S.C. 1437-1440), Section 235 or Section 236 of the National 
Housing Act (12 U.S.C. 1715z and 1715z-1) and Section 101 of the 
Housing and Urban Development Act of 1965 (12 U.S.C. 1701s).
    Single person. A person who lives alone or intends to live alone, 
and who does not qualify as:
    (1) An elderly family;
    (2) A displaced person (as defined in this section); or
    (3) The remaining member of a tenant family.
    Soft costs. The nonphysical improvement costs, that exclude any 
costs in development accounts 1450 through 1475.
    State. Any of the several States of the United States of America, 
the District of Columbia, the Commonwealth of Puerto Rico, the 
territories and possessions of the United States, the Trust Territory 
of the Pacific Islands, and Indian tribes.
    Subsequent homebuyer. Any homebuyer other than the homebuyer who 
first occupies a home pursuant to a Mutual Help and Occupancy (MHO) 
agreement.
    Substantial rehabilitation. A modernization program for a project 
that provides for all physical and management improvements needed to 
meet the modernization and energy conservation standards and to ensure 
long-term physical and social viability.
    Successor homebuyer. A person eligible to become a homebuyer who 
has been designated by a current homebuyer to succeed to an interest 
under a homeownership agreement in the event of the current homebuyer's 
death or mental incapacity.
    Surcharge. The amount charged by the IHA to a tenant, in addition 
to the Tenant Rent, for consumption of utilities in excess of the 
allowance for IHA-furnished utilities or for estimated consumption 
attributable to tenant-owned major appliances or to optional functions 
of IHA-furnished equipment. Surcharges calculated pursuant to subpart K 
of this part, based on estimated consumption where checkmeters have not 
been installed, are referred to as ``scheduled surcharges.''
    Tenant-purchased utilities. Utilities purchased by the tenant 
directly from a utility supplier.
    Tenant rent. The amount payable monthly by the family as rent to 
the IHA. Where all utilities (except telephone) and other essential 
housing services are supplied by the IHA, tenant rent equals total 
tenant payment. Where some or all utilities (except telephone) and 
other essential housing services are not supplied by the IHA and the 
cost thereof is not included in the amount paid as rent, tenant rent 
equals total tenant payment less the utility allowance.
    Total development cost. The sum of all HUD-approved costs for a 
project including all undertakings necessary for administration, 
planning, site acquisition, demolition, construction or equipment and 
financing (including the payment of carrying charges), and for 
otherwise carrying out the development of the project. The maximum 
total development cost excludes off-site water and sewer facilities 
development costs; costs normally paid for by other entities, but 
included in the development cost budget for the project for contracting 
or accounting convenience; and any donations received from public or 
private sources.
    Total tenant payment. The monthly amount calculated under subpart D 
of this part. Total tenant payment does not include any surcharge for 
excess utility consumption or other miscellaneous charges (see subpart 
K of this part).
    Unit approved for deprogramming. (1) A dwelling unit for which HUD 
has approved the IHA's formal request to remove the dwelling unit from 
the IHA's inventory and the Annual Contributions Contract but for which 
removal, i.e. deprogramming, has not yet been completed; or
    (2) A nondwelling structure or a dwelling unit used for nondwelling 
purposes that the IHA has determined will no longer be used for IHA 
purposes and that HUD has approved for removal from the IHA's inventory 
and Annual Contributions Contract.
    Unit months available. Project units multiplied by the number of 
months the project units are expected to be available for occupancy 
during a given IHA fiscal year. Except as provided in the following 
sentence, for purposes of this part, a unit is considered available for 
occupancy from the date on which the end of the initial operating 
period for the project is established until the time it is approved by 
HUD for deprogramming and is vacated or approved for nondwelling use. 
On or after July 1, 1991, a unit is not considered available for 
occupancy in any IHA Requested Budget Year if the unit is located in a 
vacant building in a project that HUD has determined is nonviable.
    Utilities. For purposes of determining utility allowances, 
utilities include electricity, gas, heating fuel, water, sewerage 
service, septic tank pumping/maintenance, sewer system hookup charges 
(after development), and trash and garbage collection. Telephone 
service is not included as a utility. For purposes of IHA accounting, 
PFS and non-PFS, trash and garbage collection and maintenance and 
repair of any systems are considered maintenance expenses and not 
utility expenses.
    Utilities expense level. The per-unit per-month dollar amount of 
utilities expense used in calculation of operating subsidy, as provided 
in Sec. 950.715.
    Utility allowance. An allowance for IHA-furnished utilities 
represents the maximum consumption units (e.g., kilowatt hours of 
electricity), that may be used by a dwelling unit without a surcharge 
against the tenant for excess consumption. An allowance for tenant-
purchased utilities is a fixed dollar amount that is deducted from the 
total tenant payment otherwise chargeable to a tenant who has retail 
service, whether the charges are more or less than the amounts of the 
allowance. (See Secs. 950.865 and 950.870.)
    Utility reimbursement. The amount, if any, by which the utility 
allowance for tenant-purchased utilities for the unit, if applicable, 
exceeds the family's total tenant payment.
    Very low-income family. A low-income family whose annual income 
does not exceed 50 percent of the median income for the area, as 
determined by HUD, with adjustments for smaller and larger families. 
HUD may establish income limits higher or lower than 50 percent of the 
median income for an Indian area on the basis of its finding that such 
variations are necessary because of unusually high or low family 
incomes.
    Welfare assistance. Welfare or other payments to families or 
individuals, based on need, that are made under programs funded, 
separately or jointly, by Federal, State, or local governments.
    Work item. Any separately identifiable unit of work constituting a 
part of a modernization program.
    Work Statements. Work Statements cover the second through fifth 
years of the Five-Year Action Plan and set forth the major work 
categories and costs, by development or IHA-wide, that the IHA intends 
to undertake in each year of years two through five. In preparing these 
Work Statements, the IHA shall assume that the current FFY formula 
amount will be available in each year of years two through five.


Sec. 950.110  Assistance from Indian Health Service and Bureau of 
Indian Affairs.

    Because HUD assistance under this part is not limited to IHAs of 
Federally recognized tribes, provisions in this part relating to 
assistance from BIA or IHS, or to required approvals, actions, or 
determinations by these agencies in connection with such assistance, 
are [[Page 18195]] applicable only to projects undertaken by IHAs of 
Federally recognized tribes or by regional housing authorities created 
by Alaska state law. These projects shall be developed promptly and 
operated in accordance with the provisions of this part and the 
Interdepartmental Agreement.


Sec. 950.115  Applicability of civil rights requirements.

    (a) Indian Civil Rights Act. (1) The Indian Civil Rights Act (ICRA) 
(title II of the Civil Rights Act of 1968, 25 U.S.C. 1301-1303) 
provides, among other things, that no Indian tribe in exercising powers 
of self-government shall deny to any person within its jurisdiction the 
equal protection of its laws or deprive any person of liberty or 
property without due process of law. The ICRA also states these equal 
protection and due process rights do not apply if they violate customs, 
traditions, and practices of the tribe. The ICRA applies to any tribe, 
band, or other group of Indians subject to the jurisdiction of the 
United States in the exercise of recognized powers of self-government. 
The ICRA is applicable in all cases in which an IHA has been 
established by exercise of tribal powers of self-government.
    (2) For IHAs established pursuant to State law, HUD will determine 
the applicability of the ICRA on a case-by-case basis. Factors 
considered may include the existence of recognized powers of self-
government; the scope and jurisdiction of such powers; and the 
applicability of such powers to the area of operation of a particular 
IHA. Generally, determinations by HUD of the existence of recognized 
powers of self-government and the jurisdiction of such powers will be 
made in consultation with the Department of Interior-Bureau of Indian 
Affairs, and may be based on applicable legislation, treaties, and 
judicial decisions. The area of operation of an IHA may be determined 
by the jurisdiction of the governing body creating the IHA, any 
limitations within the enabling legislation, and judicial decisions.
    (3) Projects of IHAs subject to the ICRA shall be developed and 
operated in compliance with its provisions and all HUD regulations 
thereunder.
    (b) Applicability of Title VI, the Fair Housing Act; and Title II 
of the Americans with Disabilities Act. Title VI of the Civil Rights 
Act of 1964 (42 U.S.C. 2000d), which prohibits discrimination on the 
basis of race, color, or national origin in federally assisted 
programs; the Fair Housing Act (42 U.S.C. 3601-3619), which prohibits 
discrimination based on race, color, religion, sex, or national origin 
in the sale or rental of housing; and Title II of the Americans with 
Disabilities Act (42 U.S.C. 12131) apply to those IHAs created by State 
law for which HUD has determined that the ICRA is inapplicable. Actions 
taken by an IHA to implement the statutory admission restriction in 
favor of Indian families in the MH program, as set forth in 
Sec. 950.416, shall not be considered a violation of any provision of 
either Title VI, the Fair Housing Act, or Title II of the Americans 
with Disabilities Act.
    (c) Indian Housing Act of 1988--Mutual Help program admissions. For 
provisions generally limiting admission to the Mutual Help 
Homeownership Opportunity program to Indians and requiring findings of 
need for admission of non-Indians, see Sec. 950.416.
    (d) Disability. (1) Under section 504 of the Rehabilitation Act of 
1973 (29 U.S.C. 794), as amended, HUD is required to assure that no 
otherwise-qualified disabled person is excluded from participation, 
denied benefits, or discriminated against under any program or activity 
receiving Federal financial assistance, solely by reason of his or her 
disability. IHAs shall comply with implementing instructions in 24 CFR 
part 8.
    (2) The IHA shall comply with the Architectural Barriers Act of 
1968 (42 U.S.C. 4151-4157), and HUD implementing regulations (24 CFR 
part 40).
    (e) Minority Business Enterprise Development and Women's Business 
Enterprise Policy. Executive Orders 12432 (3 CFR, 1983 Comp., p. 198) 
and 12138 (3 CFR, 1979 Comp., p. 39), respectively, apply to Indian 
Housing Authorities.


Sec. 950.117  Displacement, relocation, and acquisition.

    (a) Minimizing displacement. Consistent with the other goals and 
objectives of this part, IHAs shall assure that they have taken all 
reasonable steps to minimize the displacement of persons (families, 
individuals, businesses, nonprofit organizations, and farms) as a 
result of a project assisted under this part.
    (b) Temporary relocation. Residents who will not be required to 
move permanently, but who must relocate temporarily (e.g., to permit 
rehabilitation), shall be provided:
    (1) Reimbursement for all reasonable out-of-pocket expenses 
incurred in connection with the temporary relocation, including the 
cost of moving to and from the temporary housing and any increase in 
monthly rent/utility costs.
    (2) Appropriate advisory services, including reasonable advance 
written notice of:
    (i) The date and approximate duration of the temporary relocation;
    (ii) The location of the housing, which may include a traditional 
home, to be made available for the temporary period;
    (iii) The terms and conditions under which the resident may lease 
and occupy a suitable, decent, safe, and sanitary dwelling in the 
development following its completion; and
    (iv) The provisions of paragraph (b)(1) of this section.
    (c) Relocation assistance for displaced persons. (1) A displaced 
person (defined in paragraph (g) of this section) shall be provided 
relocation assistance at the levels described in, and in accordance 
with the requirements of, the Uniform Relocation Assistance and Real 
Property Acquisition Policies Act of 1970, as amended (URA) (42 U.S.C. 
4601-4655) and implementing regulations at 49 CFR part 24.
    (2) A comparable Indian housing unit, project-based Section 8 
housing, or a privately-owned dwelling made affordable by a Section 8 
Rental Certificate or Rental Voucher, may qualify as a comparable 
replacement dwelling for a person displaced from an Indian housing 
unit.
    (d) Real property acquisition requirements. The acquisition of real 
property for a development is subject to the URA and the requirements 
described in 49 CFR part 24, subpart B, whether the acquiring entity is 
organized under State law or tribal law.
    (e) Appeals. A person who disagrees with the IHA's determination 
concerning whether the person qualifies as a displaced person, or the 
amount of relocation assistance for which the person is eligible, may 
file a written appeal of that determination with the IHA. A lower-
income person who is dissatisfied with the IHA's determination on his 
or her appeal may submit a written request for review of that 
determination to the HUD Area ONAP.
    (f) Responsibility of IHA. (1) The IHA shall certify (i.e., provide 
assurance of compliance, as required by 49 CFR part 24) that it will 
comply with the URA, the regulations at 49 CFR part 24, and the 
requirements of this section, and shall ensure such compliance 
notwithstanding any third party's contractual obligation to the IHA to 
comply with the requirements in 49 CFR part 24.
    (2) The cost of required relocation assistance is an eligible 
project cost in the same manner and to the same extent 
[[Page 18196]] as other project costs. However, such assistance also 
may be paid from funds available from other sources.
    (3) The IHA shall maintain records in sufficient detail to 
demonstrate compliance with the requirements of this section.
    (g) Definition of displaced person. (1) For purposes of this 
section, the term ``displaced person'' means a person (family, 
individual, business, nonprofit organization, or farm) that moves from 
real property, or moves personal property from real property, 
permanently, as a direct result of acquisition, rehabilitation, 
demolition, or conversion of a unit to homeownership (Mutual Help 
Homeownership Opportunity (MH) Program) for a project assisted under 
this part or as a direct result of disposition in accordance with 
subpart M of this part. This includes any permanent, involuntary move 
for an assisted project including any permanent move from the 
development that is made:
    (i) After notice to the person by the IHA or property owner to move 
permanently from the property, if the move occurs on or after:
    (A) For the comprehensive improvement assistance program (CIAP) and 
the comprehensive grant program (CGP) under subpart I of this part, 45 
calendar days from before:
    (1) The IHA issues the invitation for bids for the project, or
    (2) The start of force account work, whichever is applicable; or
    (B) For the disposition or demolition of Indian housing under 
subpart M of this part, the date of HUD approval of the IHA's proposal; 
or
    (C) For other projects subject to this section, the date HUD 
approves the site for the project; or, if HUD site approval is not 
required, the date the IHA approves the site for the project;
    (ii) Before the date described in paragraph (g)(1)(i) of this 
section, if the IHA or HUD determines that the displacement resulted 
directly from acquisition, rehabilitation, demolition, or conversion 
for the assisted project; or
    (iii) By a resident of a dwelling unit, if any one of the following 
three situations occurs:
    (A) The resident moves after the initiation of negotiations (as 
defined in paragraph (h) of this section) and the move occurs before 
the resident is provided written notice offering him or her the 
opportunity to lease and occupy a suitable, decent, safe, and sanitary 
dwelling in the same development, under reasonable terms and 
conditions, upon its completion. Such reasonable terms and conditions 
include a monthly rent and estimated average monthly utility costs that 
do not exceed the amount determined in accordance with Sec. 950.325; or
    (B) The resident is required to relocate temporarily, does not 
return to the development, and either:
    (1) The resident is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with the temporary relocation; 
or
    (2) Other conditions of the temporary relocation are not 
reasonable; or
    (C) The resident is required to move to another dwelling unit in 
the same development but is not offered reimbursement for all 
reasonable out-of-pocket expenses incurred in connection with the move, 
or other conditions of the move are not reasonable.
    (2) Notwithstanding the provisions of paragraph (g)(1) of this 
section, a person does not qualify as a displaced person (and is not 
eligible for relocation assistance under the URA or this section), if:
    (i) The person has been evicted for serious or repeated violation 
of the terms and conditions of the lease or occupancy agreement, 
violation of applicable Federal, State, tribal, or local law, or other 
good cause, and HUD determines that the eviction was not undertaken for 
the purpose of evading the obligation to provide relocation assistance;
    (ii) The person moved into the property after the date described in 
paragraph (g)(1)(i) of this section and, before commencing occupancy, 
was provided written notice of the project, its possible impact on the 
person (e.g., the person may be displaced, temporarily relocated, or 
suffer a rent increase) and the fact that he or she will not qualify as 
a displaced person (or for assistance under this section) as a result 
of the project:
    (iii) The person is ineligible under 49 CFR 24.2(g)(2); or
    (iv) HUD determines that the person was not displaced as a direct 
result of acquisition, rehabilitation, demolition, or conversion for 
the project.
    (3) The IHA may, at any time, ask HUD to determine whether a 
displacement is or would be covered by this section.
    (h) Definition of initiation of negotiations. For purposes of 
determining the formula for computing the replacement housing 
assistance to be provided to a resident, the term ``initiation of 
negotiations'' means the following action:
    (1) For the comprehensive improvement assistance program (CIAP) or 
comprehensive grant program (CGP) under subpart I of this part, 45 
calendar days before:
    (i) The IHA's issuance of the invitation for bids for the project; 
or
    (ii) The start of force account work, whichever is applicable;
    (2) For an IHA purchase through an arm's-length transaction as 
described in 49 CFR 24.101(a)(1), the seller's acceptance of the IHA's 
written offer to purchase the property;
    (3) For an IHA purchase that does not qualify as an arm's-length 
transaction, the delivery of the initial written purchase offer from 
the IHA to the Owner of the property. However, if the IHA issues a 
notice of intent to acquire the property, and a person moves after that 
notice, but before the initial written purchase offer, the initiation 
of negotiations is the actual move of the person from the property;
    (4) For disposition or demolition of Indian housing under subpart M 
of this part, HUD approval of the IHA's proposal; or
    (5) For other programs under this part 950, the notice to the 
occupant that he or she shall move permanently, or, if there is no 
notice, the person's actual move from the property.


Sec. 950.120  Compliance with other Federal requirements.

    (a) Environmental clearance. Before obligating or expending funds 
for any physical improvements under a development or modernization 
project, the IHA will comply with the requirements of 24 CFR part 58.
    (b) Flood insurance protection. HUD will not approve financial 
assistance for acquisition, construction, reconstruction, repair, or 
improvement of a building located in an area that has been identified 
by the Federal Emergency Management Agency (FEMA) as having special 
flood hazards, unless the following conditions are met:
    (1) Flood insurance on the building is obtained in compliance with 
section 102(a) of the Flood Disaster Protection Act of 1973 (42 U.S.C. 
4012a(a)); and
    (2) The community in which the area is situated is participating in 
the National Flood Insurance Program in accord with section 202(a) of 
the Flood Disaster Protection Act of 1973 (42 U.S.C. 4106(a)), or less 
than a year has passed since FEMA notification regarding such flood 
hazards. For this purpose, the ``community'' is the jurisdiction, such 
as an Indian tribe or authorized tribal organization, an Alaska native 
village, or authorized native organization, or a municipality or 
county, that has authority to adopt and enforce flood plain management 
regulations for the area. [[Page 18197]] 
    (c) Wage rates for laborers and mechanics. (1) With respect to 
construction work on a project, including a modernization project 
(except for nonroutine maintenance work, as described in paragraph (2) 
of the definition of ``nonroutine maintenance'' in Sec. 950.102), the 
IHA and its contractors shall pay not less than the wages prevailing in 
the locality, as predetermined by the Secretary of Labor pursuant to 
the Davis-Bacon Act (40 U.S.C. 276a through 276a-5), to all laborers 
and mechanics who are employed by an IHA or its contractors for work or 
contracts over $2,000.
    (2) With respect to all maintenance work on a project, including 
nonroutine maintenance work (as described in paragraph (2) of the 
definition of ``nonroutine maintenance'' in Sec. 950.102) on a 
modernization project, the IHA and its contractors shall pay not less 
than the wages prevailing in the locality, as determined or adopted 
(after a determination under State, tribal, or local law) by HUD 
pursuant to section 12 of the United States Housing Act of 1937 (42 
U.S.C. 1437j), to all laborers and mechanics who are employed by an IHA 
or its contractors.
    (3) Prevailing wage rates determined under State or tribal law are 
inapplicable under the circumstances set out in Sec. 950.172(b).
    (d) Professional and technical wage rates. All architects, 
technical engineers, draftsmen, and technicians employed in the 
development of a project shall be paid not less than the wages 
prevailing in the locality, as determined or adopted (after a 
determination under applicable State, tribal, or local law) by HUD.
    (e) Access to records: audits. (1) HUD and the Comptroller General 
of the United States shall have access to all books, documents, papers, 
and other records that are pertinent to the activities carried out 
under this part, in order to make audit examinations, excerpts, and 
transcripts, in accordance with 24 CFR 85.42.
    (2) IHAs that receive financial assistance under this part shall 
comply with the audit requirements of 24 CFR part 44. If an IHA has 
failed to submit an acceptable audit on a timely basis in accordance 
with that part, HUD may arrange for, and pay the costs of, the audit. 
In such circumstances, HUD may withhold, from assistance otherwise 
payable to the IHA under this part, amounts sufficient to pay for the 
reasonable costs of conducting an acceptable audit, including, when 
appropriate, the reasonable costs of accounting services necessary to 
place the IHA's books and records into auditable condition. The costs 
to place the IHA's books and records into auditable condition do not 
generate additional subsidy eligibility under this part.
    (f) Uniform administrative requirements. The Uniform Administrative 
Requirements for Grants and Cooperative Agreements to States, Local, 
and Federally Recognized Indian Tribal Governments, as set forth in 24 
CFR part 85, are applicable to grants under this part, except as 
specified in this part. However, the provisions of 24 CFR 85.36 have 
been incorporated in the procurement regulations (subpart B of this 
part).
    (g) Lead-based paint poisoning prevention. See 24 CFR part 35 and 
subpart H of this part.
    (h) Coastal barriers. In accordance with the Coastal Barriers 
Resources Act (16 U.S.C. 3501), no financial assistance under this part 
may be made available within the Coastal Barrier Resources System.
    (i) Economic opportunities for low- and very low-income persons. 
IHAs shall comply with section 3 of the Housing and Urban Development 
Act of 1968 (12 U.S.C. 1701u) and the regulations in 24 CFR part 135, 
as provided in part 135, to the maximum extent consistent with, but not 
in derogation of, compliance with section 7(b) of the Indian Self-
Determination and Education Assistance Act (25 U.S.C. 450e(b)). See 
also 24 CFR 950.170(c).


Sec. 950.125  Establishment of IHAs pursuant to State law.

    An IHA may be established pursuant to a State law that provides for 
the establishment of IHAs with all necessary legal powers to carry out 
low-income housing projects for Indians.


Sec. 950.126  Establishment of IHAs by tribal ordinance.

    (a) Legal capacity of tribe to establish IHA. Where an Indian tribe 
has governmental police power to promote the general welfare, including 
the power to create a housing authority, an IHA may be established by 
tribal ordinance enacted by the governing body of the tribe.
    (b) Form of ordinance. The form of tribal ordinance shall be 
determined by the tribe and reviewed by the ONAP Administrator. The IHA 
shall also demonstrate that it has the legal authority to develop, own, 
and operate a public housing project under the Act. Unless an IHA is 
created as part of the tribal government, ordinances shall include 
language that allows the IHA to sue and be sued in its corporate name. 
A sample format will be provided by HUD.
    (c) Approval or review of ordinance. HUD shall not enter into an 
undertaking for assistance to an IHA formed by tribal ordinance unless 
such ordinance has been submitted to HUD.
    (d) Submission to HUD of documents establishing IHA. (1) The tribal 
ordinance shall be submitted to HUD prior to receiving financial 
assistance.
    (2) An IHA must certify that it has enacted the ordinance pursuant 
to any constitutional law or practice and has the local cooperation 
required by law.


Sec. 950.130  IHA Commissioners who are tenants or homebuyers.

    (a) Tenant or homebuyer commissioners. No person shall be barred 
from serving on an IHA's Board of Commissioners because he or she is a 
tenant or homebuyer in a housing project of the IHA. A Commissioner who 
is a tenant or homebuyer shall be entitled to participate fully in all 
meetings concerning matters that affect all of the tenants or 
homebuyers, even though such matters affect him or her as well. 
However, no such Commissioner shall be entitled or permitted to 
participate in or be present at any meeting (except in his or her 
capacity as a tenant or homebuyer), or be counted or treated as a 
member of the Board, concerning any matter involving his or her 
individual rights, obligations, or status as a tenant or homebuyer.
    (b) Commissioner as IHA employee. A member of the IHA's Board of 
Commissioners shall not be eligible for employment by the IHA, except 
under extremely unusual circumstances in which it is documented that no 
one except the commissioner is qualified for the position and where the 
HUD Area ONAP approves in advance of the hiring.


Sec. 950.135  Administrative capability.

    (a) HUD determination. At least annually, HUD shall carry out such 
reviews of the performance of each IHA, including remote reviews, on-
site limited and full reviews, audits, surveys, and a formal annual 
review or risk analysis assessment, as may be necessary or appropriate 
to make the determinations required by this section, taking into 
consideration all available evidence. HUD will evaluate an IHA's 
compliance in the areas of development, modernization, and operations, 
including such functions as administration, financial management, 
occupancy, and maintenance.
    (b) Obligation to maintain. (1) An IHA shall maintain 
administrative capability at all times throughout the term of the 
[[Page 18198]] ACC. In order to be considered administratively capable, 
an IHA shall administer the Indian housing program in accordance with 
applicable statutory requirements, HUD regulations, and contracts with 
no serious deficiencies. If any of the following conditions exist, it 
shall be considered a serious deficiency:
    (i) The IHA is not financially stable, based on the most recent 
annual audit, technical assistance visit, or other reliable 
information;
    (ii) An audit, conducted in accordance with 24 CFR part 44 and 
Sec. 950.120, or HUD reviews (including monitoring findings) reveal 
deficiencies that HUD reasonably believes require corrective action 
and/or that corrective actions are not taken in accordance with 
established timeframes;
    (iii) The IHA has management systems that do not meet the standards 
as set forth in 24 CFR part 85, and the lack of such systems may result 
in mismanagement or misuse of Federal funds;
    (iv) The IHA has not conformed to the terms and conditions of 
previous awards, including for new construction, the Comprehensive 
Improvement Assistance Program, the Comprehensive Grant Program, or the 
use of Operating Subsidies;
    (v) The IHA lacks properly trained and competent personnel at key 
management positions of the IHA; or
    (vi) The IHA is in violation of the terms of applicable statutes, 
regulations, or Annual Contributions Contracts.
    (2) If an IHA has serious deficiencies, HUD shall take any or all 
of the following actions:
    (i) Issue a notice of deficiency;
    (ii) Issue a corrective action order; or
    (iii) Classify the IHA as ``high risk'' (see 24 CFR part 85).
    (c) Notice of deficiency. Based on HUD reviews of IHA performance 
and findings of any of the deficiencies in paragraph (b)(1) of this 
section, HUD may issue to the IHA a notice of deficiency, stating the 
specific program requirements that the IHA has violated and requesting 
the IHA to take appropriate action. The notification shall be in 
writing and contain the following:
    (1) The deficiencies, i.e., the IHA actions and the statutory or 
regulatory or other requirements that have been violated;
    (2) Recommended actions that may be taken by the IHA and a 
timeframe for completion;
    (3) The documentation necessary for evidence that all actions have 
been completed.
    (d) Corrective action order. (1) Based on HUD reviews of IHA 
performance and findings of any of the deficiencies described in 
paragraph (b)(1) of this section, HUD may issue to the IHA a corrective 
action order. An order may be issued, whether or not a notice of 
deficiency previously has been issued with regard to the specific 
deficiency on which the corrective action order is based. HUD may order 
corrective action at any time by notifying the IHA of the specific 
program requirements that the IHA has violated, and by specifying the 
corrective actions that shall be taken. HUD shall design corrective 
action to prevent a continuation of the deficiency, mitigate any 
adverse effects of the deficiency to the extent possible, and prevent a 
recurrence of the same or similar deficiencies.
    (2) Before ordering corrective action, HUD will notify the IHA and 
give it an opportunity to consult with HUD regarding the proposed 
action unless HUD notifies the IHA that special circumstances exist 
that warrant giving immediate effect to the announced HUD action.
    (3) Any corrective action ordered by HUD shall become a condition 
of the ACC grant agreement.
    (4) The order shall be in writing and shall contain the following:
    (i) The deficiencies, i.e., the IHA actions and the statutory or 
regulatory or other requirements that have been violated;
    (ii) The corrective action(s) that shall be taken by the IHA and 
the time allowed for completing the corrective action(s);
    (iii) The method of requesting reconsideration of the HUD action 
and the documentation necessary to evidence that all corrective actions 
have been completed.
    (e) Management improvement plan (MIP). (1) When an IHA receives a 
corrective action order, it shall respond to the determination, in 
writing. This response shall include a management improvement plan to 
correct existing deficiencies. The plan shall describe in detail the 
method to be used and the time schedule to be maintained, shall be 
approved by the IHA Board of Commissioners, and is subject to HUD 
approval.
    (2) After receiving the response from the IHA, HUD may direct the 
IHA to take one or more of the following actions:
    (i) Submit additional information:
    (A) Concerning the IHA's administrative, planning, budgeting, 
accounting, management, and evaluation functions, to determine the 
cause for the IHA having deficiencies, as described in paragraph (b)(1) 
of this section;
    (B) Explaining any steps the IHA is taking to correct the 
deficiencies;
    (C) Documenting that IHA activities were not inconsistent with the 
IHA's annual statement or other applicable statutes, regulations, or 
program requirements;
    (ii) Submit schedules for completing the work identified in the 
MIP;
    (iii) Submit additional material in support of one or more of the 
statements, resolutions, and certifications submitted as part of the 
IHA's MIP;
    (iv) Not incur financial obligations, or to suspend payments for 
one or more activities;
    (v) Reimburse, from non-HUD sources, one or more program accounts 
for any amounts improperly expended; or
    (vi) Take such other corrective actions as HUD determines 
appropriate to correct the IHA deficiencies.
    (3) HUD shall determine whether the IHA has satisfied, or has made 
reasonable progress towards satisfying, the management improvement 
plan.
    (4) If the IHA does not satisfy the terms of the plan or does not 
act in good faith to meet the timeframes included in its MIP, HUD may 
impose additional restrictions. In addition, existing projects may be 
terminated, or other action may be instituted, as appropriate.
    (f) High risk determination. An IHA may be classified as ``high 
risk'' and determined ineligible for certain types of future funding 
related to the classification of risk, or may be determined eligible 
for future funding but subject to special conditions or restrictions 
corresponding to the high risk classification. A corrective action 
order listing the specific violation shall accompany the high risk 
designation.
    (1) If an IHA is determined to be high risk, the conditions that 
form the basis for that determination shall be sufficiently serious to 
warrant a determination to exclude the IHA from future funding of a 
particular type. The determination of high risk shall state the cause 
for that finding.
    (2) An IHA may continue to be eligible for funding despite a 
finding that it is high risk--subject to special conditions and/or 
restrictions corresponding to the deficiencies found--if it has 
submitted a management improvement plan that was approved by HUD, and 
it has exhibited substantial compliance with the plan or a good faith 
effort to comply with the plan. If HUD determines that it is necessary 
to impose special conditions or restrictions, it will notify the IHA in 
writing of the applicable conditions or restrictions. One or more 
[[Page 18199]] of the following special conditions or restrictions may 
be imposed:
    (i) Submission to HUD of additional documentation;
    (ii) Submission to HUD of additional or more detailed financial 
reports;
    (iii) Additional project monitoring from the HUD Area ONAP;
    (iv) Additional requirements for technical assistance, from HUD or 
another entity approved by HUD;
    (v) Establishing additional approvals by HUD;
    (vi) Withholding some or all of the IHA's grant;
    (vii) Declaring a breach of the ACC grant amendment with respect to 
some or all of the IHA's functions; or
    (viii) Any other sanction authorized by law or regulation.
    (g) Appeals. (1) An IHA may appeal a corrective action order or a 
determination of high risk status to the local HUD Administrator, 
Office of Native American Programs (ONAP). All appeals shall be made in 
writing within 30 calendar days of notice to the IHA of the HUD action 
and shall state clearly any justification or evidence that the action 
is unwarranted or too severe. If an appeal is filed concerning one or 
more action(s), the action(s) shall not take effect until HUD makes a 
final determination on the appeal or notifies the IHA that special 
circumstances exist that warrant giving immediate effect to the 
announced HUD action. The HUD Administrator shall respond to the appeal 
within 30 days of receipt of the appeal.
    (2) An IHA may appeal a decision of the Administrator to the ONAP, 
Headquarters, only if the case involves actions related to a 
determination of ineligibility of funding for the upcoming funding 
cycle. An appeal of the Administrator's decision shall be made to ONAP, 
Headquarters in writing, stating the justification or evidence, and 
shall be received within 21 days of the date of the Administrator's 
decision. Decisions reviewed by Headquarters will be evaluated based on 
the facts as presented to the Administrator and on any aggravating or 
extenuating circumstances.
    (3) The IHA's Board of Commissioners shall notify the tribal 
government of HUD's final determination to withhold or suspend funds or 
declare a breach of the ACC grant agreement, as well as the basis for, 
and consequences resulting from, such a determination.

Subpart B--Procurement


Sec. 950.160  Procurement standards.

    (a) HUD standards. (1) Applicability. This subpart sets forth 
Federal requirements to be followed by IHAs in the procurement of 
services, supplies, and goods.
    (2) Contracting authorization. An IHA may execute contracts without 
HUD approval for the procurement of work, materials, equipment, and/or 
professional services, in accordance with paragraph (a)(3)(ii) of this 
section. Before the execution of contracts, the IHA Board of 
Commissioners will ensure that procedures are in place to ensure all 
ACC, statutory, and regulatory requirements are satisfied before the 
execution of contracts. The IHA Board of Commissioners will 
periodically review compliance with these procedures.
    (3) Limitations. (i) An IHA shall not award a contract until the 
prospective contractor has demonstrated, to the satisfaction of the 
IHA, the technical, administrative, and financial capability to perform 
contract work of the size and type involved and within the time 
provided under the contract. The IHA shall not award a contract to a 
person or firm on the List of Parties Excluded from Federal Procurement 
and Nonprocurement Programs, which is compiled, maintained, and 
distributed by the General Services Administration (GSA), or to a 
person or firm that is subject to a limited denial of participation 
issued by the HUD Office of Native American Programs. (See 24 CFR part 
24.)
    (ii) The IHA may execute or approve any agreement or contract for 
personnel, management, legal, or other services with any person or firm 
without the prior written approval of HUD, except under the following 
circumstances:
    (A) When the term of the agreement or contract (including renewal) 
is in excess of two years; or
    (B) When the amount of the agreement or contract is in excess of 
the amount included for such purpose in the HUD-approved development 
cost budget, Comprehensive Grant program budget, or operating budget, 
or an amount specified from time to time by HUD, as the case may be; or
    (C) When the agreement or contract is for legal or other services 
in connection with litigation; or
    (D) For contracts in excess of $100,000 in the aggregate when the 
IHA proposes to award a contract based upon a single bid or proposal 
received except when the procurement meets the requirements of 24 CFR 
950.165(d).
    (4) Records. An IHA shall maintain records sufficient to detail the 
significant history of a procurement. The IHA shall maintain evidence 
in its files:
    (i) That the solicitation and award procedures were conducted in 
compliance with State, tribal, or local laws and Federal requirements, 
including requirements for Indian preference and wage rates;
    (ii) That the award does not exceed the approved budget amount and 
is not being made on the basis of a single bid or proposal; and
    (iii) That the IHA reviewed the contractor's qualifications, 
checked to ensure that the contractor is not listed on the GSA List of 
Parties Excluded from Federal Procurement and Nonprocurement Programs, 
and determined that the contractor has the capacity to successfully 
complete the work or services under the terms and conditions of the 
contract. This determination shall consider the contractor's record of 
past performance, integrity, compliance with public policy, and 
financial and technical resources.
    (5) Contract administration. An IHA is responsible, in accordance 
with good administrative practice and sound business judgment, for the 
settlement of all contractual and administrative issues arising out of 
procurement.
    (6) Competition. All procurement transactions must be conducted in 
a manner providing full and open competition.
    (7) Contract cost and price. An IHA must perform a cost or price 
analysis in connection with every procurement action, including 
contract modifications.
    (b) IHA standards. (1) IHA procedures. Each IHA shall adopt, 
promulgate, and comply with rules or regulations for the procurement 
and administration of supplies, materials, services, and equipment in 
connection with the development and operation of projects. Upon 
adoption or modification, the IHA will promptly furnish a copy of these 
rules or regulations to HUD. These rules or regulations shall contain 
provisions on at least the following subjects:
    (i) Procedures to ensure that all procurement transactions are 
conducted in a full and open competitive manner, consistent with the 
standards of 24 CFR 85.36;
    (ii) Identification (by position title) of IHA officials authorized 
to enter into and approve contracts on a noncompetitive basis as 
authorized by 24 CFR 85.36(d)(4);
    (iii) Procedures for inventory control;
    (iv) Procedures for storage and protection of goods and supplies;
    (v) Procedures for issuance of, or other disposition of, supplies 
and equipment; [[Page 18200]] 
    (vi) Procedures for implementing Indian preference requirements;
    (vii) Procedures for handling complaints and protests regarding 
procurement;
    (viii) Standards of conduct governing IHA directors, board members, 
officers, and employees; and
    (ix) Conflict of interest provisions governing directors, officers, 
employees, contractors/developers, and others doing business with the 
IHA.
    (2) Contract administration system. An IHA shall maintain a 
contract administration system that ensures that contractors perform in 
accordance with the terms, conditions, and specifications of their 
contracts and purchase orders.
    (c) Government-wide contract requirements. A HUD regulation found 
at 24 CFR part 85 embodies government-wide administrative requirements 
for grants to State, local, and federally recognized Indian tribal 
governments (including grants received by IHAs). The contract 
provisions listed in 24 CFR 85.36(i) of that regulation are to be 
included in any IHA contracts.


Sec. 950.165  Methods of procurement.

    (a) Small purchase procedures. Small purchase procedures are those 
relatively simple and informal procurement methods for securing 
services, supplies, or other property that do not cost more than 
$100,000 in the aggregate. If small purchase procurements are used, 
price or rate quotations will be obtained from an adequate number of 
qualified sources.
    (b) Procurement by sealed bids (Invitations for Bid (IFB)). Bids 
are publicly solicited and a firm fixed price contract (lump sum or 
unit price) is awarded to the responsible bidder whose bid, conforming 
with all the material terms and conditions of the invitation for bids, 
is the lowest in price. The sealed bid method is the preferred method 
for procuring construction, if the conditions in Sec. 950.165(b)(1) 
apply.
    (1) In order for sealed bidding to be feasible, the following 
conditions should be present:
    (i) A complete, adequate, and realistic specification or purchase 
description is available;
    (ii) Two or more responsible bidders are willing and able to 
compete effectively for the business; and
    (iii) The procurement lends itself to a firm fixed price contract 
and the selection of the successful bidder can be made principally on 
the basis of price.
    (2) If sealed bids are used, the following requirements apply:
    (i) The invitation for bids will be publicly advertised and bids 
shall be solicited from an adequate number of known suppliers, 
providing them sufficient time prior to the date set for opening the 
bids;
    (ii) The invitation for bids, which will include any specifications 
and pertinent attachments, shall define the items or services in order 
for the bidder to properly respond;
    (iii) All bids will be publicly opened at the time and place 
prescribed in the invitation for bids;
    (iv) A firm fixed price contract award will be made in writing to 
the lowest responsive and responsible bidder; and
    (v) Any or all bids may be rejected if there is a sound documented 
reason.
    (c) Procurement by competitive proposals (Request for Proposals 
(RFP)). The technique of competitive proposals is normally conducted 
with more than one source submitting an offer, and either a fixed price 
or cost reimbursement type contract is awarded. It is generally used 
when conditions are not appropriate for the use of sealed bids. If this 
method is used, the following requirements apply:
    (1) Requests for proposals will be publicized and identify all 
evaluation factors and their relative importance. Any response to 
publicized requests for proposals shall be honored to the maximum 
extent practical;
    (2) Proposals will be solicited from an adequate number of 
qualified sources;
    (3) IHAs will have a method for conducting technical evaluations of 
the proposals received and for selecting awardees;
    (4) Awards will be made to the responsible firm whose proposal is 
most advantageous to the program, with price and other factors 
considered; and
    (5) IHAs may use competitive proposal procedures for 
qualifications-based procurement of architectural/engineering (A/E) 
professional services whereby competitors' qualifications are evaluated 
and the most qualified competitor is selected, subject to negotiation 
of fair and reasonable compensation. The method, when price is not used 
as a selection factor, can only be used in procurement of A/E 
professional services. It cannot be used to purchase other types of 
services though A/E firms, even though they are a potential source to 
perform the proposed effort.
    (d) Procurement by noncompetitive proposals is procurement through 
solicitation of a proposal from only one source, or where after 
solicitation of a number of sources, competition is determined 
inadequate.
    (1) Procurement by noncompetitive proposals may be used only when 
the award of a contract is infeasible under small purchase procedures, 
sealed bids, or competitive proposals, and one of the following 
circumstances applies:
    (i) The item is available only from a single source;
    (ii) The public exigency or emergency for the requirement will not 
permit a delay resulting from competitive solicitation;
    (iii) HUD authorizes noncompetitive proposals; or
    (iv) After solicitation of a number of sources, competition is 
determined inadequate.
    (2) Cost analysis, i.e., verifying the proposed cost data, the 
projections of the data, and the evaluation of the specific elements of 
costs and profit, is required.


Sec. 950.170  Other requirements applicable to development contracts.

    (a) Bonding requirements. For construction contracts for more than 
$100,000, each contractor shall be required to provide bid guarantees 
and adequate assurance of performance and payment acceptable to HUD in 
accordance with 24 CFR 85.36(h). In the case of a Mutual Help project, 
the term ``total contract price'' as used with respect to each of the 
above assurance methods includes the value of all Mutual Help 
contributions for work, materials, or equipment to be provided to the 
contractor for use in performing the contract work. The following 
methods may be used to provide performance and payment assurance:
    (1) Performance and payment bonds for 100 percent of the total 
contract price;
    (2) Deposit with the IHA of a cash escrow of not less than 20 
percent of the total contract price, subject to reduction during the 
warranty period, commensurate with potential risk;
    (3) Letter of credit for 25 percent of the total contract price, 
unconditionally payable upon demand of the IHA, subject to reduction 
during the warranty period commensurate with potential risk;
    (4) Letter of credit for 10 percent of the total contract price 
unconditionally payable upon demand of the IHA subject to reduction 
during the warranty period commensurate with potential risk, and 
compliance with the procedures for monitoring of disbursements by the 
contractor.
    (b) Executive Order 11246 (equal employment opportunity). Contracts 
for construction work in connection with Projects under this part are 
subject to Executive Order 11246 (3 CFR, 1964-65 Comp., p. 339), as 
amended by Executive Order 11375 (3 CFR, 1966-70 Comp., p. 684), and to 
applicable [[Page 18201]] implementing regulations (24 CFR part 130; 41 
CFR chapter 60), rules, and orders of HUD and the Office of Federal 
Contract Compliance Programs of the Department of Labor (DOL). 
Executive Order 11246 prohibits discrimination and requires affirmative 
action to ensure that employees or applicants for employment are 
treated without regard to their race, color, religion, sex, or national 
origin. Compliance with E.O. 11246, and related regulations, Orders, 
and requirements shall be to the maximum extent consistent with, but 
not in derogation of, compliance with section 7(b) of the Indian Self-
Determination and Education Assistance Act.
    (c) Local area residents. In accordance with section 3 of the 
Housing and Urban Development Act of 1968 (12 U.S.C. 1701u) and the 
implementing regulations in 24 CFR part 135, IHAs and their contractors 
and subcontractors shall make best efforts, consistent with existing 
Federal, State, 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 135.3(1)) and to give section 3 business concerns 
the contracting opportunities generated by section 3 covered 
assistance.


Sec. 950.172  Wage rates.

    (a) Determination of prevailing wage rates. For the applicable 
method of determination of the prevailing wage rates to be paid 
laborers and mechanics, see Sec. 950.120(c).
    (b) Preemption of prevailing wage rates. (1) A prevailing wage rate 
determined under State or tribal law shall be inapplicable to a 
contract or IHA-performed work item for the development, maintenance, 
or modernization of a project whenever:
    (i) The contract or the work item is otherwise subject to State or 
tribal law requiring the payment of wage rates determined by a State, 
local, or tribal government or agency to be prevailing and is for a 
project assisted with funds for low-income housing under the Act; and
    (ii) The wage rate (the basic hourly rate and any fringe benefits) 
determined under State or tribal law to be prevailing with respect to 
an employee in any trade or position employed in the development, 
maintenance, or modernization of a project exceeds whichever of the 
following Federal wage rates is applicable:
    (A) The wage rate determined by the Secretary of Labor pursuant to 
the Davis-Bacon Act (40 U.S.C. 276a, et seq.) to be prevailing in the 
locality with respect to such trade;
    (B) An applicable apprentice wage rate based thereon specified in 
an apprenticeship program registered with the Department of Labor or a 
DOL-recognized State Apprenticeship Agency;
    (C) An applicable trainee wage rate based thereon specified in a 
DOL-certified trainee program; or
    (D) The wage rate determined by the Secretary of HUD to be 
prevailing in the locality with respect to such trade or position.
    (2) For the purpose of ascertaining whether a wage rate determined 
under State or tribal law for a trade or position exceeds the Federal 
wage rate:
    (i) When a rate determined by the Secretary of Labor or an 
apprentice or trainee wage rate based thereon is applicable, the total 
wage rate determined under State or tribal law, including fringe 
benefits (if any) and basic hourly rate, shall be compared to the total 
wage rate determined by the Secretary of Labor or apprentice or trainee 
wage rate; and
    (ii) When a rate determined by the Secretary of HUD is applicable, 
any fringe benefits determined under State or tribal law shall be 
excluded from the comparison with the rate determined by the Secretary 
of HUD.
    (3) Whenever paragraph (b)(1)(i) of this section is applicable:
    (i) Any solicitation issued by the IHA and any contract executed by 
the IHA for development, maintenance, or modernization of the project 
shall include a statement as prescribed in this paragraph, and failure 
to include this statement may constitute grounds for requiring re-
solicitation. The statement that any prevailing wage rate (including 
basic hourly rate and any fringe benefits) determined under State or 
tribal law to be prevailing with respect to an employee in any trade or 
position employed under the contract is inapplicable to the contract 
and shall not be enforced against the contractor or any subcontractor 
with respect to employees engaged under the contract must be included 
whenever either of the following occurs:
    (A) Such non-Federal prevailing wage rate exceeds:
    (1) The applicable wage rate determined by the Secretary of Labor 
pursuant to the Davis-Bacon Act (40 U.S.C. 276a, et seq.) to be 
prevailing in the locality with respect to such trade;
    (2) An applicable apprentice wage rate based thereon specified in 
an apprenticeship program registered with the Department of Labor or a 
DOL-recognized State Apprenticeship Agency; or
    (3) An applicable trainee wage rate based thereon specified in a 
DOL-certified trainee program; or
    (B) Such non-Federal prevailing wage rate, exclusive of any fringe 
benefits, exceeds the applicable wage rate determined by the Secretary 
of HUD to be prevailing in the locality with respect to such trade or 
position.
    (ii) The IHA itself shall not be required to pay the basic hourly 
rate or any fringe benefits comprising a prevailing wage rate 
determined under State or tribal law and described in paragraph (b)(2) 
of this section to any of its own employees who may be engaged in the 
development, maintenance, or modernization of the project; and
    (iii) Neither the basic hourly rate nor any fringe benefits 
comprising a prevailing wage rate determined under State or tribal law 
and described in paragraph (b)(2) of this section shall be enforced 
against the IHA or any of its contractors or subcontractors with 
respect to employees engaged in the contract or IHA-performed work item 
for development, maintenance, or modernization of the project.
    (4) Nothing in paragraph (b) of this section shall affect the 
applicability of any wage rate established in a collective bargaining 
agreement with an IHA or its contractors or subcontractors when such 
wage rate equals or exceeds the applicable Federal wage rate referred 
to in paragraph (b)(1)(ii) of this section, nor does paragraph (b) of 
this section impose a ceiling on wage rates an IHA or its contractors 
or subcontractors may choose to pay independent of State law.
    (5) The provisions of paragraph (b) of this section shall apply to 
work performed under any prime contract entered into as a result of a 
solicitation of bids or proposals issued on or after October 6, 1988 
and to any work performed by employees of an IHA on or after October 6, 
1988.


Sec. 950.175  Indian preference requirements.

    (a) Applicability. HUD has determined that grants under this part 
are subject to section 7(b) of the Indian Self-Determination and 
Education Assistance Act (25 U.S.C. 450e(b)), which requires that, to 
the greatest extent feasible:
    (1) Preference and opportunities for training and employment shall 
be given to Indians; and
    (2) Preference in the award of contracts and subcontracts shall be 
given to Indian organizations and Indian-owned economic enterprises. 
[[Page 18202]] 
    (b) Definitions. Indian organizations and Indian-owned economic 
enterprises include either of the following:
    (1) Any economic enterprise as defined in section 3(e) of the 
Indian Financing Act of 1974 (25 U.S.C. 1452); that is, ``any Indian-
owned (as defined by the Secretary of Interior) commercial, industrial, 
or business activity established or organized for the purpose of profit 
provided that such Indian ownership and control shall constitute not 
less than 51 percent of the enterprise''; and
    (2) Any Tribal organization as defined in section 4(c) of the 
Indian Self-Determination and Education Assistance Act (25 U.S.C. 
450(b)(8)); that is, ``the recognized governing body of any Indian 
Tribe; any legally established organization of Indians which is 
controlled, sanctioned or chartered by such governing body or which is 
democratically elected by the adult members of the Indian community to 
be served by such organizations and which includes the maximum 
participation of Indians in all phases of its activities.''
    (c) Preference in employment and training. To the greatest extent 
feasible, IHAs and their contractors and subcontractors shall give 
preference and opportunities for training and employment in connection 
with the administration of grants awarded under this part and in the 
award of contracts funded under this part to Indians and Alaskan 
natives. The Indian Self-Determination Act defines ``Indians'' to mean 
persons who are members of an Indian tribe, and defines ``Indian 
tribe'' to mean any Indian tribe, band, nation, or other organized 
group or community, including any Alaska Native village or regional or 
village corporation as defined in or established pursuant to the Alaska 
Native Claims Settlement Act, which is recognized as eligible for the 
special programs and services provided by the United States to Indians 
because of their status as Indians.
    (d) Preference in contracting. To the greatest extent feasible, 
IHAs shall give preference in the award of contracts funded under this 
part to Indian organizations and Indian-owned economic enterprises.
    (1) Each IHA shall:
    (i) Advertise for bids or proposals limited to qualified Indian 
organizations and Indian-owned enterprises; or
    (ii) Use a two-stage preference procedure, as follows:
    (A) Stage 1. Invite or otherwise solicit Indian-owned economic 
enterprises to submit a statement of intent to respond to a bid 
announcement limited to Indian organizations and Indian-owned 
enterprises;
    (B) Stage 2. If responses to the solicitation of intent to bid 
under Stage 1, above, are received from more than one Indian 
organization or Indian-owned enterprise that is found to be qualified, 
advertise for bids or proposals limited to Indian organizations and 
Indian-owned economic enterprises (otherwise, bids may be solicited on 
an open, competitive basis); or
    (iii) Develop and incorporate into their procurement policy, 
subject to HUD Area ONAP one-time approval, the IHA's method of 
providing preference. In no instance shall HUD approve a method that 
provides preference based upon affiliation or membership in a 
particular tribe or group of tribes.
    (2) If the IHA-selected method of providing preference under 
paragraph (d)(1) of this section results in fewer than two responsible 
qualified Indian organizations or Indian-owned enterprises submitting a 
statement of intent, a bid, or a proposal to perform the contract at a 
reasonable cost, then the IHA shall:
    (i) Re-compete the contract, using any of the methods described in 
paragraph (d)(1) of this section; or
    (ii) Re-compete the contract without limiting the advertisement for 
bids or proposals to Indian organizations and Indian-owned economic 
enterprises; or
    (iii) If only one bid or proposal is received, request Area ONAP 
review and approval of the proposed contract and related procurement 
documents, in accordance with 24 CFR 85.36, in order to award the 
contract to the single bid or proposal.
    (3) Procurements that are within the dollar limitations established 
for small purchases under 24 CFR 85.36(d)(1) need not follow the formal 
requirements for public announcement and advertising for bids or 
proposals as provided in paragraph (d)(1) of this section. However, an 
IHA small purchase procurement shall, to the greatest extent feasible, 
provide Indian preference in the award of contracts.
    (4) All preferences shall be publicly announced in the solicitation 
and the contract documents.
    (5) An IHA, at its discretion, may require information of 
prospective contractors seeking to qualify as Indian organizations or 
Indian-owned economic enterprises. IHAs may require prospective 
contractors to submit information prior to submitting a bid or 
proposal, or at the time of submission. Information requested by the 
IHA may include but is not limited to the following:
    (i) Evidence showing fully the extent of Indian ownership, control, 
and interest;
    (ii) Evidence of structure, management, and financing affecting the 
Indian character of the enterprise, including major subcontracts and 
purchase agreements; materials or equipment supply arrangements; and 
management salary or profit-sharing arrangements; and evidence showing 
the effect of these on the extent of Indian ownership and interest; and
    (iii) Evidence sufficient to demonstrate to the satisfaction of the 
IHA that the prospective contractor has the technical, administrative, 
and financial capability to perform contract work of the size and type 
involved.
    (6) The IHA shall incorporate the following clause (referred to as 
the Section 7(b) clause) in each contract awarded in connection with a 
project funded under this part:
    (i) The work to be performed under this contract is on a project 
subject to Section 7(b) of the Indian Self-Determination and Education 
Assistance Act (25 U.S.C. 450e(b)) (Indian Act). Section 7(b) requires 
that to the greatest extent feasible:
    (A) Preferences and opportunities for training and employment shall 
be given to Indians; and
    (B) Preferences in the award of contracts and subcontracts shall be 
given to Indian organizations and Indian-owned economic enterprises.
    (ii) The parties to this contract shall comply with the provisions 
of section 7(b) of the Indian Act.
    (iii) In connection with this contract, the contractor shall, to 
the greatest extent feasible, give preference in the award of any 
subcontracts to Indian organizations and Indian-owned economic 
enterprises, and preferences and opportunities for training and 
employment to Indians and Alaskan natives.
    (iv) The contractor shall include this Section 7(b) clause in every 
subcontract in connection with the project, and shall, at the direction 
of the IHA, take appropriate action pursuant to the subcontract upon a 
finding by the IHA or HUD that the subcontractor has violated the 
Section 7(b) clause of the Indian Act.
    (e) Additional Indian preference requirements. An IHA may, subject 
to applicable State, local, or tribal law, provide for additional 
Indian preference requirements as conditions for the award of, or in 
the terms of, any contract in connection with a project funded under 
this part. The additional Indian preference requirements shall be 
consistent with the objectives of the [[Page 18203]] Section 7(b) 
clause of the Indian Act and shall not result in a significantly higher 
cost or greater risk of nonperformance or longer period of performance. 
The additional Indian preference requirements permitted by this part do 
not include the imposition of geographic preferences or restrictions to 
the procurement process.
    (f) Complaint procedures. The following complaint procedures are 
applicable to complaints arising out of any of the methods of providing 
for Indian preference contained in this subpart, including alternate 
methods enacted and approved in the manner described in this subpart B.
    (1) Each complaint shall be in writing, signed, and filed with the 
IHA.
    (2) A complaint must be filed with the IHA no later than 20 
calendar days from the date of the action (or omission) upon which the 
complaint is based.
    (3) Upon receipt of a complaint, the IHA shall promptly stamp the 
date and time of receipt upon the complaint, and immediately 
acknowledge its receipt.
    (4) Within 20 calendar days of receipt of a complaint, the IHA 
shall either meet, or communicate by mail or telephone, with the 
complaining party in an effort to resolve the matter. The IHA shall 
make a determination on a complaint and notify the complainant, in 
writing, within 30 calendar days of submittal of the complaint to the 
IHA. The decision of the IHA shall constitute final administrative 
action on the complaint.


Sec. 950.190  Insurance.

    (a) Purpose. This section implements policies concerning insurance 
coverage required under the Annual Contributions Contract (ACC) or 
Mutual Help Annual Contributions Contract (MHACC) between HUD and an 
IHA. These contracts require (in section 305 of the ACC and Article IX 
of the MHACC) that IHAs maintain specified insurance coverage for 
property and casualty losses that would jeopardize the financial 
stability of the IHAs. The insurance coverage is required to be 
obtained under procedures that provide for open and competitive 
bidding. The HUD Appropriations Act for Fiscal Year 1992 (Pub.L. 102-
368) provided that an IHA could purchase insurance coverage without 
regard to competitive selection procedures when it purchases it from a 
nonprofit insurance entity owned and controlled by IHAs approved by HUD 
in accordance with standards established by regulation. This section 
specifies the standards.
    (b) Method of selection of insurance coverage. While 24 CFR part 85 
requires that grantees solicit full and open competition for their 
procurements, the HUD Appropriations Act for Fiscal Year 1992 (Pub.L. 
102-368) provides an exception to this requirement. IHAs are authorized 
to obtain any line of insurance from a nonprofit insurance entity that 
is owned and controlled by IHAs and approved by HUD in accordance with 
this section, without regard to competitive selection procedures. 
Procurement of insurance from other entities is subject to competitive 
selection procedures.
    (c) Approval of a nonprofit insurance entity. Under the following 
conditions, HUD will approve a nonprofit self-funded insurance entity 
created by IHAs that limits participation to IHAs (and to nonprofit 
entities associated with IHAs that engage in activities or perform 
functions only for housing authorities or housing authority residents):
    (1) An insurance company (including a risk retention group);
    (i) The insurance company maintains a current license or is 
authorized to do business in the State or tribal area by the State 
Insurance Commissioner or Indian tribal governing body and has 
submitted documentation of this authority to HUD; and
    (ii) The insurance company has not been suspended from providing 
insurance coverage in the State or tribal area or been suspended or 
debarred from doing business with the Federal Government. The insurance 
company is obligated to send to HUD a copy of any action taken by the 
authorizing official to withdraw the license or authorization;
    (2) An entity not organized as an insurance company.
    (i) The entity has competent underwriting staff (hired directly or 
engaged by contract with a third party), as evidenced by professionals 
with an average of at least five years of experience in large risk 
(exceeding $100,000 in annual premiums) commercial underwriting or at 
least five years of experience in the underwriting of risks for public 
entity risk pools. This standard may be satisfied by submission of 
evidence of competent underwriting staff, including copies of resumes 
of underwriting staff for the entity;
    (ii) The entity has efficient and qualified management (hired 
directly or engaged by contract with a third party), as evidenced by 
the report submitted to HUD in accordance with paragraph (d)(3) of this 
section and by having at least one senior staff person who has a 
minimum of five years of experience:
    (A) At the management level of Vice President of a property/
casualty insurance entity;
    (B) As a senior branch manager of a branch office with annual 
property/casualty premiums exceeding $5 million; or
    (C) As a senior manager of a public entity risk pool. Documentation 
for this standard must include copies of resumes of key management 
personnel responsible for oversight and for the day-to-day operation of 
the entity;
    (iii) The entity maintains internal controls and cost containment 
measures, as evidenced by an annual budget;
    (iv) The entity maintains sound investments consistent with:
    (A) The State insurance commissioner's requirements for licensed 
insurance companies, or other State statutory requirements controlling 
investments of public entities in the State in which the entity is 
organized, investing only in assets that qualify as ``admitted 
assets''; or
    (B) Any applicable provisions of Indian tribal law concerning 
investments, in the case of an IHA that is not subject to such State 
law;
    (v) The entity maintains adequate surplus and reserves for 
undischarged liabilities of all types, as evidenced by a current 
audited financial statement and an actuarial review conducted in 
accordance with paragraph (d) of this section; and
    (vi) Upon application for initial approval, the entity has proper 
organizational documentation, as evidenced by copies of the articles of 
incorporation, by-laws, business plans, copies of contracts with third 
party administrators, and an opinion from legal counsel that 
establishment of the entity conforms with all legal requirements under 
Federal, State, or tribal law. Any material changes made to these 
documents after initial approval must be submitted for review and 
approval before becoming effective.
    (d) Professional evaluations of performance. Audits and actuarial 
reviews are required to be prepared and submitted annually to the HUD 
Office of Public and Indian Housing, for review and appropriate action, 
by nonprofit insurance entities that are not insurance companies 
approved under paragraph (c)(1) of this section. Selection of entities 
to perform such reviews shall comply with the competitive requirements 
of 24 CFR 85.36. In addition, an evaluation of other management factors 
is required to be performed by an insurance professional every three 
years. For fiscal years ending on or after December 31, 1993, the 
initial audit, actuarial review, and insurance management review 
required for a nonprofit insurance entity must be 
[[Page 18204]] submitted to HUD within 90 days after the end of the 
entity's fiscal year.
    (1) The annual financial statement prepared in accordance with 
generally accepted accounting principles (including any supplementary 
data required by GASB 10) is to be audited by an independent auditor 
(see 24 CFR part 44), in accordance with generally accepted auditing 
standards. The independent auditor shall express an opinion on whether 
the entity's financial statement is presented fairly in accordance with 
generally accepted accounting principles. A copy of this audit must be 
submitted to HUD.
    (2) The actuarial review must be done consistent with requirements 
established by the National Association of Insurance Commissioners and 
must be conducted by an independent property/casualty actuary who is an 
Associate or Fellow of a recognized professional actuarial 
organization, such as the Casualty Actuary Society. The report issued, 
a copy of which must be submitted to HUD, must include an opinion on 
any over or under reserving and the adequacy of the reserves maintained 
for the open claims and for incurred but unreported claims.
    (3) A review must be conducted, a copy of which must be submitted 
to HUD, by an independent insurance consulting firm that has at least 
one person on staff who has received the professional designation of 
chartered property/casualty underwriter (CPCU), associate in risk 
management (ARM), or associate in claims (AIC), of the following:
    (i) Efficiency of any Third Party Administrator;
    (ii) Timeliness of the claim payments and reserving practices; and
    (iii) The adequacy of reinsurance coverage.
    (e) Revocation of approval of a nonprofit insurance entity. HUD may 
revoke its approval of a nonprofit insurance entity under this section 
when it no longer meets the requirements of this section. The nonprofit 
insurance entity will be notified in writing of the proposed revocation 
of its approval, and the manner and time in which to request a hearing 
to challenge the determination. The procedure to be followed is 
specified in 24 CFR part 26.


Sec. 950.195  Lead-based paint liability insurance coverage.

    (a) General. The purpose of this section is to specify what HUD 
deems reasonable insurance coverage with respect to the hazards 
associated with testing for and abatement of lead-based paint that the 
IHA undertakes, in accordance with the IHA's ACC or MHACC with HUD. The 
insurance coverage does not relieve the IHA of its responsibility for 
assuring that lead-based paint testing and abatement activities are 
conducted in a responsible manner.
    (b) Insurance coverage requirements. When the IHA undertakes lead-
based paint testing and abatement, it must assure that it has 
reasonable insurance coverage for itself for potential personal injury 
liability associated with those activities. If the work is being done 
by IHA employees, the IHA must obtain a liability insurance policy 
directly to protect the IHA. If the work is being done by a contractor, 
the IHA may obtain, from the insurer of the contractor performing this 
type of work in accordance with a contract, a certificate of insurance 
providing evidence of such insurance and naming the IHA as an 
additional insured; or it may obtain such insurance directly. Insurance 
must remain in effect during the entire period of testing and abatement 
and must comply with the following requirements:
    (1) Named insured. If purchased by the IHA, the policy shall name 
the IHA as insured. If purchased by an independent contractor, the 
policy shall name the contractor as insured and the IHA as an 
additional insured, in connection with performing work under the IHA's 
lead-based paint testing and abatement contract. If the IHA has 
executed a contract with a Resident Management Corporation (RMC) to 
manage a building/project on behalf of the IHA, the RMC shall also be 
an additional insured under the policy in connection with the lead-
based paint testing and abatement contract. (The duties of the RMC are 
similar to those of a real estate management firm.)
    (2) Coverage limits. The minimum limit of liability shall be 
$500,000 per occurrence written, with a combined single limit for 
bodily injury and property damage.
    (3) Deductible. A deductible, if any, may not exceed $5,000 per 
occurrence.
    (4) Supplementary payments. Payments for such supplementary costs 
as the costs of defending against a claim must be in addition to, and 
not as a reduction of, the limit of liability. However, it will be 
permissible for the policy to have a limit on the amount payable for 
defense costs. If a limit is applicable, it must not be less than 
$250,000 per claim prior to such costs being deducted from the limit of 
liability.
    (5) Occurrence form policy. The form used must be an ``occurrence'' 
form, or a ``claims made'' form that contains an extended reporting 
period of at least five years. (Under an occurrence form, coverage 
applies to any loss if the policy was in effect when the loss occurred, 
regardless of when the claim is made.)
    (6) Aggregate limit. If the policy contains an aggregate limit, the 
minimum acceptable limit is $1,000,000.
    (7) Cancellation. In the event of cancellation, at least 30 days' 
advance notice is to be given to the insured and any additional 
insured.
    (c) Exception to requirements. Insurance already purchased by the 
IHA or contractor and in force on the date this rule is effective, 
which provides coverage for the hazards involved in the testing for and 
abatement of lead-based paint, shall be considered as meeting the 
requirements of this rule until the expiration of the policy. This rule 
is not applicable to architects, engineers, or consultants who do not 
physically perform lead-based paint testing and abatement work.
    (d) Insurance for the existence hazard. An IHA may also purchase 
special liability insurance against the existence hazard of lead-based 
paint, although it is not a required coverage. An IHA may purchase this 
coverage if, in the opinion of the IHA, the policy meets the IHA's 
requirements, the premium is reasonable, and the policy is obtained in 
accordance with applicable procurement standards of this subpart B. If 
this coverage is purchased, the premium must be paid from funds 
available under the Performance Funding System or from reserves.

Subpart C--Development


Sec. 950.200  Roles and responsibilities of Federal agencies.

    HUD, IHS, BIA, and other appropriate agencies shall coordinate 
their functions in accordance with the Interdepartmental Agreement. HUD 
shall take the lead role in the coordination of the construction of 
Indian housing under this part.


Sec. 950.205  Allocation.

    HUD will allocate funds to Area ONAPs using a systematic process 
that considers the relative need for housing in each HUD area or other 
geographic area, based on the most recent and reliable data available. 
(See 24 CFR part 791, subpart D.)


Sec. 950.207  Eligibility.

    (a) Basic criteria. An IHA is eligible to submit an application for 
new housing development and to be considered for funding if it meets 
the following criteria: [[Page 18205]] 
    (1) Has been established in accordance with the provisions of 
Sec. 950.125 or Sec. 950.126; and
    (2) Has not been determined to be administratively incapable, in 
accordance with Sec. 950.135; and
    (3) Meets all the performance thresholds contained in paragraph (b) 
of this section.
    (b) Performance thresholds. An IHA shall be in compliance with the 
following requirements for all projects in development or operation to 
be considered for additional new housing development funding. The ONAP 
Administrator may waive performance thresholds for good cause.
    (1) Environmental Review requirements of Sec. 950.247;
    (2) Fiscal closeout requirements of Sec. 950.285;
    (3) Final site approval and site control requirements of 
Sec. 950.250(c);
    (4) Firm commitments from utility suppliers in accordance with 
Sec. 950.235(c) prior to the execution of a construction contract, 
contract of sale, or start of construction; and
    (5) Pre-construction certification requirements of Sec. 950.260.


Sec. 950.210  Authority for proceeding without HUD approval.

    (a) IHA authority to proceed. An IHA shall proceed with development 
functions without obtaining HUD approval except as otherwise specified 
in this part. An IHA shall accomplish necessary planning and 
administration activities to assure the timely completion of the 
development grant (generally six years from the initial development 
grant approval to development grant closeout).
    (b) Rescinding authorization. At any time during the development 
process, HUD may make a determination, subject to the procedures 
specified under Sec. 950.135, that an IHA shall obtain HUD approval of 
additional processing steps. If such a determination is made, HUD shall 
explain in writing the reasons for the determination and specify any 
processing steps that are subject to additional technical assistance 
and prior approval by HUD.
    (c) Time constraints. The IHA shall commence project planning so 
that construction begins within 24 months of the initial development 
grant approval date. HUD shall not recapture funds reserved for the 
project during the 30-month period following the initial development 
grant approval. Excluded from the computation of the 30-month period 
shall be any delay caused by the failure of HUD to process such project 
within a reasonable period of time, any environmental review 
requirement (other than the failure to initiate the environmental 
review process by the responsible entity), any legal action affecting 
the project, or any other factor beyond the control of the IHA. If an 
IHA fails to reach construction start for a project within 24 months of 
the date of initial development grant approval, HUD shall analyze the 
circumstances that have resulted in the failure to reach construction 
start and, subject to the availability of resources, shall provide 
assistance to the IHA to enable construction start within 30 months 
after the date of initial development grant approval.


Sec. 950.215  Production methods.

    (a) Choice and approval of production method. The IHA may utilize 
any production method or combination of production methods as long as 
the production method(s) is not in conflict with the procurement 
requirements of 24 CFR 85.36 and subpart B of this part. The IHA shall 
advise HUD on its application of its choice of production methods. 
Prior HUD approval is required if the method selected is Force Account 
or if the IHA proposes to utilize a noncompetitive procurement method. 
If HUD disapproves the IHA's preferred development method, it shall 
provide a justification to the IHA. Production methods utilized in the 
Indian Housing program are Conventional, Turnkey, Modified Turnkey, 
Self-Help, Acquisition, and Force Account.
    (b) Special requirements for approval of Force Account method. The 
Force Account method may be used only if approved by the Area ONAP. The 
IHA shall demonstrate that it has the technical and administrative 
capabilities to complete the project within the projected time and 
budget. The Area ONAP shall require that a tribe or IHA agree in 
writing:
    (1) To cover any costs in excess of those included in the HUD-
approved development cost budget;
    (2) Demonstrate that it has the financial resources to meet the 
excess costs up to a specified amount; and
    (3) Provide some form of security acceptable to HUD to cover excess 
costs. For this purpose, an IHA may use attachable assets including 
funds maintained in its reserve for replacements received from the sale 
of Mutual Help units. The Area ONAP may approve the Force Account 
method without requiring the IHA or tribe to provide security to cover 
excess costs if the IHA agrees to develop the project in small stages 
with additional HUD monitoring and oversight. Under such approval, the 
IHA continues to be obligated to cover costs in excess of those 
included in the HUD-approved development cost budget.


Sec. 950.220  Total development cost.

    (a) Total development cost standard. Total development cost (TDC) 
standards, which establish the maximum allowable cost for developing 
Indian housing projects, are determined as a per unit cost for various 
unit sizes, structure types, and geographic areas, and are published 
annually by HUD.
    (b) Resident training and insurance. The total development cost of 
a project may include costs associated with a HUD-approved tenant or 
homebuyer counseling program (in accordance with the provisions of 
Sec. 950.453) and the insurance premiums for the first three years of 
project operation with no obligation for reimbursement from operating 
receipts. The anticipated cost of such insurance premiums may be 
charged to the development and placed in escrow by the IHA to enable 
closeout of the development grant.
    (c) Costs excluded from TDC. The TDC standard for a project 
includes all costs associated with the project except for off-site 
water and sanitation facilities infrastructure and donations received 
from any public or private source. Costs for off-site water and 
sanitation facilities infrastructure and any donations received shall 
be included in the project development cost budget but will be excluded 
from the calculation of the project TDC limit.


Sec. 950.225  Application.

    (a) Submission to HUD. (1) An eligible IHA may submit an 
application for a project after HUD issues a notice of funding 
availability (NOFA).
    (2) The application shall be on the form prescribed by HUD and 
shall be accompanied by all the legal and administrative attachments 
required by the form.
    (3) State-created IHAs for non-Federally recognized tribes shall 
certify that sites selected shall be within the IHA's area of 
operation. For purposes of this section ``area of operation'' is 
defined as a land area with defined geographical boundaries, which has 
a significant concentration of Indian families who are:
    (i) Not served by a PHA or tribally-created IHA; and
    (ii) Have a bona fide historic presence or connection with the 
land, as recognized by the Federal Government or a State.
    (b) Rating process. (1) Applications shall be rated and points 
shall be awarded for at least the following categories: [[Page 18206]] 
    (i) Relative unmet need for housing;
    (ii) Relative IHA occupancy rate compared to the occupancy rates of 
other eligible IHAs submitting applications;
    (iii) Length of time since the last development grant approval date 
for each IHA compared to other eligible IHAs submitting applications;
    (iv) Current IHA development pipeline activity; and
    (v) Other factors identified in a NOFA.
    (2) After the completion of the rating process, all applications 
shall be combined into one list to produce an ordered ranking to be 
used in determining applications to be funded.


Sec. 950.227  Initial development grant approval and ACC execution.

    (a) Grant approval. (1) For those applications selected for 
funding, the Area ONAP shall issue a development grant approval that 
shall specify housing type, household type, development method, the 
amount of funds reserved, the minimum and maximum number of total 
units, and the number of units of each bedroom size to be developed. 
The total project development cost is limited to the funds designated 
in the development grant approval plus any donations to the project.
    (2) As long as the total project development cost limit and the 
funds reserved in the development grant approval are not exceeded, the 
IHA may change any of the elements specified in the development grant 
approval it determines necessary to complete the project. If an IHA 
decides to change any of the elements specified in the development 
grant approval, it shall submit to HUD a request to amend the 
development grant approval, including documentation supporting the 
request. HUD shall either approve the request or notify the IHA of the 
reason the request is not approved. Amendment funds may not be used to 
increase the project size.
    (b) Execution of ACC. (1) Upon issuance of the development grant 
approval by HUD, the IHA and HUD may execute an ACC to cover the 
eligible costs of the project with respect to the number of units 
covered by the development grant approval.
    (2) The ACC must be amended, if required, upon completion of 
project planning to correctly identify the number of units in the 
development, program type, and production method.


Sec. 950.229  Expenditure of funds.

    (a) Development Cost Budgets. The IHA shall submit for HUD review 
and acceptance a development cost budget showing anticipated 
expenditures and any needed supporting documentation before funds can 
be obligated or expended.
    (1) The IHA may submit a development cost budget for planning for 
an amount that the IHA demonstrates is required for the planning of the 
project. A development cost budget for planning may include costs for 
comprehensive planning. (See paragraph (c) of this section.)
    (2) The IHA shall submit a construction stage development cost 
budget, in accordance with the procedures specified under Sec. 950.260.
    (b) Limitations. (1) An IHA shall not incur any development cost in 
excess of the amount identified on the ACC for that project.
    (2) Obligation or expenditure of development funds is limited to 
the amounts reviewed and accepted by HUD in the latest development cost 
budget.
    (3) Use of development funds of projects under ACC to cover costs 
for another project is strictly prohibited except as provided for under 
paragraph (c) of this section.
    (c) Comprehensive housing plan. At the request of an IHA, HUD may 
approve up to one percent of the development grant to establish and/or 
update a master housing plan for the IHA's area of operation. The plan 
shall contain such elements as proposed housing sites, existing and 
proposed off-site roads, and existing and proposed water and sewer 
facilities. In addition, the plan shall address geographical and 
topographical features, as well as socio-economic and cultural factors, 
such as employment opportunities, schools, and services, that have an 
impact on the placement of residential housing. The plan shall be 
approved by resolution of the tribal council. The one-percent cost for 
the comprehensive housing plan may be charged to the development and 
placed in an escrow or revolving fund account by the IHA to enable 
closeout of the development program and/or pooling of planning 
resources.


Sec. 950.231  Project coordination.

    (a) Project coordination meeting. Upon notification of a 
development grant approval, the IHA shall schedule a project 
coordination meeting to plan and schedule the steps needed to develop 
the project. The IHA shall invite to the project coordination meeting 
the project designer (if known) and any tribal, State, or Federal 
officials who will participate in the development of the project. At 
the project coordination meeting, the IHA shall establish a schedule of 
planning activities with target dates for completion of key activities, 
including the submission to HUD of a construction stage development 
cost budget and other requirements contained in Sec. 950.260. The 
schedule, and any amendments thereto, shall be provided to meeting 
participants and to HUD to be used in planning and monitoring 
activities.
    (b) Citizen participation. The IHA shall hold at least one public 
meeting at which comments are solicited on the proposed sites and 
project design from potential occupants, as well as from other 
interested parties. The meeting may be held in conjunction with a 
regularly scheduled board meeting or may be held separately. In either 
case, adequate notice shall be provided to the public to enable full 
participation. The IHA shall give maximum consideration to all public 
comments in the design of the project. Failure to hold a public meeting 
or failure to consider public comments in the design of the project 
shall be grounds for HUD to rescind authorization, in accordance with 
the procedures specified in Sec. 950.210(b).


Sec. 950.235  Site selection criteria.

    (a) Relation to tribal, local, and regional plans. Selected sites 
shall comply with all applicable tribal, local, and/or regional plans.
    (b) Access roads. Access roads up to the boundaries of multi-unit 
sites shall be provided by the BIA, the tribe, or other appropriate 
agency and shall not be an eligible cost of the project. Access roads 
up to the boundaries of individual homesites in a scattered site 
project shall be provided by the homebuyer, the tribe, or other 
appropriate agency and shall not be an eligible cost of the project. 
Access roads shall be maintained by a responsible local entity to 
provide safe and suitable vehicular access. No site shall be approved 
unless such access roads exist, or a written assurance has been 
obtained from the responsible entity that roads shall be constructed 
before commencement of project construction.
    (c) Utilities. Before final site approval, the IHA shall obtain 
firm commitments from utility suppliers that all utility services 
necessary for the operation of the project are available or will be 
available at the time of project occupancy.
    (d) Physical characteristics of site. The physical characteristics 
of a site shall facilitate overall economy in site preparation, 
construction, and management. Only reasonable costs for surveys, 
planning, test borings, and test wells shall be included in the 
development cost of the project. [[Page 18207]] 
    (e) Size of sites. An individual homesite, whether a scattered site 
or included in a multi-unit site, shall not exceed the size determined 
by the IHA or by tribal or local policy to be necessary for the use and 
occupancy of the dwelling unit.
    (f) Access to sites. For a Mutual Help unit, each homesite shall be 
legally and practicably available for use by another homebuyer. If a 
site is part of other land owned by the prospective homebuyer, the 
lease or other conveyance to the IHA shall include the legal right of 
access to the site by any substitute homebuyer.


Sec. 950.240  Types of interest in land.

    (a) Trust or restricted land. Sites on tribally or individually 
owned trust or restricted land (as defined in 25 CFR 151.2) shall be 
leased to the IHA for a term of not less than 50 years (25 years, 
automatically renewable for an additional term of 25 years) on a HUD-
approved form of lease, which shall provide that the lease cannot be 
terminated before its expiration without the consent of the IHA, and 
while the site remains under the ACC, by HUD.
    (b) Unrestricted land. Sites on unrestricted land shall be either 
conveyed to the IHA in fee or leased to the IHA on a HUD-approved form 
of lease for a term of not less than 50 years.
    (c) Tax exempt status. Notwithstanding the type of interest in 
land, all project property shall be exempt from local or State imposed 
real or personal property tax in accordance with section 6(d) of the 
U.S. Housing Act of 1937 (42 U.S.C. 1437d(d)).


Sec. 950.245  Appraisals.

    (a) When the cost of a site is to be charged to the IHA's 
development cost and the cost of the site exceeds $1,500 per dwelling 
unit, an appraisal shall be made in accordance with the requirements of 
the Uniform Relocation Assistance and Real Property Acquisition 
Policies Act of 1970, as amended (42 U.S.C. 4601-4655). Government-wide 
implementing regulations are at 49 CFR part 24. The cost of donated 
land may be assumed to be $1,500 per unit and no appraisal is required. 
An appraisal of donated land shall be performed only if the IHA 
determines that the value to be attributed to the site exceeds $1,500.
    (b) When the interest to be appraised is a leasehold interest in 
tribally or individually owned trust or restricted land and comparable 
leasehold transactions are not available, the appraiser shall estimate 
the value of the land as if alienable in fee, based on a comparison of 
the land being valued with sales of fee interests in comparable land in 
the same or competing market areas.


Sec. 950.247  Environment.

    In order to assure that the policies of the National Environmental 
Policy Act of 1969 and other provisions of Federal law that further the 
purposes of that act are most effectively implemented in connection 
with the expenditure of Indian housing funds, the IHA shall comply with 
the Environmental Review Procedures specified under 24 CFR part 58. 
Upon completion of the environmental review, the IHA shall submit a 
certification and request for release of funds for particular projects 
in accordance with 24 CFR part 58. Costs associated with completing the 
environmental review are eligible project expenses.


Sec. 950.250  Site approval.

    (a) IHA certification. Included in the IHA's certifications 
pursuant to Sec. 950.260 shall be a certification to HUD that all 
conditions that would prevent the site from being included in the 
project have been satisfactorily addressed, and that there are no legal 
or physical reasons that would interfere with the occupancy and use of 
the site during the term of the ACC. Such certification shall be 
conditioned only upon final acquisition or execution of a lease on the 
property.
    (b) Tentative site approval. (1) When a site is proposed for use, 
the IHA shall inspect the property to ascertain its suitability for 
development. When appropriate, the IHA shall request an inspection of 
any proposed site by utility suppliers, the BIA, the IHS, and a 
representative of the local governing body and shall include each 
agency's comments in a list of potential site approval concerns. 
Tentative approval of the site by the IHA occurs when the IHA 
determines that:
    (i) A site can be economically included in the project;
    (ii) A site does not contain any legal or physical conditions that 
cannot be adequately addressed that would exclude it from consideration 
for acquisition; and
    (iii) The environmental review of the site has been completed (see 
Sec. 950.247) and a finding of no significant impact issued.
    (2) Tentative site approval shall not be determined until the 
requirements for compliance with local governmental approval have been 
met. (See 24 CFR part 791.)
    (c) Final site approval. (1) Final site approval occurs when all of 
the conditions stated in the tentative approval have been appropriately 
addressed and, with respect to trust land or restricted land over which 
the BIA has authority, the BIA has given either unconditional 
concurrence for final site approval or concurrence conditioned only on 
subsequent execution of site leases or right-of-way easements. If the 
BIA has given final site approval conditioned on subsequent execution 
of site leases of right-of-way easements, the IHA shall obtain from the 
BIA written assurance that a valid lease or easement, executed by all 
the necessary parties, can be obtained within a reasonable time and 
before start of construction.
    (2) Final site approval on all sites for the project shall occur:
    (i) Before any commitment is made to acquire or lease any site; and
    (ii) Before construction is started, except for a project developed 
under the acquisition method for restricted land sites, in accordance 
with paragraph (c)(3) of this section. In addition, leases and 
necessary rights-of-way shall be obtained before solicitation of 
construction bids or before construction may begin on any units.
    (3) With respect to trust or restricted land sites, construction 
may start before final site approval of all sites only when the 
following conditions have been met:
    (i) All sites for the project have tentative site approval;
    (ii) At least 50 percent of the sites have final site approval;
    (iii) HUD is satisfied that the balance of the sites will meet the 
requirements for final site approval no later than one year from 
execution of the construction contract; and
    (iv) The construction contract provides that if all sites, finally 
approved and with executed leases, have not been delivered by the IHA 
to the contractor/developer within one year from execution of the 
construction contract (or HUD-approved extension), the construction 
contract shall be reduced by the amount attributable to the units to be 
developed on the undelivered sites.


Sec. 950.255  Design criteria.

    (a) Building standards. (1) The IHA shall use tribal or, if 
appropriate, local government building codes that meet or exceed 
standards of national building codes. In the absence of tribal or local 
government adopted building codes that meet the requirements of this 
section, the IHA Board of Commissioners shall specify, by Resolution, 
the building codes to be followed in the development of its housing.
    (2) Codes used shall provide sufficient flexibility to permit the 
use of different designs and materials; shall include 
[[Page 18208]] standards for reasonable site designs; shall give proper 
consideration to the needs of physically handicapped persons for ready 
access to, and use of, housing assisted under this part (see 24 CFR 
part 8); and shall be sufficient to produce a decent, safe, and 
sanitary home.
    (3) Modifications to model national building codes are authorized 
if a tribe or, in the absence of tribally adopted codes, an IHA 
determines to make special provisions in its codes for traditional and 
culturally oriented design features.
    (b) Fuel and energy consumption. (1) Newly constructed housing 
shall meet or exceed the requirements of the latest Model Energy Code 
published by the Council of American Building Officials. In selecting 
from among design options for heating, cooking, and electrical systems, 
maximum attention shall be given to cost, adequacy, maintenance of the 
system, and the long-term reliability of fuel supplies. Where fuel is 
not locally available at low cost, alternate systems such as wind, 
solar, or coal may be used and included in the project cost.
    (2) Life-cycle cost-effective energy performance standards 
established by HUD to reduce the operating costs of Indian housing 
developments over the estimated life of the buildings shall apply to 
all new Indian housing developments under this part.
    (c) Moderate housing design. The IHA shall select a moderate design 
standard taking into consideration anticipated long-term operating 
costs.
    (d) Water provisions for Alaska. Alaska Native housing assisted 
under this part shall be designed and constructed to include water 
storage tanks when the housing is not served by or scheduled to be 
served by piped utilities. These tanks shall be no less than 100 
gallons in capacity and constructed to be accessed from outside the 
house.
    (e) Design approval. The IHA shall obtain the approval of project 
designs by all local or tribal regulatory agencies, by the BIA for on-
site streets, and the IHS, where appropriate, for community water and/
or sewer facilities. The IHA shall assure the design meets applicable 
building codes, that the project can be constructed within the amount 
of funds reserved for the development, and that the project is 
financially feasible including ongoing maintenance cost considerations.


Sec. 950.260  Construction stage development cost budget and 
certifications.

    (a) IHA submission. Upon completion of project planning, an IHA 
shall submit to HUD a construction stage development cost budget, 
certifications attesting to the completion of all preconstruction 
requirements, and project characteristics information. Submission of 
this information shall be in accordance with the schedule established 
at the project coordination meeting. The IHA's timely submission of the 
information specified in this paragraph, in the form prescribed by HUD, 
shall be a factor in HUD's evaluation of an IHA's administrative 
capability in accordance with Sec. 950.135. The information and 
documentation submitted by the IHA shall demonstrate the financial 
feasibility of the project, the legal sufficiency to proceed with 
construction, and compliance with all ACC, statutory, and regulatory 
requirements.
    (b) HUD actions. HUD shall review the IHA submittals and shall 
determine whether they meet the requirements specified in paragraph (a) 
of this section. If the submittals meet the requirements of this 
section, HUD will notify the IHA. If the submission does not meet the 
requirements of this section, HUD shall notify the IHA of the reasons 
and allow the IHA to amend and resubmit the documents.


Sec. 950.265  Construction and inspections.

    (a) Construction start. Following HUD review and acceptance of the 
IHA submittals, the IHA shall commence final preconstruction activities 
and begin construction of the development.
    (b) Notification. Upon award of construction contract, execution of 
a contract of sale, or construction start, the IHA shall notify all 
participating agencies. The notification to HUD shall include a revised 
development cost budget, if appropriate, and a statement that the IHA 
has met all ACC, statutory, and regulatory requirements for the 
applicable development method. Upon request, the IHA shall submit to 
HUD copies of the construction plans and specifications, the 
construction contract or contract of sale, detailed plans for Force 
Account construction management, the notice to proceed, or other 
applicable contracting documents.
    (c) Inspections and Monitoring. (1) Whatever the development method 
used, the IHA shall be responsible for obtaining inspections throughout 
the construction period including the frequency of inspections and the 
procedures to be used to assure completion of quality housing in 
accordance with the contract documents. Inspections shall be performed 
by an architect, engineer, or other qualified person selected by the 
IHA.
    (2) The IHA shall coordinate inspections with tribal or local 
regulatory agencies and, where applicable, the BIA and/or IHS, to 
assure that all governing codes and other requirements are met.
    (3) HUD representatives or agents may visit construction sites to 
evaluate the IHA's contract administration. These visits are not 
inspections of the quality of construction and shall not be construed 
by the IHA as construction inspections.


Sec. 950.270  Construction completion and settlement.

    (a) Final inspection. The IHA shall assure that all work is 
satisfactorily completed, in accordance with the terms of the 
construction contract, prior to scheduling a final inspection. The 
final inspection shall be made jointly by the IHA and the contractor. 
Where appropriate, the IHA shall notify tribal or local regulatory 
agencies, the BIA, the IHS, and HUD before this inspection to provide 
them with the opportunity to participate in the final inspection of all 
or part of the work. In a MH project, homebuyers shall also be invited 
to participate in the inspection of their homes, but acceptance shall 
be by the IHA. Maximum consideration shall be given to all homebuyer 
concerns.
    (b) Contract settlement. (1) If the final inspection discloses no 
deficiencies other than punch list items or seasonal completion items, 
the IHA shall, as soon as practical, develop an interim Certificate of 
Completion to enable partial settlement of the contract. The interim 
Certificate shall detail the items remaining and set forth a schedule 
for their completion, and shall allow the IHA to accept the units (or 
stage) for occupancy. Upon completion of the interim Certificate and 
receipt of the contractor's Certificate and Release, the IHA shall 
release the monies due the contractor/developer less withholdings in 
accordance with the construction contract.
    (2) The contractor/developer shall complete the punch list items in 
accordance with the time schedule contained in the interim Certificate. 
The IHA may pay the contractor/developer for items that are completed 
to the satisfaction of the IHA. If the IHA is satisfied that the 
applicable requirements of the construction contract and the interim 
Certificate have been met, the IHA shall prepare a final Certificate of 
Completion and release the amounts withheld to the contractor/
developer.
    (c) Notification to HUD. (1) Upon acceptance of the project or any 
part thereof, the IHA shall notify HUD of [[Page 18209]] such action. 
When all units within a project are accepted, the IHA shall provide a 
notification to HUD of the date the project was fully available for 
occupancy by residents.
    (2) The IHA shall notify HUD when all units in the project are 
occupied.


Sec. 950.275  Warranty inspections and enforcement.

    (a) The construction contract shall specify the warranty periods 
applicable to items completed as part of the contract. It shall also 
provide for assignment to the IHA of manufacturers' and suppliers' 
warranties covering equipment or supplies.
    (b) The IHA shall conduct an inspection of each dwelling unit at 
least once not later than six months after the start of the 
contractor's warranty period. A separate or final warranty inspection 
shall be made in time to exercise the IHA's rights before expiration of 
the contractor's warranties. Each inspection shall cover all items 
under warranty at the time of the inspection, including items covered 
by manufacturers' and suppliers' warranties. At each inspection, the 
IHA shall obtain a signed statement from the occupants as to any 
deficiencies in the structure, equipment, grounds, etc., so that it may 
enforce any rights under applicable warranties.


Sec. 950.280  Correcting deficiencies.

    (a) Responsibility. The IHA shall pursue correction of any 
deficiencies against the responsible party (e.g., architect, 
contractor/developer or MH homebuyer) as soon as possible after 
discovering the deficiencies. Where the costs of correcting 
deficiencies cannot be recovered from the responsible party and/or the 
deficiency requires immediate correction to protect life or safety or 
to avoid further damage to the project unit(s), the IHA may apply to 
HUD for amendment of the development budget to provide the funds 
required. The IHA may also use operating receipts to cover such costs. 
The IHA shall be responsible for correction of any deficiencies that 
could have been detected and/or corrected during the warranty period if 
the IHA had inspected at the appropriate time or had pursued correction 
of deficiencies against the responsible parties.
    (b) Amendments. (1) HUD may, but is not obligated to, provide 
additional funding to the IHA to correct deficiencies. The ACC may be 
amended to provide amounts needed to correct deficiencies (and any 
resulting damage) in design, construction, and equipment only where 
there is substantial evidence that it is not possible to obtain timely 
correction or payment by the responsible parties, including the source 
of the performance bond.
    (2) In the case of a MH home, the additional cost for correcting 
deficiencies in design, construction, or equipment (and any damage 
resulting therefrom) shall not result in an increase in the homebuyer's 
purchase price. If a homebuyer is not in compliance with the MHO 
Agreement, the IHA shall reach agreement with the homebuyer to correct 
the noncompliance before approving or beginning the corrective work.


Sec. 950.285  Fiscal closeout.

    The IHA shall submit to HUD a certificate of actual development 
cost within 24 months of the date of full availability (see 
Sec. 950.270(c)(1)), or such later date as may be approved by HUD, in a 
form prescribed by HUD. Audit verification of the actual development 
costs shall be submitted to HUD within 36 months of the date of full 
availability. The audit shall follow the requirements of 24 CFR part 44 
(Single Audit Act of 1984). If the audit of the actual development 
costs indicates that excess funds have been advanced to the IHA, the 
IHA shall dispose of the excess as HUD directs. If the audited 
development cost certificate discloses unauthorized expenditures, the 
IHA shall take such corrective actions as HUD directs. If the IHA fails 
to submit a certificate of actual development cost or audit within the 
prescribed times, the Area ONAP may make a determination that all 
development activities have been completed as of a specified date, and 
inform the IHA that such action has been taken and that no additional 
costs may be incurred for the development. The Area ONAP shall then 
proceed with the fiscal close-out of the development.

Subpart D--Operation


Sec. 950.301  Admission policies.

    (a) Admission policies. (1) The IHA shall establish and adopt 
written policies for admission of participants. The policies shall 
cover all programs operated by the housing authority and, as 
applicable, will address the programs individually to meet their 
specific requirements (i.e., Rental, MH, or Turnkey III). A copy of the 
policies shall be posted prominently in the IHA's office for 
examination by prospective participants. (See Sec. 950.416 with respect 
to Mutual Help admission policies.)
    (2) These policies shall be designed:
    (i) To attain, to the maximum extent feasible, residency that 
includes families with a broad range of incomes and that avoids 
concentrations of the most economically deprived families with serious 
social problems;
    (ii) To preclude admission of applicants whose habits and practices 
reasonably may be expected to have a detrimental effect on the 
residents or the project environment;
    (iii) To give a preference in selection of tenants and homebuyers 
to applicants who qualify for a Federal preference, ranking preference, 
or local preference, in accordance with Secs. 950.303 through 950.307; 
and
    (iv) To establish objective and reasonable policies for selection 
by the IHA among otherwise eligible applicants.
    (3) The IHA admission policies shall include the following:
    (i) Requirements for applications and waiting lists;
    (ii) Description of the policies for selection of applicants from 
the waiting list that includes the following:
    (A) How the Federal preferences (described in Sec. 950.303) will be 
used;
    (B) How any ranking preferences (described in Sec. 950.303) will be 
used;
    (C) How any local preferences (described in Sec. 950.303) will be 
used; and
    (D) How any residency preference will be used;
    (iii) Policies for verification and documentation of information 
relevant to acceptance or rejection of an applicant;
    (iv) Policies for resident transfer between units, projects, and 
programs. For example, an IHA could adopt a criterion for voluntary 
transfer that the resident had met all obligations under the current 
program, including payment of charges to the IHA and completion of 
maintenance requirements;
    (v) Policies for compliance with 24 CFR part 750, which requires 
applicants and participants to disclose and verify social security 
numbers at the time eligibility is determined and at later income 
reexaminations; and
    (vi) Policies for compliance with 24 CFR part 760, which requires 
applicants and participants to sign and submit consent forms for the 
obtaining of wage and claims information from State wage and 
information collections agencies.
    (4) These selection policies shall:
    (i) Be duly adopted; and
    (ii) Be publicized by posting copies thereof in each office where 
applications are received and by furnishing copies to applicants or 
residents upon request, free or at their expense, at the discretion of 
the IHA.
    (5) Such policies shall be submitted to the HUD Area ONAP upon 
request from that office.
    (6) ``Residency preference'' means a preference for admission of 
families [[Page 18210]] living in the jurisdiction of the IHA. 
Residency provisions are subject to the following:
    (i) Residency requirements are not permitted;
    (ii) A residency preference may not be based on how long the 
applicant has resided in the jurisdiction; and
    (iii) Applicants who are working or who have been notified that 
they are hired to work in the jurisdiction shall be treated as 
residents of the jurisdiction.
    (b) Income limits. (1) A family shall be a low-income family, as 
defined in Sec. 950.102, to be eligible for admission. (With respect to 
eligibility for the Mutual Help program, see special provisions of 
Sec. 950.416.)
    (2) In extremely unusual circumstances, the IHA may request that 
HUD increase or decrease income limits for low-income families or for 
very low-income families in the Indian area because of unusually high 
or low family incomes. Such a request can be granted only by joint 
approval of HUD's Assistant Secretary for Housing and Assistant 
Secretary for Public and Indian Housing, after consultation with the 
Secretary of Agriculture (if the income limits are being established 
for a ``rural area'' as defined in section 520 of the Housing Act of 
1949 (42 U.S.C. 1490)).
    (c) Standards for IHA tenant/homebuyer selection criteria. (1) The 
criteria to be established and information to be considered shall be 
reasonably related to individual attributes and behavior of an 
applicant, and shall not be related to those that may be imputed to a 
particular group or category of persons of which an applicant may be a 
member. The IHA's tenant/homebuyer selection criteria shall be in 
accordance with HUD guidelines and submitted to the HUD Area ONAP. 
(With respect to the Mutual Help program, see special provisions of 
Sec. 950.416.)
    (2) In the event of any unfavorable information regarding an 
applicant, the IHA shall take into consideration the time, nature, and 
extent of the past occurrence and reasonable probability of future 
favorable performance.
    (d) Admission of single persons--priority to elderly and displaced 
persons. An IHA shall extend preference to elderly families (including 
disabled persons and handicapped persons), displaced families, and 
displaced persons over single persons.
    (e) Selection preference with respect to projects for elderly 
families. (1) In determining priority for admission to projects for 
elderly families, an IHA shall give a preference to elderly families. 
When selecting applicants for admission from among elderly families, an 
IHA shall follow its policies and procedures for applying the Federal 
preferences, ranking preferences, and local preferences in accordance 
with Secs. 950.303 through 950.307.
    (2) An IHA may give a preference to near elderly families in 
determining priority for admission to projects for elderly families 
when the IHA determines that there are not enough eligible elderly 
families to fill all the units that are currently vacant or expected to 
become vacant in the next 12 months. In no event may an IHA admit a 
near elderly family if there are eligible elderly families on the IHA's 
waiting list that would be willing to accept an offer for a suitable 
vacant unit in that project.
    (3) Before electing the discretionary preference in paragraph 
(e)(2) of this section, an IHA shall conduct outreach to attract 
eligible elderly families, including, where appropriate, elderly 
families residing in projects not designated as being for elderly 
families.
    (4) If an IHA elects the discretionary preference in paragraph 
(e)(2) of this section, the IHA shall follow its policies and 
procedures for applying the Federal preferences, ranking preferences, 
and local preferences in accordance with Secs. 950.303 through 950.307 
when selecting applicants for admission from among near elderly 
families. Near elderly families that do not qualify for a Federal 
preference and that are given preference for admission under this 
section over other nonelderly families that qualify for such a Federal 
preference are not subject to the 30 percent limitation on local 
preference admissions. If a near elderly applicant is a single person, 
the near elderly single person may be given a preference for admission 
over other single persons to projects for the elderly.
    (f) Verification of information and notification to applicants.
    (1) Verification. Adequate procedures shall be developed to obtain 
and verify information with respect to each applicant. Information 
relative to the acceptance or rejection of an applicant shall be 
documented and placed in the applicant's file.
    (2) Notification to applicants. (i) If an IHA determines that an 
applicant is ineligible for admission to a project, the IHA shall 
promptly notify the applicant of the basis for such determination and 
shall provide the applicant, upon request and within a reasonable time 
after the determination is made, with an opportunity for an informal 
hearing on such determination; and
    (ii) When a determination has been made that an applicant is 
eligible and satisfies all requirements for admission including the 
tenant selection criteria, the applicant shall be notified of the 
approximate date of occupancy insofar as that date can be reasonably 
determined.


Sec. 950.303  Selection preferences.

    (a) Types of preference. There are three types of admission 
preferences.
    (1) ``Federal preferences'' are preferences that are prescribed by 
Federal law and required to be used in the selection process. See 
Sec. 950.304(a).
    (2) ``Ranking preferences'' are preferences that may be established 
by the IHA to use in selecting among applicants that qualify for 
Federal preferences. See Sec. 950.304(b).
    (3) ``Local preferences'' are preferences that may be established 
by the IHA for use in selecting among applicants without regard to 
their Federal preference status.
    (b) Use of preference in selection process. (1) Factors other than 
preference. (i) Characteristics of the unit. The IHA may match other 
characteristics of the applicant family with the type of unit 
available, e.g., number of bedrooms. In selection of a family for a 
unit that has special accessibility features, the IHA shall give 
preference to families that include persons with disabilities who can 
benefit from those features of the unit (see 24 CFR 8.27). Also, in 
selection of a family for a unit in a project for elderly families, the 
owner will give preference to elderly families and disabled families.
    (ii) Singles preference. See Sec. 950.102.
    (2) Local preference admissions. (i) If the IHA wants to use 
preferences to select among applicants without regard to their Federal 
preference status, it may adopt a preference system for this purpose. 
These local preferences may only be adopted after the IHA has conducted 
a public hearing to establish preferences that respond to local housing 
needs and priorities. The IHA may only use local preferences in 
selection for admission if the IHA has conducted the required public 
hearing.
    (ii) ``Local preference limit'' means 30 percent of total annual 
admissions to the program. In any year, the number of families given 
preference in admission pursuant to a local preference over families 
with a Federal preference may not exceed the local preference limit.
    (3) Prohibition of preference if applicant was evicted for drug-
related criminal activity. The IHA may not give a preference to an 
applicant (Federal preference, local preference, or ranking preference) 
if any member of the family is a person who was evicted during the 
[[Page 18211]] past three years because of drug-related criminal 
activity from housing assisted under a 1937 Housing Act program. 
However, the IHA may give an admission preference in any of the 
following cases:
    (i) If the IHA determines that the evicted person has successfully 
completed a rehabilitation program approved by the IHA;
    (ii) If the IHA determines that the evicted person clearly did not 
participate in or know about the drug-related criminal activity; or
    (iii) If the IHA determines that the evicted person no longer 
participates in any drug-related criminal activity.
    (c) Informing applicants about admission preferences. (1) The IHA 
shall inform all applicants about available preferences and shall give 
applicants an opportunity to show that they qualify for available 
preferences (Federal preference, ranking preference, or local 
preference).
    (2) If the IHA determines that the notification to all applicants 
on a waiting list required by paragraph (d)(1) of this section is 
impracticable because of the length of the list, the IHA may provide 
this notification to fewer than all applicants on the list at any given 
time. However, the IHA shall have notified a sufficient number of 
applicants at any given time that, on the basis of the IHA's 
determination of the number of applicants on the waiting list who 
already claim a Federal preference and the anticipated number of 
project admissions:
    (i) There is an adequate pool of applicants who are likely to 
qualify for a Federal preference; and
    (ii) It is unlikely that, on the basis of the IHA's framework for 
applying the preferences and the Federal preferences claimed by those 
already on the waiting list, any applicant who has not been so notified 
would receive assistance before those who have received notification.
    (d) Nondiscrimination. (1) Any selection preference used by an IHA 
shall be established and administered in a manner that is consistent 
with HUD's affirmative fair housing objectives.
    (2) The Indian Civil Rights Act may apply to operations of the IHA.
    (3) In addition, the following nondiscrimination requirements may 
apply:
    (i) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and 
the implementing regulations at 24 CFR part 1;
    (ii) The Fair Housing Act (42 U.S.C. 3601-19) and the implementing 
regulations at 24 CFR parts 100, 108, 109, and 110;
    (iii) Executive Order 11063 on Equal Opportunity in Housing and the 
implementing regulations at 24 CFR part 107;
    (iv) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) 
and the implementing regulations at 24 CFR part 8;
    (v) The Age Discrimination Act of 1975 (42 U.S.C. 6101-07) and the 
implementing regulations at 24 CFR part 146; and
    (vi) The Americans with Disabilities Act (42 U.S.C. 12101-12213) to 
the extent applicable.
    (e) Notice and opportunity for a meeting if preference is denied. 
(1) If the IHA determines that an applicant does not qualify for a 
Federal preference, ranking preference, or local preference claimed by 
the applicant, the IHA shall promptly give the applicant written notice 
of the determination. The notice shall contain a brief statement of the 
reasons for the determination, and state that the applicant has the 
right to meet with a representative of the IHA to review the 
determination. The meeting may be conducted by any person or persons 
designated by the IHA, who may be an officer or employee of the IHA, 
including the person who made or reviewed the determination or a 
subordinate employee.
    (2) The applicant may exercise other rights if the applicant 
believes that the applicant has been discriminated against in violation 
of requirements stated in paragraph (d) of this section.


Sec. 950.304  Federal preferences: general.

    (a) Definition. A Federal preference is a preference under Federal 
law for selection of families that are:
    (1) Involuntarily displaced;
    (2) Living in substandard housing (including families that are 
homeless or living in a shelter for the homeless); or
    (3) Paying more than 50 percent of family income for rent.
    (b) Ranking preferences: selection among Federal preference 
holders. The IHA's admission policy may provide for the use of a 
ranking preference for selecting among applicants who qualify for a 
Federal preference.
    (1) The IHA could give preference to working families. (If an IHA 
adopts such a preference, an applicant household shall be given the 
benefit of the preference if the head and spouse, or sole member is age 
62 or older or is receiving social security disability, supplemental 
security income disability benefits, or any other payments based on an 
individual's inability to work.) An IHA also could give preference to 
graduates of, as well as active participants in, educational and 
training programs that are designed to prepare individuals for the job 
market. An IHA also could use its local preferences for the Section 8 
Certificate and Voucher programs to rank Federal preference holders.
    (2) The IHA may limit the number of applicants who may qualify for 
any ranking preference.
    (3) The system may give different weight to the Federal 
preferences, through such means as:
    (i) Aggregating the Federal preferences (e.g., provide that two 
Federal preferences outweigh one);
    (ii) Giving greater weight to holders of a particular Federal 
preference (e.g., provide that an applicant living in substandard 
housing has greater need for housing than--and, therefore, would be 
considered for assistance before--an applicant paying more than 50 
percent of family income for rent); or
    (iii) Giving greater weight to a Federal preference holder who fits 
a particular category of a single Federal preference (e.g., provide 
that those living in housing that is dilapidated or has been declared 
unfit for habitation by an agency or unit of government have a greater 
need for housing than those whose housing is substandard only because 
it does not have a usable bathtub or shower inside the unit for the 
exclusive use of the family).
    (c) Qualifying for a Federal preference. (1) Basis of Federal 
preference. The IHA shall use the following definitions of the Federal 
preferences (as elaborated upon in Secs. 950.305, 950.306, and 950.307) 
unless it has received HUD approval of alternative definitions.
    (i) Displacement. An applicant qualifies for Federal preference if:
    (A) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing (as defined in 
Sec. 950.305(a)(2)), or
    (B) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the IHA.
    (ii) Substandard housing. An applicant qualifies for a Federal 
preference if the applicant is living in substandard housing. An 
applicant that is homeless or living in a shelter for the homeless is 
considered as living in substandard housing.
    (iii) Rent burden. An applicant qualifies for a Federal preference 
if the applicant is paying more than 50 percent of family income for 
rent.
    (2) Certification of preference. An applicant may claim 
qualification for a Federal preference by certifying to the 
[[Page 18212]] IHA that the family qualifies for Federal preference. 
The IHA shall accept this certification, unless the IHA verifies that 
the applicant is not qualified for Federal preference.
    (3) Verification of preference. (i) Before admitting an applicant 
on the basis of a Federal preference, the IHA shall require the 
applicant to provide information needed by the IHA to verify that the 
applicant qualifies for a Federal preference due to the applicant's 
current status. The applicant's current status shall be determined 
without regard to whether there has been a change in the applicant's 
qualification for a Federal preference between the time of application 
and selection for admission, including a change from one Federal 
preference category to another.
    (ii) Once the IHA has verified an applicant's qualification for a 
Federal preference, the IHA need not require the applicant to provide 
information needed by the IHA to verify such qualification again 
unless:
    (A) The IHA determines reverification is desirable because a long 
time has passed since verification; or
    (B) The IHA has reasonable grounds to believe that the applicant no 
longer qualifies for a Federal preference.
    (4) Effect of current residence in assisted housing. No applicant 
is to be denied a Federal preference for which the family otherwise 
qualifies on the basis that the applicant already resides in assisted 
housing; for example, the actual condition of the housing unit shall be 
considered, or the possibility of involuntary displacement resulting 
from domestic violence shall be evaluated.


Sec. 950.305  Federal preference: involuntary displacement.

    (a) How applicant qualifies for displacement preference. (1) An 
applicant qualifies for a Federal preference on the basis of 
involuntary displacement if either of the following apply:
    (i) The applicant has been involuntarily displaced and is not 
living in standard, permanent replacement housing; or
    (ii) The applicant will be involuntarily displaced within no more 
than six months from the date of preference status certification by the 
family or verification by the IHA.
    (2) (i) ``Standard, permanent replacement housing'' is housing:
    (A) That is decent, safe, and sanitary;
    (B) That is adequate for the family size; and
    (C) That the family is occupying pursuant to a lease or occupancy 
agreement.
    (ii) ``Standard, permanent replacement housing'' does not include:
    (A) Transient facilities, such as motels, hotels, or temporary 
shelters for victims of domestic violence or homeless families; or
    (B) In the case of domestic violence, the housing unit in which the 
applicant and the applicant's spouse or other member of the household 
who engages in such violence live.
    (b) Meaning of involuntary displacement. An applicant is or will be 
involuntarily displaced if the applicant has vacated or will have to 
vacate the unit where the applicant lives because of one or more of the 
following:
    (1) Displacement by disaster. An applicant's unit is uninhabitable 
because of a disaster, such as a fire or flood.
    (2) Displacement by government action. Activity carried on by an 
agency of the United States or by any State or local governmental body 
or agency in connection with code enforcement or a public improvement 
or development program.
    (3) Displacement by action of housing owner. (i) Action by a 
housing owner forces the applicant to vacate its unit.
    (ii) An applicant does not qualify as involuntarily displaced 
because action by a housing owner forces the applicant to vacate its 
unit unless:
    (A) The applicant cannot control or prevent the owner's action;
    (B) The owner action occurs although the applicant met all 
previously imposed conditions of occupancy; and
    (C) The action taken by the owner is other than a rent increase.
    (iii) To qualify as involuntarily displaced because action by a 
housing owner forces the applicant to vacate its unit, reasons for an 
applicant's having to vacate a housing unit include, but are not 
limited to, conversion of an applicant's housing unit to nonrental or 
nonresidential use; closing of an applicant's housing unit for 
rehabilitation or for any other reason; notice to an applicant that the 
applicant shall vacate a unit because the owner wants the unit for the 
owner's personal or family use or occupancy; sale of a housing unit in 
which an applicant resides under an agreement that the unit shall be 
vacant when possession is transferred; or any other legally authorized 
act that results or will result in the withdrawal by the owner of the 
unit or structure from the rental market.
    (iv) Such reasons do not include the vacating of a unit by a tenant 
as a result of actions taken by the owner because the tenant refuses:
    (A) To comply with HUD program policies and procedures for the 
occupancy of underoccupied or overcrowded units; or
    (B) To accept a transfer to another housing unit in accordance with 
a court decree or in accordance with policies and procedures under a 
HUD-approved desegregation plan.
    (4) Displacement by domestic violence. (i) An applicant is 
involuntarily displaced if:
    (A) The applicant has vacated a housing unit because of domestic 
violence; or
    (B) The applicant lives in a housing unit with a person who engages 
in domestic violence.
    (ii) ``Domestic violence'' means actual or threatened physical 
violence directed against one or more members of the applicant family 
by a spouse or other member of the applicant's household.
    (iii) To qualify as involuntarily displaced because of domestic 
violence:
    (A) The IHA shall determine that the domestic violence occurred 
recently or is of a continuing nature; and
    (B) The applicant shall certify that the person who engaged in such 
violence will not reside with the applicant family unless the IHA has 
given advance written approval. If the family is admitted, the IHA may 
deny or terminate assistance to the family for breach of this 
certification.
    (5) Displacement to avoid reprisals. (i) An applicant family is 
involuntarily displaced if:
    (A) Family members provided information on criminal activities to a 
law enforcement agency; and
    (B) Based on a threat assessment, a law enforcement agency 
recommends rehousing the family to avoid or minimize a risk of violence 
against family members as a reprisal for providing such information.
    (ii) The IHA may establish appropriate safeguards to conceal the 
identity of families requiring protection against such reprisals.
    (6) Displacement by hate crimes. (i) An applicant is involuntarily 
displaced if:
    (A) One or more members of the applicant's family have been the 
victim of one or more hate crimes; and
    (B) The applicant has vacated a housing unit because of such crime, 
or the fear associated with such crime has destroyed the applicant's 
peaceful enjoyment of the unit.
    (ii) ``Hate crime'' means actual or threatened physical violence or 
intimidation that is directed against a person or his or her property 
and that is based on the person's race, color, religion, sex, national 
origin, handicap, or familial status.
    (iii) The IHA shall determine that the hate crime involved occurred 
recently or is of a continuing nature. [[Page 18213]] 
    (7) Displacement by inaccessibility of unit. An applicant is 
involuntarily displaced if:
    (i) A member of the family has a mobility or other impairment that 
makes the person unable to use critical elements of the unit; and
    (ii) The owner is not legally obligated to make the changes to the 
unit that would make critical elements accessible to the disabled 
person as a reasonable accommodation.
    (8) Displacement because of HUD disposition of multifamily project. 
Involuntary displacement includes displacement because of disposition 
of a multifamily rental housing project by HUD under section 203 of the 
Housing and Community Development Amendments of 1978.


Sec. 950.306  Federal preference: substandard housing.

    (a) When unit is substandard. A unit is substandard if it:
    (1) Is dilapidated;
    (2) Does not have operable indoor plumbing;
    (3) Does not have a usable flush toilet inside the unit for the 
exclusive use of a family;
    (4) Does not have a usable bathtub or shower inside the unit for 
the exclusive use of a family;
    (5) Does not have electricity, or has inadequate or unsafe 
electrical service;
    (6) Does not have a safe or adequate source of heat;
    (7) Should, but does not, have a kitchen; or
    (8) Has been declared unfit for habitation by an agency or unit of 
government.
    (b) Other definitions. (1) Dilapidated unit. A housing unit is 
dilapidated if:
    (i) The unit does not provide safe and adequate shelter, and in its 
present condition endangers the health, safety, or well-being of a 
family; or
    (ii) The unit has one or more critical defects, or a combination of 
intermediate defects in sufficient number or extent to require 
considerable repair or rebuilding. The defects may involve original 
construction, or they may result from continued neglect, lack of 
repair, or serious damage to the structure.
    (2) Homeless family. (i) An applicant that is a ``homeless family'' 
is considered to be living in substandard housing.
    (ii) A ``homeless family'' includes any person or family that:
    (A) Lacks a fixed, regular, and adequate nighttime residence; and 
also
    (B) Has a primary nighttime residence that is:
    (1) A supervised publicly or privately operated shelter designed to 
provide temporary living accommodations (including welfare hotels, 
congregate shelters, and transitional housing);
    (2) An institution that provides a temporary residence for 
individuals intended to be institutionalized; or
    (3) A public or private place not designed for, or ordinarily used 
as, a regular sleeping accommodation for human beings.
    (iii) A ``homeless family'' does not include any person imprisoned 
or otherwise detained pursuant to an Act of Congress or a State or 
tribal law.
    (3) Status of SRO housing. In determining whether an individual 
living in single room occupancy (SRO) housing qualifies for Federal 
preference, SRO housing is not considered substandard solely because it 
does not contain sanitary or food preparation facilities.


Sec. 950.307  Federal preference: rent burden.

    (a) ``Rent burden preference'' means the Federal preference for 
admission of applicants that are required to pay more than 50 percent 
of family income for rent.
    (b) For purposes of determining whether an applicant qualifies for 
the rent burden preference:
    (1) ``Family income'' means Monthly Income, as defined in 
Sec. 950.102.
    (2) ``Rent'' means:
    (i) The actual monthly amount due under a lease or occupancy 
agreement between a family and the family's current landlord; and
    (ii) For utilities purchased directly by tenants from utility 
providers:
    (A) The utility allowance for family-purchased utilities and 
services that is used in the IHA's programs; or
    (B) If the family chooses, the average monthly payments that the 
family actually made for these utilities and services for the most 
recent 12-month period or, if information is not obtainable for the 
entire period, for an appropriate recent period.
    (3) Amounts paid to or on behalf of a family under any energy 
assistance program shall be subtracted from the otherwise applicable 
rental amount, to the extent that they are not included in the family's 
income.
    (c) An applicant does not qualify for a rent burden preference if 
either of the following is applicable:
    (1) The applicant has been required to pay more than 50 percent of 
income for rent for less than 90 days.
    (2) The applicant is paying more than 50 percent of family income 
to rent a unit because the applicant's housing assistance for occupancy 
of the unit under any of the following programs has been terminated due 
to the applicant's refusal to comply with applicable program policies 
and procedures on the occupancy of underoccupied and overcrowded units:
    (i) The Section 8 programs or public and Indian housing programs 
under the United States Housing Act of 1937;
    (ii) The rent supplement program under section 101 of the Housing 
and Urban Development Act of 1965; or
    (iii) Rental assistance payments under section 236(f)(2) of the 
National Housing Act.


Sec. 950.308  Exemption from eligibility requirements for police 
officers and other security personnel.

    (a) Purpose and scope. The purpose of this section is to permit the 
admission to Indian housing of police officers and other security 
personnel who are not otherwise eligible for such housing under any 
other admission requirements or procedures, under a plan submitted by 
an Indian housing authority (IHA) and approved by the Department, and 
to set forth standards and criteria for the approval of such plans. The 
Department's objective in granting the exemption allowed by this 
section is to permit long-term residence in Indian housing developments 
by police officers and security personnel, whose visible presence is 
expected to serve as a deterrent to criminal activity in and around 
Indian housing.
    (b) Definitions. For the purposes of this section:
    Department means the U.S. Department of Housing and Urban 
Development (HUD). For purposes of plan submission and approval, 
Department refers to the local HUD Office of Native American Programs.
    Eligible Families means families that are eligible for residence in 
Indian housing assisted under the United States Housing Act of 1937.
    Officer means a professional police officer or other professional 
security provider. Police officers and other security personnel are 
considered professional if they are employed full time, i.e., not less 
than 35 hours per week, by a governmental unit or a private employer 
and compensated expressly for providing police or security services. As 
used in this section, ``Officer'' may refer to the Officer as so 
defined or to the Officer and his or her family taken together, 
depending on the context.
    Plan means the written plan submitted by an IHA to the Department, 
under which, if approved, the Department will exempt Officers from the 
normal eligibility requirements for residence in Indian housing 
developments and allow Officers who [[Page 18214]] are otherwise not 
eligible to reside in Indian housing units. An IHA may have only one 
plan in effect at any one time, which will govern exemptions under this 
section for all housing developments managed by that IHA.
    (c) Exemption from eligibility requirements; plan submission; plan 
approval or disapproval.
    (1) Conditions for exemption. The Department may exempt Officers 
from the eligibility requirements for admission to Indian housing, 
provided that:
    (i) The Officers would not be eligible, under any other admission 
requirements or procedures, for admission to the Indian housing 
development without such an exemption; and
    (ii) The exemption is given under a properly submitted plan that 
satisfies the standards and criteria set forth in Sec. 950.308(d), and 
accordingly has been approved by the Department.
    (2) Plan submission. A plan is properly submitted when it is 
received by the local HUD Office of Native American Programs with 
jurisdiction over the IHA.
    (3) Notification of plan approval or disapproval. The Department 
will notify an IHA of the approval or disapproval of its plan within 
thirty days of its submission. Plan approval by the Department 
constitutes granting of the exemption for the purposes of this section.
    (d) Plan standards and criteria. (1) Minimum requirements. To be 
approved, a plan shall satisfy the following requirements:
    (i) The plan shall identify the total number of units under 
management by the IHA; the specific housing developments, and the 
number of units they contain, where the IHA intends to place Officers; 
and the particular units (stating number of bedrooms) within each 
development that would be allocated to Officers. For each unit 
identified, the plan shall state the amount of rent that the Officer 
will pay and facts and circumstances (such as the rent that would 
ordinarily be charged for the unit, the IHA's annual maintenance cost 
for the unit, the degree of difficulty in attracting Officers to reside 
in the unit, the extent of the crime problem in the development, and 
the anticipated benefits of the Officer's presence) that demonstrate 
the reasonableness of that amount, as required under 
Sec. 950.308(e)(i).
    (ii) The plan shall identify specifically the benefits to the 
community and to the IHA that will result from the presence of Officers 
in each affected development.
    (iii) The plan shall describe the existing physical and social 
conditions in and around each affected development, providing specific 
evidence of criminal activity (such as frequency of telephone calls to 
local police, number of arrests and types of offenses involved, and 
data on drug abuse in the community) in order to permit the Department 
to make an informed assessment of the level of need for increased 
security.
    (iv) The plan shall afford the Department a reasonable basis, which 
necessarily includes the certifications required under 
Sec. 950.308(d)(2), for determining that the use by Officers of the 
identified dwelling units will:
    (A) Increase security for other Indian housing residents;
    (B) Result in a limited loss of income to the IHA; and
    (C) Not result in a significant reduction of units available for 
residence by Eligible Families.
    (2) Certifications by IHA. Only upon making the determination 
described in Sec. 950.308(d)(1)(iv) will the Department approve a plan. 
Further, the Department will not make this determination unless the 
plan contains a written statement, signed by an authorized officer or 
other agent of the IHA, certifying that:
    (i) The dwelling units proposed to be allocated to Officers are 
situated so as to place the Officers in close physical proximity to 
other residents;
    (ii) No resident families will have to be transferred to other 
dwelling units in order to make available the units proposed to be 
allocated to Officers;
    (iii) The dwelling units proposed to be allocated to Officers will 
be rented under a lease that contains the terms described in 
Sec. 950.308(e); and
    (iv) The number of dwelling units proposed to be allocated to 
Officers under the plan does not exceed the limits set forth in 
Sec. 950.308(d)(3), or, in the alternative, any units so allocated in 
excess of the applicable maximum number are vacant units for which 
there are no Eligible Families. This certification on the part of the 
IHA satisfies the requirements of Secs. 950.308(d)(1)(iv)(B) and (C).
    (3) Unit allocation table. For purposes of the certification 
required by Sec. 950.308(d)(2), the following table sets forth the 
maximum number of units to be allocated to Officers as a function of 
the total number of units under management by the IHA:

                          Unit Allocation Table                         
------------------------------------------------------------------------
                                                               Units to 
                Total units under management                      be    
                                                               allocated
------------------------------------------------------------------------
500-999.....................................................           5
1000-4999...................................................          10
5000-9999...................................................          15
10,000 +....................................................          20
------------------------------------------------------------------------

The maximum number of units to be allocated by IHAs with less than 500 
units under management will be determined by the Office of Native 
American Programs on a case by case basis.

(Approved by the Office of Management and Budget under OMB control 
number 2577-0185.)

    (e) Special rent requirements and other terms and conditions. The 
IHA shall lease units to Officers under a lease agreement, which shall 
be submitted as a part of the plan, containing terms that provide as 
follows:
    (1) Reasonable rent. The lease shall provide for a reasonable rent, 
which may be a flat amount not related to the Officer's income. The IHA 
should attempt to establish a rent that will provide an incentive to 
Officers to reside in the units but that is also consistent with the 
limited loss of income requirement of Sec. 950.308(d)(1)(iv)(B). As 
required in Sec. 950.308(d)(1)(i), the plan shall state facts and 
circumstances (such as the rent that would ordinarily be charged for 
the unit, the IHA's annual maintenance cost for the unit, the degree of 
difficulty in attracting Officers to reside in the unit, the extent of 
the crime problem in the development, and the anticipated benefits of 
the Officer's presence) that demonstrate the reasonableness of the rent 
amount.
    (2) Responsibility for damage and overall condition. The Officer 
shall be responsible for physical damage to the interior of the leased 
unit, hallway, and entrance, if any, and exterior area bordering the 
unit. The lease also shall require the Officer to maintain the overall 
condition of the leased unit, including control of litter in the area 
of the development immediately around the unit.
    (3) Responsibility for normal facility management. The lease shall 
impose on the IHA responsibility for routine facility management 
relating to the leased unit, including ongoing maintenance and repair 
of equipment, trash collection, and similar areas of responsibility.
    (4) Continued employment. The lease shall provide that the 
Officer's right of occupancy is dependent on the continuation of 
employment as an [[Page 18215]] Officer. The lease also shall provide 
that the Officer will move out of the leased unit within a reasonably 
prompt time, to be established by the lease, after termination of 
employment as an Officer.
    (5) Prohibition on subletting. The lease shall prohibit the Officer 
from subletting the unit, and provide that the unit shall be the 
Officer's primary residence.
    (f) Applicability of the annual contributions contract; effect on 
the performance funding system. (1) Annual contributions contract. 
Except to the extent that an exemption from eligibility requirements is 
provided under Sec. 950.308(c), Indian housing units occupied by 
Officers in accordance with a plan submitted and approved under this 
section will be subject to the terms and conditions of the annual 
contributions contract (ACC) between the IHA and HUD. This section does 
not override any of the terms and conditions of the ACC except insofar 
as they are inconsistent with the provisions of this section.
    (2) Performance Funding System. For purposes of the operating 
subsidy under the Performance Funding System (PFS) described in subpart 
J of this part, dwelling units allocated to Officers in accordance with 
this section are excluded from the total unit months available, as 
defined in Sec. 950.102. Also for purposes of the operating subsidy 
under the PFS, the full amount of any rent paid by Officers in 
accordance with this section is included in other income, as defined in 
Sec. 950.102. IHAs may receive operating subsidy for one unit per 
housing development to promote economic self-sufficiency services or 
anti-drug programs, including housing police officers and security 
personnel. An IHA may request consideration of such units in its 
calculation of operating subsidy eligibility through the appropriate 
local HUD Office of Native American Programs.


Sec. 950.310  Restrictions on assistance to noncitizens.

    (a) Requirements concerning documents. For any notice or document 
(decision, declaration, consent form, etc.) that this section requires 
an IHA to provide to an individual, or requires that the IHA obtain the 
signature of the individual, the IHA, where feasible, must arrange for 
the notice or document to be provided to the individual in a language 
that is understood by the individual if the individual is not 
proficient in English. (See 24 CFR 8.6 of HUD's regulations for 
requirements concerning communications with persons with disabilities.)
    (b) Restrictions on assistance. Assistance provided under a Section 
214 covered program is restricted to:
    (1) Citizens; or
    (2) Noncitizens who have eligible immigration status in one of the 
following categories:
    (i) A noncitizen lawfully admitted for permanent residence, as 
defined by section 101(a)(20) of the Immigration and Nationality Act 
(INA), as an immigrant, as defined by section 101(a)(15) of the INA (8 
U.S.C. 1101(a)(20) and 1101(a)(15), respectively) [immigrants]. (This 
category includes a noncitizen admitted under section 210 or 210A of 
the INA (8 U.S.C. 1160 or 1161), [special agricultural worker], who has 
been granted lawful temporary resident status);
    (ii) A noncitizen who entered the United States before January 1, 
1972, or such later date as enacted by law, and has continuously 
maintained residence in the United States since then, and who is not 
ineligible for citizenship, but who is deemed to be lawfully admitted 
for permanent residence as a result of an exercise of discretion by the 
Attorney General under section 249 of the INA (8 U.S.C. 1259);
    (iii) A noncitizen who is lawfully present in the United States 
pursuant to an admission under section 207 of the INA (8 U.S.C. 1157) 
[refugee status]; pursuant to the granting of asylum (which has not 
been terminated) under section 208 of the INA (8 U.S.C. 1158) [asylum 
status]; or as a result of being granted conditional entry under 
section 203(a)(7) of the INA (8 U.S.C. 1153(a)(7)) before April 1, 
1980, because of persecution or fear of persecution on account of race, 
religion, or political opinion or because of being uprooted by 
catastrophic national calamity;
    (iv) A noncitizen who is lawfully present in the United States as a 
result of an exercise of discretion by the Attorney General for 
emergent reasons or reasons deemed strictly in the public interest 
under section 212(d)(5) of the INA (8 U.S.C. 1182(d)(5)) [parole 
status];
    (v) A noncitizen who is lawfully present in the United States as a 
result of the Attorney General's withholding deportation under section 
243(h) of the INA (8 U.S.C. 1253(h)) [threat to life or freedom]; or
    (vi) A noncitizen lawfully admitted for temporary or permanent 
residence under section 245A of the INA (8 U.S.C. 1255a) [amnesty 
granted under INA 245A].
    (c) Family eligibility for assistance. (1) A family shall not be 
eligible for assistance unless every member of the family residing in 
the unit is determined to have eligible status, as described in 
paragraph (b) of this section;
    (2) Despite the ineligibility of one or more family members, a 
mixed family may be eligible for one of the three types of assistance 
provided in paragraph (r) of this section. A family without any 
eligible members and receiving assistance on June 19, 1995 may be 
eligible for temporary deferral of termination of assistance as 
provided in paragraph (r) of this section.
    (d) Exemption of certain homebuyers from restrictions of this 
section. A homebuyer who executed a Homeownership Opportunity Agreement 
under the Turnkey III program or who executed a Mutual Help and 
Occupancy Agreement under the Mutual Help Homeownership program before 
June 19, 1995 is not subject to this citizenship or eligible 
immigration status requirement for continued participation in the 
program.
    (e) Submission of evidence of citizenship or eligible immigration 
status.
    (1) General. Eligibility for assistance or continued assistance 
under a Section 214 covered program is contingent upon a family's 
submission to the IHA of the documents described in paragraph (e)(2) of 
this section for each family member. If one or more family members do 
not have citizenship or eligible immigration status, the members may 
exercise the election not to contend to have eligible immigration 
status as provided in paragraph (f) of this section, and the provisions 
of paragraph (r) of this section shall apply.
    (2) Evidence of citizenship or eligible immigration status. Each 
family, regardless of age, must submit the following evidence to the 
IHA:
    (i) For citizens, the evidence consists of a signed declaration of 
U.S. citizenship;
    (ii) For noncitizens who are 62 years of age or older or who will 
be 62 years of age or older and receiving assistance under a Section 
214 covered program on June 19, 1995, the evidence consists of:
    (A) A signed declaration of eligible immigration status; and
    (B) Proof of age document.
    (iii) For all other noncitizens, the evidence consists of:
    (A) A signed declaration of eligible immigration status;
    (B) The INS documents listed in paragraph (k)(2) of this section; 
and
    (C) A signed verification consent form.
    (3) Declaration. For each family member who contends that he or she 
is a U.S. citizen or a noncitizen with eligible immigration status, the 
family must submit to the IHA a written [[Page 18216]] declaration, 
signed under penalty of perjury, by which the family member declares 
whether he or she is a U.S. citizen or a noncitizen with eligible 
immigration status.
    (i) For each adult, the declaration must be signed by the adult.
    (ii) For each child, the declaration must be signed by an adult 
residing in the assisted dwelling unit who is responsible for the 
child.
    (4) Verification consent form. (i) Who signs. Each noncitizen who 
declares eligible immigration status, must sign a verification consent 
form as follows:
    (A) For each adult, the form must be signed by the adult;
    (B) For each child, the form must be signed by an adult member of 
the family residing in the assisted dwelling unit who is responsible 
for the child.
    (ii) Notice of release of evidence by IHA. The verification consent 
form shall provide that evidence of eligible immigration status may be 
released by the IHA, without responsibility for the further use or 
transmission of the evidence by the entity receiving it, to:
    (A) HUD as required by HUD; and
    (B) The INS for purposes of verification of the immigration status 
of the individual.
    (iii) Notice of release of evidence by HUD. The verification 
consent form also shall notify the individual of the possible release 
of evidence of eligible immigration status by HUD. Evidence of eligible 
immigration status shall only be released to the INS for purposes of 
establishing eligibility for financial assistance and not for any other 
purpose. HUD is not responsible for the further use or transmission of 
the evidence or other information by the INS.
    (f) Individuals who do not contend to have eligible immigration 
status. If one or more members of a family elect not to contend that 
they have eligible immigration status and the other members of the 
family establish their citizenship or eligible immigration status, the 
family may be considered for assistance under paragraphs (r) or (s) of 
this section despite the fact that no declaration or documentation of 
eligible status is submitted by one or more members of the family. The 
family, however, must identify to the IHA, the family member (or 
members) who will elect not to contend that he or she has eligible 
immigration status.
    (g) Notification of requirements of Section 214. (1) When notice is 
to be issued. Notification of the requirement to submit evidence of 
citizenship or eligible immigration status, as required by this 
section, or to elect not to contend that one has eligible immigration 
status as provided by paragraph (f) of this section, shall be given by 
the IHA as follows:
    (i) Applicant's notice. The notification described in paragraph 
(g)(1) of this section shall be given to each applicant at the time of 
application for financial assistance. Families whose applications are 
pending on June 19, 1995 shall be notified of the requirements to 
submit evidence of eligible status as soon as possible after June 19, 
1995.
    (ii) Notice to families already receiving assistance. For a family 
in occupancy on June 19, 1995, the notification described in paragraph 
(g)(1) of this section shall be given to each at the time of, and 
together with, the IHA's notice of the first regular reexamination 
after that date, but not later than one year following June 19, 1995.
    (2) Form and content of notice. The notice shall:
    (i) State that financial assistance is contingent upon the 
submission and verification, as appropriate, of the evidence of 
citizenship or eligible immigration status, as required by this 
section;
    (ii) Describe the type of evidence that must be submitted and state 
the time period in which that evidence must be submitted (see paragraph 
(h) of this section concerning when evidence must be submitted); and
    (iii) State that assistance will be prorated, denied or terminated, 
as appropriate, upon a final determination of ineligibility after all 
appeals have been exhausted (see paragraph (n) of this section 
concerning INS appeal, and paragraph (o) of this section concerning IHA 
informal hearing process) or, if appeals are not pursued, at a time to 
be specified in accordance with HUD requirements. Families already 
receiving assistance also shall be informed of how to obtain assistance 
under the preservation of families provisions of paragraph (r) of this 
section.
    (h) When evidence of eligible status is required to be submitted. 
The IHA shall require evidence of eligible status to be submitted at 
the times specified in paragraph (h) of this section subject to any 
extension granted in accordance with paragraph (i) of this section.
    (1) Applicants. For applicants, the IHA must ensure that evidence 
of eligible status is submitted not later than the date the IHA 
anticipates or has knowledge that verification of other aspects of 
eligibility for assistance will occur (see paragraph (l) of this 
section).
    (2) Families already receiving assistance. For a family already 
receiving the benefit of assistance in a covered program on June 19, 
1995, the required evidence shall be submitted at the first regular 
reexamination after June 19, 1995, in accordance with program 
requirements.
    (3) New occupants of assisted units. For any new family members, 
the required evidence shall be submitted at the first interim or 
regular reexamination following the person's occupancy.
    (4) Changing participation in a HUD program. Whenever a family 
applies for admission to a Section 214 covered program, evidence of 
eligible status is required to be submitted in accordance with the 
requirements of this part unless the family already has submitted the 
evidence to the IHA for a covered program.
    (5) One-time evidence requirement for continuous occupancy. For 
each family member, the family is required to submit evidence of 
eligible status only one time during continuously assisted occupancy 
under any covered program.
    (i) Extensions of time to submit evidence of eligible status. (1) 
When extension must be granted. The IHA shall extend the time, provided 
in paragraph (h) of this section, to submit evidence of eligible 
immigration status if the family member:
    (i) Submits the declaration required under paragraph (e)(3) of this 
section certifying that any person for whom required evidence has not 
been submitted is a noncitizen with eligible immigration status; and
    (ii) Certifies that the evidence needed to support a claim of 
eligible immigration status is temporarily unavailable, additional time 
is needed to obtain and submit the evidence, and prompt and diligent 
efforts will be undertaken to obtain the evidence.
    (2) Prohibition on indefinite extension period. Any extension of 
time, if granted, shall be for a specific period of time. The 
additional time provided should be sufficient to allow the family the 
time to obtain the evidence needed. The IHA's determination of the 
length of the extension needed, shall be based on the circumstances of 
the individual case.
    (3) Grant or denial of extension to be in writing. The IHA's 
decision to grant or deny an extension as provided in paragraph (i)(1) 
of this section shall be issued to the family by written notice. If the 
extension is granted, the notice shall specify the extension period 
granted. If the extension is denied, the notice shall explain the 
reasons for denial of the extension.
    (j) Failure to submit evidence or establish eligible immigration 
status. If the family fails to submit required [[Page 18217]] evidence 
of eligible immigration status within the time period specified in the 
notice, or any extension granted in accordance with paragraph (i) of 
this section, or if the evidence is timely submitted but fails to 
establish eligible immigration status, the IHA shall proceed to deny, 
prorate or terminate assistance, or provide continued assistance or 
temporary deferral of termination of assistance, as appropriate, in 
accordance, respectively with the provisions of paragraph (m) of this 
section or paragraph (r) of this section.
    (k) Documents of eligible immigration status. (1) General. An IHA 
shall request and review original documents of eligible immigration 
status. The IHA shall retain photocopies of the documents for its own 
records and return the original documents to the family.
    (2) Acceptable evidence of eligible immigration status. The 
original of one of the following documents is acceptable evidence of 
eligible immigration status, subject to verification in accordance with 
paragraph (l) of this section:
    (i) Form I-551, Alien Registration Receipt Card (for permanent 
resident aliens);
    (ii) Form I-94, Arrival-Departure Record, with one of the following 
annotations:
    (A) ``Admitted as Refugee Pursuant to Section 207'';
    (B) ``Section 208'' or ``Asylum'';
    (C) ``Section 243(h)'' or ``Deportation stayed by Attorney 
General'';
    (D) ``Paroled Pursuant to Sec. 212(d)(5) of the INA'';
    (iii) If Form I-94, Arrival-Departure Record, is not annotated, 
then accompanied by one of the following documents:
    (A) A final court decision granting asylum (but only if no appeal 
is taken);
    (B) A letter from an INS asylum officer granting asylum (if 
application is filed on or after October 1, 1990) or from an INS 
district director granting asylum (if application filed before October 
1, 1990);
    (C) A court decision granting withholding or deportation; or
    (D) A letter from an INS asylum officer granting withholding of 
deportation (if application filed on or after October 1, 1990).
    (iv) Form I-688, Temporary Resident Card, which must be annotated 
``Section 245A'' or ``Section 210'';
    (v) Form I-688B, Employment Authorization Card, which must be 
annotated ``Provision of Law 274a.12(11)'' or ``Provision of Law 
274a.12'';
    (vi) A receipt issued by the INS indicating that an application for 
issuance of a replacement document in one of the above-listed 
categories has been made and the applicant's entitlement to the 
document has been verified; or
    (vii) If other documents are determined by the INS to constitute 
acceptable evidence of eligible immigration status, they will be 
announced by notice published in the Federal Register.
    (l) Verification of eligible immigration status. (1) When 
verification is to occur. Verification of eligible immigration status 
shall be conducted by the IHA simultaneously with verification of other 
aspects of eligibility for assistance under a Section 214 covered 
program. (See paragraph (h) of this section.) The IHA shall verify 
eligible immigration status in accordance with the INS procedures 
described in this section.
    (2) Primary verification. (i) Automated verification system. 
Primary verification of the immigration status of the person is 
conducted by the IHA through the INS automated system (INS Systematic 
for Alien Verification for Entitlements (SAVE)). The INS SAVE system 
provides access to names, file numbers and admission numbers of 
noncitizens.
    (ii) Failure of primary verification to confirm eligible 
immigration status. If the INS SAVE system does not verify eligible 
immigration status, secondary verification must be performed.
    (3) Secondary verification. (i) Manual search of INS records. 
Secondary verification is a manual search by the INS of its records to 
determine an individual's immigration status. The IHA must request 
secondary verification, within 10 days of receiving the results of the 
primary verification, if the primary verification system does not 
confirm eligible immigration status, or if the primary verification 
system verifies immigration status that is ineligible for assistance 
under a covered Section 214 covered program.
    (ii) Secondary verification initiated by IHA. Secondary 
verification is initiated by the IHA forwarding photocopies of the 
original INS documents listed in paragraph (k)(2) of this section 
(front and back), attached to the INS document verification request 
form G-845S (Document Verification Request), or such other form 
specified by the INS, to a designated INS office for review. (Form G-
845S is available from the local INS Office.)
    (iii) Failure of secondary verification to confirm eligible 
immigration status. If the secondary verification does not confirm 
eligible immigration status, the IHA shall issue to the family the 
notice described in paragraph (m)(4) of this section, which includes 
notification of appeal to the INS of the INS finding on immigration 
status (see paragraph (m)(4)(iv) of this section).
    (4) Exemption from liability for INS verification. The IHA shall 
not be liable for any action, delay, or failure of the INS in 
conducting the automated or manual verification.
    (m) Delay, denial, or termination of assistance. (1) Restrictions 
on delay, denial, or termination of assistance. Assistance to an 
applicant shall not be delayed or denied, and assistance to a tenant 
shall not be delayed, denied, or terminated, on the basis of ineligible 
immigration status of a family member if:
    (i) The primary and secondary verification of any immigration 
documents that were timely submitted has not been completed;
    (ii) The family member for whom required evidence has not been 
submitted has moved from the tenant's dwelling unit;
    (iii) The family member who is determined not to be in an eligible 
immigration status following INS verification has moved from the 
tenant's dwelling unit;
    (iv) The INS appeals process under paragraph (n) of this section 
has not been concluded;
    (v) For a tenant, the IHA hearing process under paragraph (o) of 
this section has not been concluded;
    (vi) Assistance is prorated in accordance with paragraph (s) of 
this section;
    (vii) Assistance for a mixed family is continued in accordance with 
paragraph (r) of this section; or
    (viii) Deferral of termination of assistance is granted in 
accordance with paragraph (r) of this section.
    (2) When delay of assistance to applicant is permissible. 
Assistance to an applicant may be delayed after the conclusion of the 
INS appeal process, but not denied until the conclusion of the IHA 
informal hearing process, if an informal hearing is requested by the 
family.
    (3) Events causing denial or termination of assistance. Assistance 
to an applicant shall be denied, and a tenant's assistance shall be 
terminated, in accordance with the procedures of this section, upon the 
occurrence of any of the following events:
    (i) Evidence of citizenship (i.e., the declaration) and eligible 
immigration status is not submitted by the date specified in paragraph 
(h) of this section, or by the expiration of any extension granted in 
accordance with paragraph (i) of this section; or [[Page 18218]] 
    (ii) The evidence of citizenship and eligible immigration status is 
timely submitted, but INS primary and second verification does not 
verify eligible immigration status of a family member; and
    (A) The family does not pursue INS appeal (as provided in paragraph 
(n) of this section) or IHA informal hearing rights (as provided in 
paragraph (o) of this section); or
    (B) INS appeal and informal hearing rights are pursued, but the 
final appeal or hearing decisions are decided against the family 
member.
    (4) Notice of denial or termination of assistance. The notice of 
denial or termination of assistance shall advise the family:
    (i) That financial assistance will be denied or terminated, and 
provide a brief explanation of the reasons for the proposed denial or 
termination of assistance;
    (ii) That the family may be eligible for proration of assistance as 
provided in paragraph (s) of this section;
    (iii) In the case of a tenant, the criteria and procedures for 
obtaining relief under the preservation of families provisions in 
paragraph (r) of this section;
    (iv) That the family has a right to request an appeal to the INS of 
the results of the secondary verification of immigration status, and to 
submit additional documentation or a written explanation in support of 
the appeal, in accordance with the procedures of paragraph (n) this 
section;
    (v) That the family has a right to request an informal hearing with 
the IHA either upon completion of the INS appeal or in lieu of the INS 
appeal, as provided in paragraph (n) of this section;
    (vi) For applicants, the notice shall advise that assistance may 
not be delayed until the conclusion of the INS appeal process, but 
assistance may be delayed during the pendency of the IHA informal 
hearing process.
    (n) Appeal to the INS. (1) Submission of request for appeal. Upon 
receipt of notification by the IHA that INS secondary verification 
failed to confirm eligible immigration status, the IHA shall notify the 
family of the results of the INS verification, and the family shall 
have 30 days from the date of the IHA's notification, to request an 
appeal of the INS results. The request for appeal shall be made by the 
family communicating that request in writing directly to the INS. The 
family must provide the IHA with a copy of the written request for 
appeal and proof of mailing. For good cause shown, the IHA shall grant 
the family an extension of time within which to request an appeal.
    (2) Documentation to be submitted as part of appeal to INS. The 
family shall forward to the designated INS office any additional 
documentation or written explanation in support of the appeal. This 
material must include a copy of the INS document verification request 
form G-845S (used to process the secondary verification request) or 
such other form specified by the INS, and a cover letter indicating 
that the family is requesting an appeal of the INS immigration status 
verification results. (Form G-845S is available from the local INS 
Office.)
    (3) Decision by INS. (i) When decision will be issued. The INS will 
issue to the family, with a copy to the IHA, a decision within 30 days 
of its receipt of documentation concerning the family's appeal of the 
verification of immigration status. If, for any reason, the INS is 
unable to issue a decision within the 30 day time period, the INS will 
inform the family and the IHA of the reasons for the delay.
    (ii) Notification of INS decision and of informal hearing 
procedures. When the IHA receives a copy of the INS decision, the IHA 
shall notify the family of its right to request an informal hearing on 
the IHA's ineligibility determination in accordance with the procedures 
of paragraph (o) of this section.
    (4) No delay, denial or termination of assistance until completion 
of INS appeal process; direct appeal to INS. Pending the completion of 
the INS appeal under this section, assistance may not be delayed, 
denied or terminated on the basis of immigration status.
    (o) Informal hearing. (1) When request for hearing is to be made. 
After notification of the INS decision, or in lieu of request of appeal 
to the INS, the family may request that the IHA provide a hearing. This 
request must be made either within 14 days of the date the IHA mails or 
delivers the notice under paragraph (m)(4) of this section, or within 
14 days of the mailing of the INS appeal decision issued in accordance 
with paragraph (n)(4) of this section (established by the date of 
postmark).
    (2) Extension of time to request hearing. The IHA shall extend the 
period of time for requesting a hearing (for a specified period) upon 
good cause shown.
    (3) Informal hearing procedures. (i) For tenants, the procedures 
for the hearing before the IHA are set forth in Sec. 950.340.
    (ii) For applicants, the procedures for the informal hearing before 
the IHA are as follows:
    (A) Hearing before an impartial individual. The applicant shall be 
provided a hearing before any person(s) designated by the IHA 
(including an officer or employee of the IHA), other than a person who 
made or approved the decision under review, and other than a person who 
is a subordinate of the person who made or approved the decision;
    (B) Examination of evidence. The applicant shall be provided the 
opportunity to examine and copy, at the applicant's expense and at a 
reasonable time in advance of the hearing, any documents in the 
possession of the IHA pertaining to the applicant's eligibility status, 
or in the possession of the INS (as permitted by INS requirements), 
including any records and regulations that may be relevant to the 
hearing;
    (C) Presentation of evidence and arguments in support of eligible 
status. The applicant shall be provided the opportunity to present 
evidence and arguments in support of eligible status. Evidence may be 
considered without regard to admissibility under the rules of evidence 
applicable to judicial proceedings;
    (D) Controverting evidence of the project owner. The applicant 
shall be provided the opportunity to controvert evidence relied upon by 
the IHA and to confront and cross-examine all witnesses on whose 
testimony or information the IHA relies;
    (E) Representation. The applicant shall be entitled to be 
represented by an attorney, or other designee, at the applicant's 
expense, and to have such person make statements on the applicant's 
behalf;
    (F) Interpretive services. The applicant shall be entitled to 
arrange for an interpreter to attend the hearing, at the expense of the 
applicant or the IHA, as may be agreed upon by both parties;
    (G) Hearing to be recorded. The applicant shall be entitled to have 
the hearing recorded by audiotape (a transcript of the hearing may, but 
is not required to, be provided by the IHA); and
    (H) Hearing decision. The IHA shall provide the applicant with a 
written final decision, based solely on the facts presented at the 
hearing within 14 days of the date of the informal hearing. The 
decision shall state basis for the decision.
    (p) Judicial relief. A decision against a family member under the 
INS appeal process or the IHA informal hearing process does not 
preclude the family from exercising the right, that may otherwise be 
available, to seek redress directly through judicial procedures. 
[[Page 18219]] 
    (q) Retention of documents. The IHA shall retain for a minimum of 5 
years the following documents that may have been submitted to the IHA 
by the family or provided to the IHA as part of the INS appeal or the 
IHA informal hearing process:
    (1) The application for financial assistance;
    (2) The form completed by the family for income re-examination;
    (3) Photocopies of any original documents (front and back), 
including original INS documents;
    (4) The signed verification consent form;
    (5) The INS verification results;
    (6) The request for an INS appeal;
    (7) The final INS determination;
    (8) The request for an IHA informal hearing; and
    (9) The final hearing decision.
    (r) Preservation of mixed families and other families. (1) 
Assistance available for mixed families. (i) Assistance available for 
tenant mixed families. For a mixed family assisted under a Section 214 
covered program on June 19, 1995, and following the appeals and 
informal hearing procedures provided in paragraphs (n) and (o) of this 
section if utilized by the family, one of the following three types of 
assistance may be available to the family:
    (A) Continued assistance (see paragraph (r)(2) of this section);
    (B) Temporary deferral of termination of assistance (see paragraph 
(r)(3) of this section); or
    (C) Prorated assistance (see paragraph (s) of this section; a mixed 
family must be provided prorated assistance if the family so requests).
    (ii) Assistance available for applicant mixed families. Prorated 
assistance is also available for mixed families applying for 
assistance, as provided in paragraph (s) of this section.
    (iii) Assistance available to other families in occupancy. For 
families receiving assistance under a Section 214 covered program on 
the June 19, 1995 and who have no members with eligible immigration 
status, the IHA may grant the family temporary deferral of termination 
of assistance.
    (2) Continued assistance. A mixed family may receive continued 
housing assistance if all of the following conditions are met:
    (i) The family was receiving assistance under a Section 214 covered 
program on June 19, 1995;
    (ii) The family's head of household or spouse has eligible 
immigration status as described in paragraph (b)(2) of this section; 
and
    (iii) The family does not include any person (who does not have 
eligible immigration status) other than the head of household, any 
spouse of the head of household, any parents of the head of household, 
any parents of the spouse, or any children of the head of household or 
spouse.
    (3) Temporary deferral of termination of assistance. (i) 
Eligibility for this type of assistance. If a mixed family qualifies 
for prorated assistance (and does not qualify for continued 
assistance), but decides not to accept prorated assistance, or if a 
family has no members with eligible immigration status, the family may 
be eligible for temporary deferral of termination of assistance if 
necessary to permit the family additional time for the orderly 
transition of those family members with ineligible status, and any 
other family members involved, to other affordable housing. Other 
affordable housing is used in the context of transition of an 
ineligible family from a rent level that reflects HUD assistance to a 
rent level that is unassisted; the term refers to housing that is not 
substandard, that is of appropriate size for the family and that can be 
rented for an amount not exceeding the amount that the family pays for 
rent, including utilities, plus 25 percent.
    (ii) Time limit on deferral period. If temporary deferral of 
termination of assistance is granted, the deferral period shall be for 
an initial period not to exceed six months. The initial period may be 
renewed for additional periods of six months, but the aggregate 
deferral period shall not exceed a period of three years.
    (iii) Notification requirements for beginning of each deferral 
period. At the beginning of each deferral period, the IHA must inform 
the family of its ineligibility for financial assistance and offer the 
family information concerning, and referrals to assist in finding, 
other affordable housing.
    (iv) Determination of availability of affordable housing at end of 
each deferral period. Before the end of each deferral period, the IHA 
must:
    (A) Make a determination of the availability of affordable housing 
of appropriate size based on evidence of conditions which when taken 
together will demonstrate an inadequate supply of affordable housing 
for the area in which the project is located, the consolidated plan (if 
applicable, as described in 24 CFR part 91), the IHA's own knowledge of 
the availability of affordable housing, and on evidence of the tenant 
family's efforts to locate such housing; and
    (B) Notify the tenant family in writing, at least 60 days in 
advance of the expiration of the deferral period, that termination will 
be deferred again (provided that the granting of another deferral will 
not result in aggregate deferral periods that exceed three years), and 
a determination was made that other affordable housing is not 
available; or 
    (C) Notify the tenant family in writing, at least 60 days in 
advance of the expiration of the deferral period, that termination of 
financial assistance will not be deferred because either granting 
another deferral will result in aggregate deferral periods that exceed 
three years, or a determination has been made that other affordable 
housing is available.
    (v) Option to select proration of assistance at end of deferral 
period. A family who is eligible for, and receives temporary deferral 
of termination of assistance, may request, and the IHA shall provide, 
proration of assistance at the end of the deferral period if the family 
has made a good faith effort during the deferral period to locate other 
affordable housing.
    (vi) Notification of decision on family preservation assistance. An 
IHA shall notify the family of its decision concerning the family's 
qualification for assistance under this section. If the family is 
ineligible for assistance under this section, the notification shall 
state the reasons, which must be based on relevant factors. For tenant 
families, the notice also shall inform the tenant family of any appeal 
rights.
    (s) Proration of assistance. (1) Applicability. This section 
applies to a mixed family other than a family receiving continued 
assistance under paragraph (r)(2) of this section, or other than a 
family who is eligible for and requests temporary deferral of 
termination of assistance under paragraph (r)(3) of this section. The 
IHA must provide an eligible mixed family prorated assistance if the 
family request prorated assistance.
    (2) Method of prorating assistance. The IHA shall prorate the 
family's assistance by:
    (i) Step 1. Determining total tenant payment in accordance with 
Sec. 950.325 (annual income includes income of all family members, 
including any family member who has not established eligible 
immigration status).
    (ii) Step 2. Subtracting the total tenant payment from a HUD-
supplied ``Indian housing maximum rent'' applicable to the unit or the 
housing authority. (``Indian housing maximum rent'' shall be determined 
by HUD using the 95th percentile rent for the housing authority.) The 
result is the maximum subsidy for which the family could 
[[Page 18220]] qualify if all members were eligible (``family maximum 
subsidy'').
    (iii) Step 3. Dividing the family maximum subsidy by the number of 
persons in the family (all persons) to determine the maximum subsidy 
per each family member who has citizenship or eligible immigration 
status (``eligible family member''). The subsidy per eligible family 
member is the ``member maximum subsidy''.
    (iv) Step 4. Multiplying the member maximum subsidy by the number 
of family members who have citizenship or eligible immigration status 
(``eligible family members'').
    (v) Step 5. The product of steps 1 through 4, as set forth in 
paragraph (s)(2) of this section is the amount of subsidy for which the 
family is eligible (``eligible subsidy''). The family's rent is the 
``public housing maximum rent'' minus the amount of the eligible 
subsidy.
    (t) Prohibition of assistance to noncitizen students. (1) General. 
The provisions of this section permitting continued assistance, 
prorated assistance or temporary deferral of termination of assistance 
for certain families, do not apply to any person who is determined to 
be a noncitizen student, as defined in paragraph (t)(2) of this 
section, or the family of the noncitizen student, as described in 
paragraph (t)(3) of this section.
    (2) Noncitizen student. For purposes of this part, a noncitizen 
student is defined as a noncitizen who:
    (i) Has a residence in a foreign country that the person has no 
intention of abandoning;
    (ii) Is a bona fide student qualified to pursue a full course of 
study; and
    (iii) Is admitted to the United States temporarily and solely for 
purposes of pursuing such a course of study at an established 
institution of learning or other recognized place of study in the 
United States, particularly designated by such person and approved by 
the Attorney General after consultation with the Department of 
Education of the United States, which institution or place of study 
shall have agreed to report to the Attorney General the termination of 
attendance of each nonimmigrant student (and if any such institution of 
learning or place of study fails to make such reports promptly the 
approval shall be withdrawn).
    (3) Family of noncitizen student. The prohibition on providing 
assistance to a noncitizen student as described in paragraph (t)(1) of 
this section also extends to the noncitizen spouse of the noncitizen 
student and minor children of any noncitizen student if the spouse or 
children are accompanying the student or following to join such 
student. The prohibition on providing assistance to a noncitizen 
student does not extend to the citizen spouse of the noncitizen student 
and the children of the citizen spouse and noncitizen student.
    (u) Protection from liability for IHAs, State, Tribal, and local 
government agencies and officials. (1) Protection from liability for 
IHAs. HUD will not take any compliance, disallowance, penalty, or other 
regulatory action against an IHA with respect to any error in its 
determination of eligibility for assistance based on citizenship or 
immigration status:
    (i) If the IHA established eligibility based upon verification of 
eligible immigration status through the verification system described 
in paragraph (l) of this section;
    (ii) Because the IHA was required to provide an opportunity for the 
applicant or family to submit evidence in accordance with paragraphs 
(h) and (i) of this section;
    (iii) Because the IHA was required to wait for completion of INS 
verification of immigration status in accordance with paragraph (l) of 
this section;
    (iv) Because the IHA was required to wait for completion of the INS 
appeal process provided in accordance with paragraph (n) of this 
section; or
    (v) Because the IHA was required to provide an informal hearing in 
accordance with paragraph (o) of this section.
    (2) Protection from liability for State, Tribal and local 
government agencies and officials. State, Tribal, and local government 
agencies and officials shall not be liable for the design or 
implementation of the verification system described in paragraph (l) of 
this section and the IHA informal hearing provided under paragraph (o) 
of this section, so long as the implementation by the State, Tribal, or 
local government agency or official is in accordance with prescribed 
HUD rules and requirements.


Sec. 950.315  Initial determination, verification, and reexamination of 
family income and composition.

    (a) Income, family composition, and eligibility. The IHA is 
responsible for determination of annual income and adjusted income, for 
determination of eligibility for admission and total tenant payment or 
homebuyer required monthly payment; and for reexamination of family 
income and composition at least annually for all tenants and 
homebuyers. The ``effective date'' of an examination or reexamination 
refers to:
    (1) In the case of an examination for admission, the effective date 
of initial occupancy; and
    (2) In the case of a reexamination of an existing tenant or 
homebuyer, the effective date of any change in tenant payment or 
required monthly payment resulting from the reexamination.
    (3) If there is no change, the effective date is the date a change 
would have taken place if the reexamination had resulted in a change in 
payment.
    (b) Verification. As a condition of admission to, or continued 
occupancy of, any assisted unit, the IHA shall require the family head 
and other such family members as it designates to execute a HUD-
approved release and consent form (including any release and consent as 
required under 24 CFR part 760) authorizing any depository or private 
source of income, or any Federal, State, or local agency, to furnish or 
release to the IHA and to HUD such information as the IHA or HUD 
determines to be necessary. The IHA also shall require the family to 
submit directly the documentation determined to be necessary, including 
any information required under 24 CFR part 750. Information or 
documentation shall be determined to be necessary if it is required for 
purposes of determining or auditing a family's eligibility to receive 
housing assistance; for determining the family's adjusted income, 
tenant rent, or required monthly payment; for verifying related 
information; or for monitoring compliance with equal opportunity 
requirements. The use or disclosure of information obtained from a 
family or from another source pursuant to this release and consent 
shall be limited to purposes directly connected with administration of 
this part or an application for assistance.
    (c) Rent and homebuyer payment adjustments. After consultation with 
the family and upon verification of the information, the IHA shall make 
appropriate adjustments in the rent or homebuyer payment amount. The 
tenant or homebuyer shall comply with the IHA's policy regarding 
required interim reporting of changes in the family's income.
    (d) Implementation of verification of citizenship or eligible 
immigration status. The IHA shall follow the procedures required by 
Sec. 950.310 for determining citizenship or eligible immigration status 
before initial occupancy, and, for tenants admitted before June 19, 
1995, at the first reexamination of family income and composition after 
that date. Thereafter, at the annual reexaminations of family income 
and composition, the IHA shall [[Page 18221]] follow the requirements 
of Sec. 950.310 concerning verification of the immigration status of 
any new family member. The family shall comply with the IHA's policy 
regarding required interim reporting of changes in the family's income 
and composition. If the IHA is informed of a change in the family 
income or other circumstances between regularly scheduled 
reexaminations, the IHA, upon consultation with the family and 
verification of the information, shall promptly make any adjustments 
appropriate in the rent or Homebuyer payment amount or take appropriate 
action concerning the addition of a family member who is a noncitizen 
with ineligible immigration status.
    (e) See 24 CFR part 908 for requirements for transmission of data 
to HUD.


Sec. 950.320  Determination of rents and homebuyer payments.

    (a) Rental and Turnkey III projects. The amount of rent required of 
a tenant in a rental project or the Turnkey III homebuyer payment 
amount for a homebuyer in a Turnkey III project for Turnkey III 
contracts executed after August 1, 1982, shall be equal to the total 
tenant payment as determined in accordance with Sec. 950.325. For 
Turnkey III contracts executed on or before August 1, 1982, the Turnkey 
III homebuyer payment is determined in accordance with the contract. If 
the utility allowance exceeds the rent or required monthly payment, the 
IHA will pay the utility reimbursement as provided in Sec. 950.325(b). 
In the case of a Turnkey III homebuyer, payment of a utility 
reimbursement may affect the IHA's evaluation of the Turnkey III 
homebuyer's homeownership potential. (See Sec. 950.529 regarding loss 
of homeownership potential and Sec. 950.523 regarding funds to cover 
such reimbursements.)
    (b) MH projects. The amount of the required monthly payment for a 
homebuyer in an MH project is determined in accordance with subpart E 
of this part.


Sec. 950.325  Total tenant payment--Rental and Turnkey III programs.

    (a) Total tenant payment. Total tenant payment shall be the highest 
of the following, rounded to the nearest dollar:
    (1) 30 percent of monthly adjusted income;
    (2) 10 percent of monthly income; or
    (3) If the family receives welfare assistance from a public agency 
and a part of such payments, adjusted in accordance with the family's 
actual housing costs, is specifically designated by such agency to meet 
the family's housing costs, the monthly portion of such payments that 
is so designated. If the family's welfare assistance is ratably reduced 
from the standard of need by applying a percentage, the amount 
calculated under paragraph (a)(3) of this section shall be the amount 
resulting from one application of the percentage.
    (b) Utility reimbursement. If the utility allowance exceeds the 
total tenant payment, the difference (the utility reimbursement) shall 
be due to the family. If the utility company consents, an IHA may, at 
its discretion, pay the utility reimbursement directly to the utility 
company.


Sec. 950.335  Rent and homebuyer payment collection policy.

    Each IHA shall establish and adopt, and use its best efforts to 
obtain compliance with, written policies sufficient to assure the 
prompt payment and collection of rent and homebuyer payments. A copy of 
the written policies shall be posted prominently in the IHA office and 
shall be provided upon request. Such policies shall be in accordance 
with the ACC and HUD statutory and regulatory requirements.


Sec. 950.340  Grievance procedures and leases.

    (a) Grievance procedures. (1) General. Each IHA shall adopt 
grievance procedures that are appropriate to local circumstances. These 
procedures shall comply with the Indian Civil Rights Act, if 
applicable, and section 6(k) of the Act, as applicable, and shall 
assure that tenants and homebuyers will:
    (i) Be advised of the specific grounds of any proposed adverse 
action by the IHA;
    (ii) Have an opportunity for a hearing before an impartial party 
upon timely request;
    (iii) Have a reasonable opportunity to examine any documents, 
records, or regulations related to the proposed action before the 
hearing (or trial in court);
    (iv) Be entitled to be represented by another person of their 
choice at any hearing;
    (v) Be entitled to ask questions of witnesses and have others make 
statements on their behalf; and
    (vi) Be entitled to receive a written decision by the IHA on the 
proposed action.
    (2) Expedited grievance procedure. An IHA may establish an 
expedited grievance procedure for any grievance concerning a 
termination of tenancy or eviction that involves:
    (i) Any criminal activity that threatens the health, safety, or 
right to peaceful enjoyment of the Indian housing development by other 
residents or employees of the IHA; or
    (ii) Any drug-related criminal activity on or near the premises.
    (3) Exclusion of certain grievances. (i) General. An IHA may pursue 
termination of tenancy or eviction without offering a grievance 
procedure if the termination or eviction is based on one of the grounds 
stated in paragraph (a)(2) of this section, so long as applicable 
tribal or State law requires that, before eviction, a tenant (including 
a homebuyer under a homeownership agreement) be given a hearing in 
court, and HUD has determined that the tribal or State procedures 
provide the basic elements of due process.
    (ii) Basic elements of due process. The elements of due process 
against which the jurisdiction's procedures are measured by HUD are the 
following:
    (A) Adequate notice to the tenant of the grounds for terminating 
the tenancy and for eviction;
    (B) Right of the tenant to be represented by counsel;
    (C) Opportunity for the tenant to refute the evidence presented by 
the IHA, including the right to confront and cross-examine witnesses 
and to present any affirmative legal or equitable defense that the 
tenant might have; and
    (D) A decision on the merits.
    (4) Notice to post office of certain evictions. When an IHA evicts 
an individual or family from a dwelling unit for engaging in criminal 
activity, including drug-related criminal activity, the IHA shall 
notify the local post office serving that dwelling unit that the 
evicted individual or family is no longer residing in the dwelling unit 
(so that the post office will terminate delivery of mail for such 
persons at the unit, and that such persons will not return to the unit 
to pick up mail).
    (5) Notice of procedures. A copy of the grievance procedures shall 
be posted prominently in the IHA office, and shall be provided to any 
tenant, homebuyer, or applicant upon request.
    (b) Leases. Each IHA shall use leases that:
    (1) Do not contain unreasonable terms and conditions;
    (2) Obligate the IHA to maintain the project in a decent, safe, and 
sanitary condition;
    (3) Require the IHA to give adequate written notice of termination 
of the lease that shall not be less than--
    (i) A reasonable time, but not to exceed 30 days, when the health 
or safety of other tenants or IHA employees is threatened;
    (ii) Fourteen days in the case of nonpayment of rent; and 
[[Page 18222]] 
    (iii) Thirty days in any other case;
    (4) Require that the IHA may not terminate the tenancy except for 
serious or repeated violation of the terms or conditions of the lease 
or for other good cause;
    (5) Provide that any criminal activity that threatens the health, 
safety, or right to peaceful enjoyment of the premises by other 
tenants, or any drug-related criminal activity on or near the premises, 
engaged in by an Indian housing tenant, any member of the tenant's 
household, or any guest or other person under the tenant's control, 
shall be cause for termination of tenancy. For purposes of this 
section, the term ``drug-related criminal activity'' means the illegal 
manufacture, sale, distribution, use, or possession with intent to 
manufacture, sell, distribute, or use, of a controlled substance (as 
defined in section 102 of the Controlled Substances Act (21 U.S.C. 
802)); and
    (6) Specify that with respect to any notice of termination of 
tenancy or eviction, notwithstanding any applicable tribal or State 
law, an Indian housing tenant shall be informed of the opportunity, 
before any hearing or trial, to examine any relevant documents, 
records, or regulations directly related to the termination or 
eviction.


Sec. 950.345  Maintenance and improvements.

    (a) General. Each IHA shall adopt written policies to assure full 
performance of the respective maintenance responsibilities of the IHA 
and tenants. A copy of such policies shall be posted prominently in the 
IHA office, and shall be provided to an applicant or tenant upon entry 
into the program and upon request.
    (b) Provisions for rental projects. For rental projects, the 
maintenance policies shall contain provisions on at least the following 
subjects:
    (i) The responsibilities of tenants for normal care and maintenance 
of their dwelling units, and of the common property, if any;
    (ii) Procedures for handling maintenance service requests from 
tenants;
    (iii) Procedures for IHA inspections of dwelling units and common 
property;
    (iv) Special arrangements, if any, for obtaining maintenance 
services from outside workers or contractors; and
    (v) Procedures for charging tenants for damages for which they are 
responsible.


Sec. 950.346  Fire safety.

    (a) Applicability. This section applies to all IHA-owned or leased 
housing, including Mutual Help and Turnkey III.
    (b) Smoke detectors. (1) After October 30, 1992, each unit shall be 
equipped with at least one battery-operated or hard-wired smoke 
detector, or such greater number as may be required by applicable 
State, local, or tribal codes, in working condition, on each level of 
the unit. In units occupied by hearing-impaired residents, smoke 
detectors shall be hard-wired.
    (2) After October 30, 1992, the public areas of all housing covered 
by this section shall be equipped with a sufficient number, but not 
less than one for each area, of battery-operated or hard-wired smoke 
detectors to serve as adequate warning of fire. Public areas include, 
but are not limited to, laundry rooms, community rooms, day care 
centers, hallways, stairwells, and other common areas.
    (3) The smoke detector for each individual unit shall be located, 
to the extent practicable, in a hallway adjacent to the bedroom or 
bedrooms. In units occupied by hearing-impaired residents, hard-wired 
smoke detectors shall be connected to an alarm system designed for 
hearing-impaired persons and installed in the bedroom or bedrooms 
occupied by the hearing-impaired residents. Individual units that are 
jointly occupied by both hearing and hearing-impaired residents shall 
be equipped with both audible and visual types of alarm devices.
    (4) If needed, battery-operated smoke detectors, except in units 
occupied by hearing-impaired residents, may be installed as a temporary 
measure where no detectors are present in a unit. Temporary battery-
operated smoke detectors shall be replaced with hard-wired electric 
smoke detectors in the normal course of an IHA's planned CIAP or CGP 
program to meet the HUD Modernization Standards of applicable State, 
local, or tribal codes, whichever standard is stricter. Smoke detectors 
for units occupied by hearing-impaired residents shall be installed in 
accordance with the acceptability criteria in paragraph (b)(3) of this 
section.
    (5) IHAs shall use operating funds to provide battery-operated 
smoke detectors in units that do not have any smoke detectors in place. 
If operating funds or reserves are insufficient to accomplish this, 
IHAs may apply for emergency CIAP funding. IHAs may apply for CIAP or 
CGP funds to replace battery-operated smoke detectors with hard-wired 
smoke detectors in the normal course of a planned modernization 
program.


Sec. 950.360  IHA employment practices.

    (a) Indian preference. Each IHA shall adopt written policies with 
respect to the IHA's own employment practices, which shall be in 
compliance with its obligations under section 7(b) of the Indian Self-
Determination and Education Assistance Act (25 U.S.C. 450e(b)), and 
E.O. 11246 (3 CFR, 1964-65 comp., p. 339), as amended by E.O. 11375 (3 
CFR, 1966-70 comp., p. 684), as applicable. A copy of these policies 
shall be posted in the IHA office. (Title VII of the Civil Rights Act 
of 1964 (42 U.S.C. 2000e), as amended, which prohibits discrimination 
in employment by making it unlawful for employers to engage in certain 
discriminatory practices, excludes Indian tribes from the 
nondiscrimination requirements of Title VII. See also Sec. 950.175(c).)
    (b) Wage rates. See Sec. 950.120 (c) and (d) with respect to the 
wage rates applicable to IHA employees.

Subpart E--Mutual Help Homeownership Opportunity Program


Sec. 950.401  Scope and applicability.

    (a) Scope. This subpart sets forth the requirements for the Mutual 
Help (MH) Homeownership Opportunity Program. For any matter not covered 
in this subpart, see other subparts contained in this part. Projects 
developed under the Self-Help development method shall comply with the 
requirements of subparts E and F of this part.
    (b) Applicability. The provisions of this subpart are applicable to 
all MH projects placed under ACC on or after March 9, 1976, and to 
projects converted in accordance with Secs. 950.455 or 950.503.


Sec. 950.416  Selection of MH homebuyers.

    (a) Admission policies. (1) Low-income families. An IHA's written 
admission policies for the MH program, adopted in accordance with 
Sec. 950.301, shall limit admission to low-income families.
    (i) An IHA may provide for admission of applicants whose family 
income exceeds the levels established for low-income families if the 
IHA demonstrates to HUD's satisfaction that there is a need to house 
such families that cannot reasonably be met except under this program.
    (ii) The number of dwelling units in any project assisted under the 
MH program that may be occupied by or reserved for families whose 
incomes exceed the levels established for low-income families (i.e., 
applicants admitted under paragraph (a)(1)(i) of this section) may not 
exceed whichever of the following is higher:
    (A) Ten percent of the dwelling units in the project; or
    (B) Five dwelling units.
    (2) An IHA may establish criteria in its Admissions and Occupancy 
Policy [[Page 18223]] for admission of a non-Indian applicant in 
circumstances where the IHA determines the presence of the family is 
essential to the well-being of Indian families and the need for housing 
for the family cannot reasonably be met except under this program.
    (3) Different standards for MH program. The IHA's admission 
policies for MH projects should be different from those for its rental 
or Turnkey III projects. The policies for the MH program should provide 
standards for determining a homebuyer's:
    (i) Ability to provide maintenance for the unit;
    (ii) Potential for maintaining at least the current income level;
    (iii) Successor to a unit at the time of an ``event `` (``event'' 
should also be defined by the IHA in its policy; see Sec. 950.449(a)); 
and
    (iv) Initial purchase price and the purchase price for a subsequent 
homebuyer.
    (b) Ability to meet homebuyer obligations. A family shall not be 
selected for MH housing unless, in addition to meeting the income 
limits and other requirements for admission (see Sec. 950.301), the 
family is able and willing to meet all obligations of an Mutual Help 
and Occupancy (MHO) Agreement, including the obligations to perform or 
provide the required maintenance, to provide the required MH 
Contribution, and to pay for utilities and the administration charge.
    (c) MH waiting list. (1) Families who wish to be considered for MH 
housing shall apply specifically for such housing. A family on any 
other IHA waiting list, or a tenant in a rental project of the IHA, 
shall also submit an application in order to be considered for an MH 
project; and
    (2) The IHA shall maintain a waiting list, separate from any other 
IHA waiting list, of families that have applied for MH housing and meet 
the admission requirements. The IHA shall maintain an MH waiting list 
in accordance with requirements prescribed by HUD and shall make 
selections in the order in which they appear on the list.
    (d) Making the selections. Within 30 days after HUD approval of the 
application for a project, the IHA shall proceed with preliminary 
selection of as many homebuyers as there are homes in the project. 
Preliminary selection of homebuyers shall be made from the MH waiting 
list in accordance with the date of application; qualification for a 
Federal preferences, ranking preferences, and local preferences, in 
accordance with Secs. 950.303 through 950.307; other pertinent factors 
under the IHA's admissions policies established in accordance with 
Sec. 950.301; and 24 CFR part 750. Final selection of a homebuyer will 
be made only after the site for that homebuyer has received final site 
approval, and the form of MH contribution has been determined.
    (e) Principal residence. A condition for selection as a homebuyer 
is that the family agrees to use the home as their principal residence 
during the term of the MHO Agreement. Ownership or use of an additional 
residence that is decent, safe, and sanitary at the time of occupancy 
or acquisition during occupancy would disqualify a family from the MH 
program. However, there are two situations that do not violate the 
principal residence requirement. First, ownership or use of a secondary 
home that is necessary for the family's livelihood or for cultural 
preservation, as solely determined by the IHA and described in the 
IHA's admission and occupancy policy, is acceptable. Second, a family's 
temporary absence from its MH home, and related subleasing of it, is 
acceptable if it is done for reasons and time periods prescribed in the 
IHA's admission and occupancy policy.
    (f) Notification of applicants. The IHA shall give families prompt 
written notice of selection for a MH home.


Sec. 950.419  MH contribution.

    (a) Amount and form of contribution. As a condition of occupancy, 
the MH homebuyer will be required to provide an MH contribution. 
Contributions other than labor may be made by an Indian tribe on behalf 
of a family.
    (1) The value of the contribution shall not be less than $1500.
    (2) The MH contribution may consist of land, labor, cash, 
materials, equipment, or any combination thereof. Land contributed to 
satisfy this requirement shall be owned in fee simple by the homebuyer 
or shall be assigned or allotted to the homebuyer for his or her use 
before application for an MH unit. Contributions of land donated by 
another person on behalf of the homebuyer will satisfy the requirement 
for an MH contribution. A homebuyer may provide cash to satisfy the MH 
contribution requirement where the cash is used for the purchase of 
land, labor, materials, or equipment for the homebuyer's home.
    (3) The amount of credit for an MH contribution in the case of 
land, labor, materials, or equipment shall be based upon the market 
value at the time of the contribution. In the case of labor, materials, 
or equipment, market value shall be determined by the contractor and 
the IHA. In the case of land, market value shall be determined by the 
IHA. (See Sec. 950.245). The use of labor, materials, or equipment as 
MH contributions shall be reflected by a reduction in the Total 
Contract Price stated in the Construction Contract.
    (b) Execution of Agreements. For projects other than Self-Help 
development projects, MHO Agreements should be signed for all units 
before execution of the construction contract for the project. Land 
leases for trust land shall be signed and approved by BIA before 
construction start.
    (c) Total contribution to be furnished before occupancy. The 
homebuyer cannot occupy the unit until the entire MH contribution is 
provided to the IHA. If the homebuyer is unable or unwilling to provide 
the MH contribution before occupancy of the project, the MHO Agreement 
for the homebuyer shall be terminated and the IHA shall select a 
substitute homebuyer from its waiting list.
    (d) MH contribution in event of substitution of homebuyer. If an 
MHO Agreement is terminated and a substitute homebuyer is selected, the 
amount of MH contribution to be provided by the substitute homebuyer 
shall be in accordance with paragraph (a) of this section. The 
substitute homebuyer may not occupy the unit until the complete MH 
contribution has been made.
    (e) Disposition of contribution. If an MHO Agreement is terminated 
by the IHA or the homebuyer before the date of occupancy, the homebuyer 
may receive reimbursement of the value of the MH contribution made plus 
other amounts contributed by the homebuyer, in accordance with 
Sec. 950.446.


Sec. 950.422  Commencement of occupancy.

    (a) Notice. (1) Upon acceptance of the home by the IHA from the 
contractor, the IHA shall determine whether the homebuyer has met all 
requirements for occupancy, including satisfaction in full of the MH 
contribution, and fulfillment of mandatory homebuyer counseling 
requirements. (See Sec. 950.453.) The IHA shall notify the homebuyer in 
writing that the home is available for occupancy as of a date specified 
in the notice.
    (2) If the IHA determines that the homebuyer has not met any of the 
other conditions for occupancy by the date of occupancy, the IHA shall 
send the homebuyer a notice in writing. This notice shall specify the 
date by which all requirements shall be satisfied and shall advise the 
homebuyer that the MHO Agreement will be terminated and a substitute 
homebuyer selected for the [[Page 18224]] unit if the requirements are 
not satisfied.
    (b) Credits to MH accounts and reserves. Promptly after the date of 
occupancy, the IHA shall credit the amount of the MH contribution to 
the homebuyer's accounts and reserves in accordance with Sec. 950.437 
and shall give the homebuyer a statement of the amounts so credited.


Sec. 950.425  Inspections, responsibility for items covered by 
warranty.

    (a) Inspection before move-in and identification of warranties. (1) 
To establish a record of the condition of the home on the date of 
occupancy, the IHA shall include the homebuyer in all inspection 
activities (See Sec. 950.270).
    (2) Within 30 days of commencement of occupancy of each home, the 
IHA shall furnish the homebuyer with a list of applicable contractors', 
manufacturers', and suppliers' warranties, indicating the items covered 
and the periods of the warranties, and stating the homebuyer's 
responsibility for notifying the IHA of any deficiencies that would be 
covered under the warranties.
    (b) Inspections during contractors' warranty periods, 
responsibility for items covered by contractors', manufacturers', or 
suppliers' warranties. It is the responsibility of the homebuyer during 
the period of the applicable warranties, to promptly inform the IHA in 
writing of any deficiencies arising during the warranty period 
(including manufacturers' and suppliers' warranties) so that the IHA 
may enforce any rights under the applicable warranties. If a homebuyer 
fails to furnish such a written report in time, and the IHA is 
subsequently unable to obtain redress under the warranty, correction of 
the deficiency shall be the responsibility of the homebuyer.
    (c) Inspection upon termination of Agreement. If the MHO Agreement 
is terminated for any reason after commencement of occupancy, the IHA 
shall inspect the home after notifying the homebuyer of the time for 
inspection and shall give the homebuyer a written statement of the cost 
of any maintenance work required to put the home in satisfactory 
condition for the next occupant (see Sec. 950.446).
    (d) Homebuyer permission for inspections; participation in 
inspections. The homebuyer shall permit the IHA to inspect the home at 
reasonable hours and intervals during the period of the MHO Agreement 
in accordance with rules established by the IHA. The homebuyer shall be 
notified of the opportunity to participate in the inspection made in 
accordance with this section.


Sec. 950.426  Homebuyer payments before March 9, 1976.

    The amount of the required monthly payment for a homebuyer in an MH 
project placed under ACC before March 9, 1976 is determined in 
accordance with the MHO Agreement and provisions of Secs. 950.315 and 
950.102 concerning income. Utility reimbursements are not applicable to 
the Mutual Help program.


Sec. 950.427  Homebuyer payments for projects under ACC on or after 
March 9, 1976.

    (a) Establishment of payment. (1) Each homebuyer shall be required 
to make a monthly payment (required monthly payment) as determined by 
the IHA. The minimum required monthly payment shall equal the 
administration charge.
    (2) Subject to the requirement for payment of at least the 
administration charge, each homebuyer shall pay an amount of required 
monthly payment computed by:
    (i) Multiplying adjusted income (determined in accordance with 
Sec. 950.102) by a specified percentage. The specific percentage shall 
be no less than 15 percent and no more than 30 percent, as determined 
by the IHA; and
    (ii) Subtracting from that amount the utility allowance determined 
for the unit.
    (3) The IHA shall provide that the required monthly payment may not 
be more than a maximum amount. The maximum shall not be less than the 
sum of:
    (i) The administration charge; and
    (ii) The monthly debt service amount shown on the homebuyer's 
purchase price schedule.
    (4) If the required monthly payment exceeds the administration 
charge, the amount of the excess shall be credited to the homebuyer's 
monthly equity payments account (see Sec. 950.437(b)).
    (b) Administration charge. The administration charge may be based 
on differences in expenses attributable to different sizes or types of 
units.
    (c) Adjustments in the amount of the required monthly payment. (1) 
After the initial determination of a homebuyer's required monthly 
payment, the IHA shall increase or decrease the amount of such payment 
in accordance with HUD regulations to reflect changes in adjusted 
income (pursuant to a reexamination by the IHA in accordance with 
Sec. 950.315), adjustments in the administration charge, or in any of 
the other factors affecting computation of the homebuyer's required 
monthly payment.
    (2) In order to accommodate wide fluctuations in required monthly 
payments due to seasonal conditions, an IHA may agree with the 
homebuyer for payments to be made in accordance with a seasonally 
adjusted schedule that assures full payment of the required amount for 
each year.
    (d) Homebuyer payment collection policy. Each IHA shall establish 
and adopt written policies to obtain prompt payment and collection of 
required homebuyer payments. A copy of the policies shall be posted 
prominently in the IHA office, and shall be provided to a homebuyer 
upon request.


Sec. 950.428  Maintenance, utilities, and use of home.

    (a) General. Each IHA shall establish and adopt written policies to 
assure full performance of the respective maintenance responsibilities 
of the IHA and homebuyers. A copy of such written policies shall be 
posted prominently in the IHA office, and shall be provided to an 
applicant or homebuyer upon entry into the program and upon request.
    (b) Provisions for MH projects. The written maintenance policies 
shall contain provisions on at least the following subjects:
    (1) The responsibilities of homebuyers for maintenance and care of 
their dwelling units and common property;
    (2) Procedures for providing advice and technical assistance to 
homebuyers to enable them to meet their maintenance responsibilities;
    (3) Procedures for IHA inspections of homes and common property;
    (4) Procedures for IHA performance of homebuyer maintenance 
responsibilities (if homebuyers fail to satisfy such responsibilities), 
including procedures for charging the homebuyer's proper account for 
the cost thereof;
    (5) Special arrangements, if any, for obtaining maintenance 
services from outside workers or contractors; and
    (6) Procedures for charging homebuyers for damage for which they 
are responsible.
    (c) IHA responsibility in MH projects. The IHA shall enforce the 
provisions of a MHO Agreement for homebuyer maintenance of the home. 
Failure of a homebuyer to meet the obligations for maintenance shall 
not relieve the IHA of responsibility in this respect. The IHA shall 
conduct a complete interior and exterior examination of each home on a 
schedule developed by the IHA that ensures that the home is maintained 
in decent, safe, and sanitary condition and shall furnish a copy of the 
inspection report to the homebuyer. The IHA shall [[Page 18225]] take 
appropriate action, as needed, to remedy conditions shown by the 
inspection, including steps to assure performance of the homebuyer's 
obligations under the homebuyer's Agreement.
    (d) Homebuyer responsibility in MH program. (1) The homebuyer shall 
be responsible for routine and nonroutine maintenance of the home, 
including all repairs and replacements (including those resulting from 
damage from any cause). The IHA shall not be obligated to pay for or 
provide any maintenance of the home, except as determined necessary in 
paragraph (d)(2) of this section.
    (2) Homebuyer's failure to perform maintenance. (i) Failure of the 
homebuyer to perform maintenance obligations constitutes a breach of 
the MHO Agreement and grounds for its termination.
    (ii) If the IHA determines that the condition of the property 
creates a hazard to the life, health, or safety of the occupants, or if 
there is a risk of damage to the property if the condition is not 
corrected, the corrective work shall be done promptly by the IHA with 
such use of the homebuyer's accounts as the IHA may determine to be 
necessary, or by the homebuyer with a charge of the cost to the 
homebuyer's accounts in accordance with Sec. 950.437.
    (iii) Any maintenance work performed by the IHA shall be accounted 
for through a work order stating the nature of and charge for the work. 
The IHA shall give the homebuyer copies of all work orders for the 
home.
    (e) Homebuyer's responsibility for utilities. The homebuyer is 
responsible for the cost of furnishing utilities. The IHA shall have no 
obligation for the utilities. If the IHA determines that the homebuyer 
is unable to pay for the utilities for the home the IHA may pay for the 
utilities on behalf of the homebuyer and charge the homebuyer's 
accounts for the costs. When the homebuyer's accounts have been 
exhausted, the IHA shall pursue termination of the homebuyer Agreement 
and may offer the homebuyer a transfer into the rental program if a 
unit is available.
    (f) Obligations with respect to home and other persons and 
property. (1) The homebuyer shall agree to abide by all provisions of 
the MHO Agreement concerning homebuyer responsibilities, occupancy, and 
use of the home.
    (2) The homebuyer may request IHA permission to operate a small 
business in the unit. An IHA may determine when permission will be 
given.
    (g) Structural changes. (1) A homebuyer shall not make any 
structural changes in or additions to the home unless the IHA has 
determined that such changes are acceptable.
    (2) If the homebuyer is in compliance with the terms of the MHO 
Agreement, the IHA may agree to allow the homebuyer to use the funds in 
the MEPA for betterments and additions to the MH home. The IHA shall 
determine whether the homebuyer will be required to replenish the MEPA 
or if the funds are to be loaned to the homebuyer at an interest rate 
determined by the IHA. The homebuyer cannot use MEPA funds for luxury 
items, as determined by the IHA.


Sec. 950.431  Operating reserve.

    The IHA shall maintain an operating reserve in an amount sufficient 
for working capital purposes, estimated future nonroutine maintenance 
requirements for IHA-owned administrative facilities and common 
property, payment of advance premiums for insurance, unanticipated 
project requirements, and other eligible uses as determined by the IHA. 
The amount of a contribution to this reserve shall be determined by the 
IHA and included in the administration charge. The amount of this 
contribution shall be increased or decreased annually to reflect the 
needs of the IHA for working capital and for reserves for anticipated 
future expenditures, and it shall be included in the operating budget.


Sec. 950.432  Operating budget submission and approval.

    (a) Required documentation. (1) An IHA shall prepare an operating 
budget each fiscal year in a manner prescribed by HUD. The board of 
commissioners shall review and approve the budget by resolution. Each 
fiscal year, the IHA shall submit to the Area ONAP the approved board 
resolution and any necessary supporting documentation for operating 
subsidy as prescribed by HUD.
    (2) The Area ONAP may direct an IHA to submit a complete operating 
budget if the IHA has been issued a corrective action order with 
respect to financial management. If such action is necessary, the Area 
ONAP will notify the IHA prior to the beginning of the fiscal year.
    (b) HUD operating budget review. (1) A detailed review will be 
performed on IHA operating budgets that are subject to HUD review and 
approval. If the HUD Area ONAP finds that an operating budget is 
incomplete, includes illegal or ineligible expenditures, mathematical 
errors, errors in the application of accounting procedures, or is 
otherwise unacceptable, the HUD Area ONAP may at any time require the 
submission by the IHA of further information regarding an operating 
budget or operating budget revision.
    (2) When the IHA no longer is operating in a manner that threatens 
the future serviceability, efficiency, economy, or stability of the 
housing, HUD will notify the IHA that it no longer is required to 
submit an operating budget to HUD for review and approval.


Sec. 950.434  Operating subsidy.

    (a) Scope. This section authorizes the use of operating subsidy for 
Mutual Help projects and establishes eligible costs.
    (b) Eligible costs. Operating subsidy may be paid to cover proposed 
expenditures approved by the Area ONAP for the following purposes:
    (1) The reasonable cost of an annual independent audit;
    (2) Administration charges for vacant units when the IHA submits 
evidence to the Area ONAP's satisfaction that it is making every 
reasonable effort to fill the vacancies;
    (3) Collection losses due to payment delinquencies on the part of 
homebuyer families whose MHO Agreements have been terminated and who 
have vacated the home, and the cost of any maintenance (including 
repairs and replacements) necessary to put the vacant home in a 
suitable condition for a subsequent homebuyer family. Operating subsidy 
may be made available for these purposes only after the IHA has 
previously used all available homebuyer credits;
    (4) An amount for the cost of a HUD-approved counseling program;
    (5) An amount for training and related travel of IHA staff and 
Commissioners;
    (6) The costs of a HUD-approved professional management contract; 
and
    (7) Operating costs resulting from other unusual circumstances 
justifying payment of operating subsidy, if approved by HUD.
    (8) Subject to appropriations, and in accordance with the 
provisions of subpart O of this part and procedures determined by HUD, 
each IHA with a duly elected resident organization (RO) shall receive 
$25 per unit per year for resident participation activities. Of this 
amount, $15 per unit per year shall fund resident participation 
activities of the RO. Ten dollars per unit per year shall fund IHA 
costs incurred in carrying out resident participation activities.
    (c) Ineligible costs. No operating subsidy shall be paid for 
utilities, maintenance, or other items for which the homebuyer is 
responsible except, as necessary, to put a vacant home in condition for 
a subsequent family as [[Page 18226]] provided in paragraph (b)(2) of 
this section.


Sec. 950.437  Homebuyer reserves and accounts.

    (a) Refundable and nonrefundable MH reserves. The IHA shall 
establish separate refundable and nonrefundable reserves for each 
homebuyer effective on the date of occupancy.
    (1) The refundable MH reserve represents a homebuyer's interest in 
funds that may be used to purchase the home at the option of the 
homebuyer. The IHA shall credit this account with the amount of the 
homebuyer's cash MH contribution or the value of the labor, materials, 
or equipment MH contribution.
    (2) The nonrefundable MH reserve also represents a homebuyer's 
interest in funds that may be used to purchase the home at the option 
of the homebuyer. The IHA shall credit this account with the amount of 
the homebuyer's share of any credits for land contributed to the 
project and the homebuyer's share of any credit for non-land 
contributions by a terminated homebuyer.
    (b) Equity accounts. (1) Monthly equity payments account (MEPA). 
The IHA shall maintain a separate MEPA for each homebuyer. The IHA 
shall credit this account with the amount by which each required 
monthly payment exceeds the administration charge. Should the homebuyer 
fail to pay the required monthly payment, the IHA may elect to reduce 
the MEPA by the amount owed each month towards the administration 
charge, until the MEPA has been fully expended. The MEPA balance shall 
be comprised of an amount backed by cash actually received in order for 
any such reduction to be made.
    (2) Investment of equity funds. (i) Funds held by the IHA in the 
equity accounts of all the homebuyers in the project shall be invested 
in HUD-approved investments. Income earned on the investments of such 
funds shall periodically, but at least annually, be prorated and 
credited to each homebuyer's equity account in proportion to the amount 
in each such account on the date of proration. If HUD determines that 
accounts are not properly managed it may ultimately remove 
responsibility of the IHA for managing such accounts to a HUD-approved 
escrow agent.
    (ii) Notwithstanding other provisions of this subpart and subject 
to Area ONAP approval, an IHA may use a portion of the homebuyer's 
equity account for low-income housing purposes provided that a reserve 
of homebuyer's MEPA is maintained. The reserve shall be at a percentage 
established by the IHA and approved by the Area ONAP. (Interest shall 
continue to be credited to the homebuyer's account based on the MEPA 
balance and the rate of interest that would have been earned if the 
funds were invested.)
    (c) Charges for maintenance. (1) If the IHA has maintenance work 
done, the cost thereof shall be charged to the homebuyer's MEPA.
    (d) Use of reserves and accounts; nonassignability. The homebuyer 
shall have no right to receive or use the funds in any reserve or 
account except as provided in the MHO Agreement, and the homebuyer 
shall not, without approval of the IHA and HUD, assign, mortgage, or 
pledge any rights in the MHO Agreement or to any reserve or account.


Sec. 950.440  Purchase of home.

    (a) General. The IHA provides the family an opportunity to purchase 
the dwelling under the MHO Agreement (a lease with an option to 
purchase), under which the purchase price is amortized over the period 
of occupancy, in accordance with a purchase price schedule. If a 
homebuyer wants to acquire ownership in a shorter period than that 
shown on the purchase price schedule, the homebuyer may exercise his or 
her option to purchase the home on or after the date of occupancy, but 
only if the homebuyer has met all obligations under the MHO Agreement. 
The homebuyer may obtain financing, from the IHA or an outside source, 
at any time to cover the remaining purchase price.
    (b) Purchase price and purchase price schedule. (1) Initial 
purchase price. The initial purchase price of a home for a homebuyer 
shall be determined by the IHA.
    (2) Purchase price schedule. Promptly after execution of the 
construction contract, the IHA shall furnish to the homebuyer a 
statement of the initial purchase price of the home, and a purchase 
price schedule that will apply, based on amortizing the balance 
(purchase price less the MH contribution) over a period, not less than 
15 years or more than 25 as determined by the IHA, at an interest rate 
determined by the IHA. The IHA may choose to forego charging interest 
and calculate the payment with an interest rate of zero.
    (c) Purchase price schedule for subsequent homebuyer. (1) Initial 
purchase price. When a subsequent homebuyer executes the MHO Agreement, 
the purchase price for the subsequent homebuyer shall be determined by 
the IHA.
    (2) Purchase price schedule. Each subsequent homebuyer shall be 
provided with a purchase price schedule, showing the monthly declining 
purchase price over a period, not less than 15 years or more than 25 
years as determined by the IHA, at an interest rate determined by the 
IHA.
    (d) [Reserved].
    (e) Conveyance of home. (1) Purchase procedure. In accordance with 
the MHO Agreement, the IHA shall convey title to the homebuyer when the 
balance of the purchase price can be covered from the amount in the 
equity account. The homebuyer may supplement the amount in the equity 
account with reserves or any other funds of the homebuyer. 
Notwithstanding the requirement for prompt conveyance, an IHA may delay 
conveyance long enough for modernization of a paid-off unit in 
accordance with its Comprehensive Plan or CIAP application. Until title 
is conveyed, the homebuyer is responsible to make monthly payments to 
cover the monthly operating expenses for the unit.
    (2) Amounts to be paid. The purchase price shall be the amount 
shown on the purchase price schedule for the month in which the 
settlement date falls.
    (3) Settlement costs. Settlement costs shall be paid by the 
homebuyer, who may use equity accounts or reserves available for the 
purchase in accordance with paragraph (e)(4) of this section.
    (4) Disposition of homebuyer accounts and reserves. When the 
homebuyer purchases the home, the net credit balances in the 
homebuyer's equity account (as described in Sec. 950.437), supplemented 
by the nonrefundable MH reserve and then the refundable MH reserve, 
shall be applied in the following order:
    (i) For the initial payment for fire and extended coverage 
insurance on the home after conveyance, if the IHA finances purchase of 
the home in accordance with Sec. 950.443;
    (ii) For settlement costs, if the homebuyer so directs;
    (iii) For the purchase price; and
    (iv) The balance, if any, for refund to the homebuyer.
    (5) Settlement. A home shall not be conveyed until the homebuyer 
has met all the obligations under the MHO Agreement, except as provided 
in Sec. 950.440(e)(8). The settlement date shall be mutually agreed 
upon by the parties. On the settlement date, the homebuyer shall 
receive the documents necessary to convey to the homebuyer the IHA's 
right, title, and interest in the home, subject to any applicable 
restrictions or covenants as expressed in such documents. The required 
documents shall be approved by the [[Page 18227]] attorneys 
representing the IHA, and by the homebuyer or the homebuyer's attorney.
    (6) IHA investment and use of purchase price payments. After 
conveyance, all homebuyer funds held or received by the IHA from the 
sale of a unit in a project financed with grants shall be held separate 
from other project funds, and shall be used for purposes related to 
low-income housing use. Homebuyer funds held or received by the IHA 
from the sale to a homebuyer of a unit in a project financed by loans 
are subject to loan forgiveness.
    (7) Removal of home from MH program. When a home has been conveyed 
to the homebuyer, whether or not with IHA financing, the unit is 
removed from the IHA's MH project under its ACC with HUD.
    (8) Homebuyers with delinquencies. (i) If a homebuyer has a 
delinquency at the end of the amortization period, the unit is no 
longer available for assistance from HUD.
    (ii) Notwithstanding the above requirements, an IHA may complete 
emergency work and modernization work required by statute or regulation 
on a unit that is paid off but not conveyed, during the term of the 
repayment schedule.
    (iii) Upon repayment of the total delinquency, the IHA may, in 
accordance with Sec. 950.602(b)(2), complete nonemergency modernization 
work on a unit prior to conveyance.


Sec. 950.443  IHA homeownership financing.

    The IHA may offer a form of homeownership financing, similar to a 
purchase money mortgage. The IHA shall set standards for determining 
eligibility and developing promissory notes, mortgages, and other 
financial instruments necessary to carry out the transaction.


Sec. 950.446  Termination of MHO Agreement.

    (a) Termination upon breach. (1) In the event the homebuyer fails 
to comply with any of the obligations under the MHO Agreement, the IHA 
may terminate the MHO Agreement by written notice to the homebuyer, 
enforced by eviction procedures applicable to landlord-tenant 
relationships.
    (2) Misrepresentation or withholding of information when applying 
for admission or in connection with any subsequent reexamination of 
income and family composition constitutes a breach of the homebuyer's 
obligations under the MHO Agreement. ``Termination,'' as used in the 
MHO Agreement, does not include acquisition of ownership by the 
homebuyer.
    (b) Notice of termination of MHO Agreement by the IHA, right of 
homebuyer to respond. Termination of the MHO Agreement by the IHA for 
any reason shall be by written notice of termination. Such notice shall 
be in compliance with the terms of the MHO Agreement and, in all cases, 
shall afford a fair and reasonable opportunity to have the homebuyer's 
response heard and considered by the IHA. Such procedures shall comply 
with the Indian Civil Rights Act, if applicable, and shall incorporate 
all the steps and provisions needed to comply with State, local, or 
tribal law, with the least possible delay. (See Sec. 950.340.)
    (c) Termination of MHO Agreement by homebuyer. The homebuyer may 
terminate the MHO Agreement by giving the IHA written notice in 
accordance with the Agreement. If the homebuyer vacates the home 
without notice to the IHA, the homebuyer shall remain subject to the 
obligations of the MHO Agreement, including the obligation to make 
monthly payments, until the IHA terminates the MHO Agreement in 
writing. Notice of the termination shall be communicated by the IHA to 
the homebuyer to the extent feasible and the termination shall be 
effective on the date stated in the notice.
    (d) Disposition of funds upon termination of the MHO Agreement. If 
the MHO Agreement is terminated, the balances in the homebuyer accounts 
and reserves shall be disposed of as follows:
    (1) The MEPA shall be charged with:
    (i) Any maintenance and replacement cost incurred by the IHA to 
prepare the home for the next occupant;
    (ii) Any amounts the homebuyer owes the IHA, including required 
monthly payments;
    (iii) The required monthly payment for the period the home is 
vacant, not to exceed 60 days from the date of receipt of the notice of 
termination, or if the homebuyer vacates the home without notice to the 
IHA, for the period ending with the effective date of termination by 
the IHA; and
    (iv) The cost of securing a vacant unit, the cost of notification 
and associated termination tasks, and the cost of storage and/or 
disposition of personal property.
    (2) If, after making the charges in accordance with paragraph 
(d)(1) of this section, there is a debit balance in the MEPA, the IHA 
shall charge that debit balance first to the refundable MH reserve, and 
second to the nonrefundable MH reserve, to the extent of the credit 
balances in these reserves and account. If the debit balance in the 
MEPA exceeds the sum of the credit balances in these reserves and 
account, the homebuyer shall be required to pay to the IHA the amount 
of the excess.
    (3) If, after making the charges in accordance with paragraph 
(d)(1) of this section, there is a credit balance in the MEPA, this 
amount shall be refunded.
    (4) Any credit balance remaining in the refundable MH reserve after 
making the charges described in paragraph (d)(2) of this section shall 
be refunded to the homebuyer.
    (5) Any credit balance remaining in the nonrefundable MH reserve 
after making the charges described in paragraph (d)(2) of this section 
shall be retained by the IHA for use by the subsequent homebuyer.
    (e) Settlement upon termination; time for settlement. Settlement 
with the homebuyer following a termination shall be made as promptly as 
possible after all charges provided in paragraph (d) of this section 
have been determined and the IHA has given the homebuyer a statement of 
such charges. The homebuyer may obtain settlement before determination 
of the actual cost of any maintenance required to put the home in 
satisfactory condition for the next occupant, if the homebuyer is 
willing to accept the IHA's estimate of the amount of such cost. In 
such cases, the amounts to be charged for maintenance shall be based on 
the IHA's estimate of the cost thereof.
    (f) Responsibility of IHA to terminate. (1) The IHA is responsible 
for taking appropriate action with respect to any noncompliance with 
the MHO Agreement by the homebuyer. In cases of noncompliance that are 
not corrected as provided further in this paragraph (f), it is the 
responsibility of the IHA to terminate the MHO Agreement in accordance 
with the provisions of this section and to institute eviction 
proceedings against the occupant.
    (2) As promptly as possible after a noncompliance comes to the 
attention of the IHA, the IHA shall discuss the matter with the 
homebuyer and give the homebuyer an opportunity to identify any 
extenuating circumstances or complaints that may exist. A plan of 
action shall be agreed upon that will specify how the homebuyer will 
come into compliance, as well as any actions by the IHA that may be 
appropriate. This plan shall be in writing and signed by both parties.
    (3) Compliance with the plan shall be checked by the IHA not later 
than 30 days from the date thereof. In the event of refusal by the 
homebuyer to agree to such a plan or failure by the homebuyer to comply 
with the plan, the IHA shall issue a notice of termination of the MHO 
Agreement and institute eviction procedures against the homebuyer in 
[[Page 18228]] accordance with the provisions of this section on the 
basis of the noncompliance with the MHO Agreement.
    (4) A record of meetings with the homebuyer, written plans of 
action agreed upon, and all other related steps taken in accordance 
with paragraph (f) of this section shall be maintained by the IHA for 
inspection by HUD.
    (g) Subsequent use of unit. After termination of a homebuyer's 
interest in the unit, it remains as part of the MH project under the 
ACC. The IHA shall follow its policies for selection of a subsequent 
homebuyer for the unit under the MH program. (See Sec. 950.449(g) for 
use of unit if no qualified subsequent homebuyer is available.)


Sec. 950.449  Succession.

    (a) Definition of ``event.'' ``Event'' means the death, mental 
incapacity, or other conditions as determined by the IHA, of all of the 
persons who have executed the MHO Agreement as homebuyers.
    (b) Designation of successor by homebuyer. A homebuyer may 
designate a successor who, at the time of the event, would assume the 
status of homebuyer, provided that at the time of the event, the 
successor meets the conditions established by the IHA.
    (c) Succession by persons designated by homebuyer. Upon occurrence 
of an event, the person designated as the successor shall succeed to 
the former homebuyer's rights and responsibilities under the MHO 
Agreement if the designated successor meets the criteria established by 
the IHA.
    (d) Designation of successor by IHA. If at the time of the event 
there is no successor designated by the homebuyer, the IHA may 
designate another family member, in accordance with its occupancy 
policy.
    (e) Occupancy by appointed guardian. If at the time of the event 
there is no qualified successor designated by the homebuyer or by the 
IHA, and a minor child or children of the homebuyer are living in the 
home, the IHA may, in order to protect their continued occupancy and 
opportunity for acquiring ownership of the home, approve as occupant of 
the home an appropriate adult who has been appointed legal guardian of 
the children with a duty to perform the obligations of the MHO 
Agreement in their interest and behalf.
    (f) Succession and occupancy on trust land. In the case of a home 
on trust land, a person who is prohibited by law from succeeding to the 
IHA's interest on such land may, nevertheless, continue in occupancy 
with all the rights, obligations, and benefits of the MHO Agreement, 
modified to conform to restrictions on succession to the land.
    (g) Termination in absence of qualified successor. If there is no 
qualified successor in accordance with the IHA's approved Admissions 
and Occupancy policy, the IHA shall terminate the MHO Agreement and 
select a subsequent homebuyer from the top of the waiting list to 
occupy the unit under a new MHO Agreement. If a new homebuyer is 
unavailable or if the home cannot continue to be used for low-income 
housing in accordance with the Mutual Help program, the IHA may submit 
an application to HUD to convert the unit to the rental program in 
accordance with Sec. 950.458 or to approve a disposition of the home, 
in accordance with subpart M of this part.


Sec. 950.452  Miscellaneous.

    (a) Annual statement to homebuyer. The IHA shall provide an annual 
statement to the homebuyer that sets forth the credits and debits to 
the homebuyer's equity accounts and reserves during the year and the 
balance in each account at the end of each IHA fiscal year. The 
statement shall also set forth the remaining balance of the purchase 
price.
    (b) Insurance before transfer of ownership, repair, or rebuilding. 
(1) Insurance. The IHA shall carry all insurance prescribed by HUD, 
including fire and extended coverage insurance upon the home.
    (2) Repair or rebuilding. In the event the home is damaged or 
destroyed by fire or other casualty, the IHA shall consult with the 
homebuyers as to whether the home shall be repaired or rebuilt. The IHA 
shall use the insurance proceeds to have the home repaired or rebuilt 
unless there is good reason for not doing so. In the event the IHA 
determines that the home should not be repaired or rebuilt and the 
homebuyer disagrees, the matter shall be submitted to the Area ONAP for 
final determination. If the final determination is that the home should 
not be repaired or rebuilt, the IHA shall terminate the MHO Agreement, 
and the homebuyer's obligation to make required monthly payments shall 
be deemed to have terminated as of the date of the damage or 
destruction.
    (3) Suspension of payments. In the event of termination of a MHO 
Agreement because of damage or destruction of the home, or if the home 
must be vacated during the repair period, the IHA will use its best 
efforts to assist in relocating the homebuyer. If the home must be 
vacated during the repair period, required monthly payments shall be 
suspended during the vacancy period.
    (c) Notices. Any notices by the IHA to the homebuyer required under 
the MHO Agreement or by law shall be delivered in writing to the 
homebuyer personally or to any adult member of the homebuyer's family 
residing in the home, or shall be sent by certified mail, return 
receipt requested, properly addressed, postage prepaid. Notice to the 
IHA shall be in writing and either delivered to an IHA employee at the 
office of the IHA, or sent to the IHA by certified mail, return receipt 
requested, properly addressed, postage prepaid.


Sec. 950.453  Counseling of homebuyers.

    (a) General. (1) The IHA shall provide counseling to homebuyers in 
accordance with this section. The purpose of the counseling program 
shall be to develop:
    (i) A full understanding by homebuyers of their responsibilities as 
participants in the MH Project;
    (ii) Ability on their part to carry out these responsibilities; and
    (iii) A cooperative relationship with the other homebuyers.
    (2) All homebuyers shall be required to participate in and 
cooperate fully with all official preoccupancy and postoccupancy 
counseling activities. Failure without good cause to participate in the 
program shall constitute a breach of the MHO Agreement.
    (b) The IHA shall submit to the HUD Area ONAP a copy of its 
counseling program with its request for funding for approval.
    (c) Progress reports. An IHA shall submit an annual progress report 
to the Area ONAP within 45 days of the end of its fiscal year or such 
later date as may be approved by the Area ONAP.


Sec. 950.455  Conversion of rental projects.

    (a) Applicability. Notwithstanding other provisions of this part, 
an IHA may apply to the HUD Area ONAP for approval to convert any or 
all of the units in an existing rental project to the MH program.
    (b) Minimum requirements. (1) In order to be eligible for 
conversion, the units shall have individually metered utilities and be 
in decent, safe, and sanitary condition. If the units are not decent, 
safe, and sanitary, the IHA shall submit a plan to correct unit 
deficiencies.
    (2) Tenants or other applicants to be homebuyers of the proposed 
conversion units shall qualify for the program under Sec. 950.416(b). 
The entire MH contribution required of the homebuyer 
[[Page 18229]] shall be made before the rental unit occupied by a 
tenant can be converted to the MH program.
    (3) In the case of conversion of apartments or row houses to 
condominium or cooperative ownership, all units in a structure shall be 
converted, with all occupants at the time of the application qualified, 
in accordance with paragraph (b)(2) of this section. Any occupants who 
do not qualify or desire to convert shall be satisfactorily relocated 
and replaced with qualified occupants before application for conversion 
of the structure.
    (c) Application process. The IHA shall submit a request for 
conversion to the HUD Area ONAP. The HUD Area ONAP shall review the 
application for legal sufficiency; tribal acceptance; demonstration of 
family interest; evidence that units are habitable, safe, and sanitary; 
family qualifications as discussed in paragraph (b)(2) of this section; 
and financial feasibility. If the IHA does not propose to convert all 
units in a project, the IHA's ability to operate the remaining rental 
units shall not be adversely affected.


Sec. 950.458  Conversion of Mutual Help projects to rental program.

    (a) Applicability. Notwithstanding other provisions of this part, 
an IHA may apply to the HUD Area ONAP for approval to convert any or 
all Mutual Help project units to the rental program, whenever a 
homebuyer or homebuyers have lost the potential for ownership due to 
the inability to meet the cost of their homebuyer responsibilities.
    (b) Minimum requirements. (1) The remaining balances in any reserve 
accounts shall be accounted for individually for each unit converted in 
a manner prescribed by HUD.
    (2) The balance remaining in the MEPA, if any, is applied first to 
outstanding tenant accounts receivable, then to repair of homebuyer 
maintenance items, and finally returned to the homebuyer.
    (c) Application process. The IHA shall submit a request for 
conversion to the HUD Area ONAP. The HUD Area ONAP shall review the 
application for legal sufficiency, tribal acceptance, demonstration of 
family interest, and financial feasibility. If the IHA does not propose 
to convert all units in a project, the IHA's ability to operate the 
remaining units shall not be adversely affected.

Subpart F--Self-Help Development in the Mutual Help Homeownership 
Opportunity Program


Sec. 950.470  Purpose and applicability.

    (a) Purpose. The purpose of the Self-Help (SH) program is to 
provide an alternate method of developing units that will be less 
costly than other methods of development, will engender community pride 
and cooperation, and will provide training in construction skills that 
will have lasting value to participants. If an IHA is interested in 
pursuing SH development, it organizes a small group of families (six to 
ten) to build a substantial portion of the homes for all the families 
in the group, with technical assistance, supervision, and materials 
provided by the IHA, augmented by skilled labor obtained under 
contract. The participants are families who qualify for participation 
in the Mutual Help Homeownership Opportunity (MH) program, who have the 
ability to furnish their share of the required labor and who agree to 
participate in the cooperative effort to build homes for all members of 
the group.
    (b) Applicability. Any IHA eligible for development funds may 
submit an application for a SH MH project.


Sec. 950.475  Basic requirements.

    (a) Contracts. A SH MH project also involves three basic contracts 
in a form approved by HUD: an ACC for a MH project executed by HUD and 
the IHA after approval of the SH project application and after HUD 
approval of the development program, an SH agreement executed by the 
participating families and the IHA before construction begins, and a 
Mutual Help and Occupancy Agreement executed by the participating 
families and the IHA after construction completion.
    (b) Family participation. Each family shall show the desire to work 
with other families in building their own homes and shall have the time 
to contribute the labor necessary to perform a substantial number of 
the tasks required in the construction of the homes. Each family shall 
sign an SH agreement with the IHA.
    (c) IHA capacity. The IHA shall have the capacity to provide for 
the financial, legal, administrative, and technical responsibilities of 
the program. The IHA is required to provide assurance that the project 
will be completed, in the form of a letter of credit or its equivalent 
in an amount equal to 10 percent of the estimated Total Development 
Cost Standard.
    (d) Funding. The funding for technical training and supervision of 
participating families will be provided through development funds, and 
the cost will be included in the Total Development Cost (TDC) of the 
project. The cost of construction supervision and technical assistance 
shall generally be no more than 15 percent, but may not exceed 20 
percent of the TDC of these SH homes.
    (e) Applicability of Indian preference. In the selection of 
contractors to perform construction supervision, skilled labor, or 
other work under this program, the provisions concerning preference for 
Indians (Sec. 950.175) apply. In the selection of participating 
families, the provisions of Sec. 950.416 apply.
    (f) Building code. The building code used by the IHA in accordance 
with Sec. 950.255 will apply to the homes constructed under this 
program.


Sec. 950.480  Self-Help agreement.

    (a) Timing. The obligations under the Self-Help agreement, executed 
by the IHA and the families in a group selected by the IHA to 
participate in a Self-Help program, will be contingent upon HUD's 
approval of the development program. Each family will be obligated to 
be available to commence work at a time that fits the IHA's schedule 
for completion of prior tasks by skilled labor, but generally within 
120 days of HUD's approval of the IHA's SH project development program, 
and to complete the work within a period not to exceed two years.
    (b) Pre-construction period. The SH agreement will provide that, 
before construction begins, the participating families will be required 
to organize themselves, with the assistance of the IHA, and to 
participate in construction skills training.
    (c) Labor contribution. (1) The SH agreement will specify the 
construction tasks to be performed by the participating families as 
their labor contribution, and the construction tasks to be performed 
under contract by skilled laborers. The number of tasks to be performed 
by the participating families shall constitute the vast majority of the 
tasks.
    (2) The labor performed is not subject to the labor standards 
specified in section 12 of the United States Housing Act of 1937 (42 
U.S.C. 1437j).
    (3) The SH agreement will specify the circumstances under which it 
may be terminated.
    (d) Insurance requirements. The SH agreement will provide that the 
families waive any liability claim against the IHA for any injury that 
might occur during the development of the project.
    (e) Standard provisions. The SH agreement will include provisions 
[[Page 18230]] prohibiting kickbacks and conflicts of interest.
    (f) Completion. The SH agreement will provide that upon successful 
completion of the family's obligations under it, the family and the IHA 
will execute a Mutual Help and Occupancy Agreement.


Sec. 950.485  Application.

    (a) General. The application for a SH development method of Mutual 
Help project shall comply with the general requirements of 
Sec. 950.225.
    (b) Need for Self-Help housing. Evidence of the need for SH housing 
shall be submitted, including the following:
    (1) The names, addresses, and number of persons in the household, 
and annual incomes of the families selected to participate;
    (2) The SH agreement;
    (3) Certification by the IHA that the participating families are 
believed to have the time and ability to fulfill their obligations 
under the SH agreement; and
    (4) Such information as the incomes and sizes of other interested 
families who appear to be eligible.
    (c) Ability of IHA to administer SH housing. The IHA shall 
demonstrate its ability to administer the program by identifying the 
staff members who will supervise construction and provide technical 
assistance, and describing their experience. If the IHA plans to 
contract with an outside entity to perform these functions, it shall 
follow the requirements concerning Indian preference. Regardless of the 
identity of the firm selected to perform this function, the IHA should 
identify the firm and briefly describe its experience. The IHA also 
shall demonstrate its capacity to administer the program, in accordance 
with Sec. 950.475.


Sec. 950.490  Development program.

    (a) In addition to complying with the requirements of Sec. 950.260, 
the IHA's development program for a SH project submitted to HUD shall 
include the following:
    (1) IHA coordination plan. The plan for organizing and implementing 
the development, including elements comparable to those covered in the 
standard Mutual Help construction contract, and the method of 
coordinating work of participating families and skilled contractors.
    (2) Difference in cost. A description of how the development cost 
differs from the cost for a project constructed under a construction 
contract. This difference should reflect the labor contribution, after 
considering the construction supervision cost.
    (3) Special provisions for acquisition with rehabilitation 
projects. A description of the repair or rehabilitation work needed on 
each home to be acquired. The work needed on all the homes should be 
reasonably comparable in the amount of labor exchange that is required. 
The estimated number of hours of labor and a description of the work to 
be done shall be provided.
    (4) Certification of participation. Certification by the IHA that 
the participating families have signed the SH agreement and remain able 
to fulfill their obligations under the SH agreement.
    (5) Changes since application stage. Statement of any changes in 
the data submitted in the application.
    (b) HUD will review the development program submitted by an IHA for 
a SH project with particular attention to the elements listed in 
paragraph (a) of this section.


Sec. 950.495  Default of Self-Help agreement.

    (a) If the IHA determines that a participating family is failing to 
provide its labor contribution, as required in accordance with its SH 
agreement, it shall counsel the family about its obligations and 
encourage fulfillment of its responsibilities. If the failure of the 
family is jeopardizing the progress of the project, the IHA shall 
declare the family in default and terminate its participation in the 
project. Upon termination of the participation of one family, the IHA 
shall move expeditiously to select an alternate family to take over the 
responsibilities of the terminated family. If another qualified family 
cannot be found to assume the responsibilities of the terminated 
family, the unit may be converted to some other development method 
(e.g., force account, conventional bid, etc.) under the MH program.
    (b) If the IHA determines that an entire group is unable to 
continue its work to completion of construction, the IHA shall first 
counsel the group about its obligations and encourage fulfillment of 
its responsibilities. If counseling is unsuccessful in bringing about 
satisfactory progress toward completion, the IHA shall declare the 
families in default and convert the project to a regular MH project. 
The IHA's plan for completing the project shall be submitted to HUD for 
review and counsel prior to terminating the Self-Help project. 
Availability of additional HUD funding for this purpose is not assured.

Subpart G--Turnkey III Program


Sec. 950.501  Introduction.

    (a) Purpose. This subpart sets forth the requirements of the 
Turnkey III Homeownership Opportunities Program, which is administered 
by HUD as part of the Indian Housing Program under the United States 
Housing Act of 1937. This part covers the management, operation, 
conversion, and sale of existing Turnkey III homes that remain in 
Indian housing authority (IHA) ownership.
    (b) Program framework. (1) All Turnkey III projects shall be 
operated in accordance with an executed Annual Contributions Contract 
(ACC), which includes the ``Special Provisions for Turnkey III 
Homeownership Opportunity Project'' and Homebuyer Ownership Opportunity 
Agreements (Homebuyer Agreement) between the IHA and the Homebuyer.
    (2) A Turnkey III development may only include units that are to be 
operated for the purpose of providing homeownership opportunities for 
eligible low-income families pursuant to this part and the special 
Turnkey III provisions of the ACC, including units occupied temporarily 
by former homebuyers who, as a result of losing homeownership 
potential, have been transferred to rental status in place, pending the 
availability of a suitable rental unit. When a homebuyer is converted 
to rental status while remaining in the same unit, pending availability 
of a satisfactory rental unit or approval of a request to convert the 
unit in accordance with Sec. 950.503, the unit remains under the 
Turnkey III project.
    (3) An IHA may establish any policies, procedures, and requirements 
that are not contrary to the ACC, this part, other applicable Federal, 
State, and local statutes and regulations, and the rights of homebuyers 
under existing homebuyer agreements.
    (c) Program overview. The Turnkey III Program provides 
homeownership opportunities for eligible low-income families. The 
program uses a lease-purchase arrangement, whereby the homebuyer family 
initially takes occupancy of a rental basis, under a homebuyer 
agreement which constitutes a lease with an option to purchase. The 
purchase price is set at the time of initial occupancy. During the 
period of rental tenancy, the homebuyer makes monthly rental payments 
based on a percentage of family income and is responsible for routine 
maintenance. A portion of the homebuyer monthly payment is used to 
establish an Earned Home Payments Account (EHPA) and a 
[[Page 18231]] Nonroutine Maintenance Reserve (NRMR). To the extent 
that these funds are not used by the IHA to perform maintenance 
relating to the home, the funds will be available to apply to the 
purchase price at the time the homebuyer is in a position to exercise 
the option to purchase. At closing, the homebuyer pays the IHA the 
balance of the purchase price due (or may be permitted by the IHA to 
finance all or a portion of that amount through a purchase money 
mortgage) and the IHA deeds the home to the homebuyer.
    (d) Contracts, agreements, other documents. All contracts, 
agreements, and other documents referred to in this subpart shall be in 
a form approved by HUD, and changes shall be made with the approval of 
the Area ONAP.


Sec. 950.503  Conversion of Turnkey III developments.

    (a) Applicability. Notwithstanding other provisions of this part, 
an IHA may apply to the Area ONAP for approval to convert any or all of 
the units in an existing Turnkey III development to the rental or MH 
program.
    (b) Minimum requirements. (1) In order to be eligible for 
conversion, the units shall have individually metered utilities and be 
in decent, safe, and sanitary condition. If the units are not decent, 
safe, and sanitary, the IHA shall submit a plan to correct unit 
deficiencies.
    (2) For conversion to MH, applicants shall qualify for the program 
under Sec. 950.416(b). The entire MH contribution required of the 
homebuyer shall be made before the Turnkey III unit occupied by a 
tenant can be converted to the MH program. In determining the purchase 
price and term, the homebuyer may receive credit for the period of time 
they have been residing in a Turnkey III homeownership unit.
    (c) Application process. The IHA shall submit a request for 
conversion to the HUD Area ONAP. The HUD Area ONAP shall review the 
application for legal sufficiency, tribal acceptance, demonstration of 
family interest, and financial feasibility. If the IHA does not propose 
to convert all units in a development, the IHA's ability to operate the 
remaining Turnkey III units shall not be adversely affected.


Sec. 950.505  Eligibility and selection of Turnkey III homebuyers.

    (a) Applications. Families who wish to be considered for Turnkey 
III shall apply specifically for that program, and a separate list of 
eligible applicants for Turnkey III shall be maintained. Applications 
shall be dated as received. The submission of an application for 
Turnkey III by a family that is also an applicant for conventional 
rental housing or that is an occupant of such housing shall in no way 
affect its status with regard to such rental housing. A family shall 
not lose its place on the waiting list until it is selected for Turnkey 
III and shall not receive any different treatment or consideration with 
respect to other rental housing programs due to having applied for 
Turnkey III. In order to be considered for selection, a family shall be 
determined to meet at least all of the following standards of potential 
for homeownership:
    (1) Sufficient income to cover the EHPA, NRMR, and the estimated 
cost of utilities with its required monthly payment (see Sec. 950.315); 
and
    (2) Ability to meet all obligations under the Homebuyer Agreement.
    (b) Selection and notification of homebuyers. Homebuyers shall be 
selected from those families determined to have potential for 
homeownership. Such selection shall be made in sequence from the 
waiting list.


Sec. 950.507  Homebuyer Ownership Opportunity Agreements (HOOA).

    (a) General. The HOOA shall be executed between the IHA and the 
homebuyer as a condition for occupancy of a Turnkey III unit.
    (b) Pre-Existing Agreements. (1) Turnkey III Projects in operation 
on the effective date of this subpart shall be governed by this 
subpart, except to the extent that the terms of any pre-existing 
Homebuyer Agreements shall govern the relationship of an IHA and 
occupant until the termination or cancellation of such agreement(s). If 
the agreement establishes a maximum or a minimum monthly payment, the 
terms of the agreement shall govern. However, in no event will the 
monthly payment charged exceed the Total Tenant Payment determined in 
accordance with subpart D of this part.
    (2) Pre-existing Homebuyer Agreements that determined the required 
monthly payment in accordance with a ``Schedule'' developed by the IHA 
and approved by HUD should continue to determine the monthly payment in 
accordance with the schedule. This schedule is determined as follows:
    (i) The operating budget for the project is based on estimated 
expenses for a given period of time. The amount needed to operate a 
particular project is called the break-even amount (see 
Sec. 950.513(a)). This is comprised of the Operating Expenses, the 
total amount needed for EHPA, and the total amount needed for NRMR.
    (ii) The aggregate of all homebuyers' incomes is determined. (If no 
definition of income is stated in the homebuyer's contract, the 
definition in subpart A of this part is used.)
    (iii) The percentage of aggregated income needed to cover 110 
percent of the break-even amount is determined. This percentage is the 
one that appears in the schedule.


Sec. 950.509  Responsibilities of homebuyer.

    (a) Repair, maintenance, and use of home. The homebuyer shall be 
responsible for the routine maintenance of the home to the satisfaction 
of the homebuyers' association (HBA) and the IHA.
    (b) Repair of damage. In addition to the obligation for routine 
maintenance, the homebuyer shall be responsible for repair of any 
damage caused by the homebuyer, other occupants, or visitors.
    (c) Care of home. A homebuyer shall keep the home in a sanitary 
condition; cooperate with the IHA and the HBA in keeping and 
maintaining the common areas and property, including fixtures and 
equipment, in good condition and appearance; and follow all rules of 
the IHA and the HBA concerning the use and care of the dwellings and 
the common areas and property.
    (d) Inspections. A homebuyer shall agree to permit officials, 
employees, or agents of the IHA and the HBA to inspect the home at 
reasonable hours and intervals in accordance with rules established by 
the IHA and the HBA.
    (e) Use of home. (1) A homebuyer shall not:
    (i) Sublet the home without the prior written approval of the IHA;
    (ii) Use or occupy the home for any unlawful purpose; or
    (iii) Provide accommodations (unless approved by the HBA and the 
IHA) to boarders or lodgers.
    (2) The homebuyer shall agree to use the home primarily as a place 
to live for the family (as identified in the initial application or by 
subsequent amendment with the approval of the IHA).
    (f) Obligations with respect to other persons and property. Neither 
the homebuyer nor any other member of the family shall interfere with 
the rights of other occupants of the development, damage the common 
property or the property of others, or create physical hazards.
    (g) Structural changes. A homebuyer shall not make any structural 
changes in or additions to the home unless the IHA has determined that 
such change would not: [[Page 18232]] 
    (1) Impair the value of the unit, the surrounding units, or the 
development as a whole; or
    (2) Affect the use of the home for residential purposes;
    (h) Statements of condition and repair. When each homebuyer moves 
in, the IHA shall inspect the home and shall give the homebuyer a 
written statement, to be signed by the IHA and the homebuyer, of the 
condition of the home and the equipment in it. Should the homebuyer 
vacate the home, the IHA shall inspect it and give the homebuyer a 
written statement of the repairs and other work, if any, required to 
put the home in good condition for the next occupant. The homebuyer or 
the homebuyer's representative and a representative of the HBA may join 
in any inspections by the IHA.
    (i) Maintenance of common property. The homebuyer may participate 
in nonroutine maintenance of the home and in maintenance of common 
property.
    (j) Assignment and survivorship. Until such time as the homebuyer 
obtains title to the home, the following conditions apply:
    (1) A homebuyer shall not assign any right or interest in the home 
or any interest under the Homebuyer Ownership Opportunity Agreement 
without the prior written approval of the IHA;
    (2) In the event of death, mental incapacity, or other condition as 
determined by the IHA, the person designated as the successor in the 
Homebuyer Ownership Opportunity Agreement shall succeed to the rights 
and responsibilities under the agreement if that person meets the 
conditions established by the IHA. Such person shall be designated by 
the homebuyer. If there is no such designation, or the designee does 
not meet the standards of potential for homeownership, the IHA may 
consider as the homebuyer any family member who meets the standards of 
potential for homeownership;
    (3) If there is no qualified successor in accordance with paragraph 
(j)(2) of this section, and no minor child of the homebuyer's family is 
in occupancy, the IHA shall terminate the agreement and select another 
family. Where a minor child or children of the homebuyer's family is in 
occupancy, and an appropriate adult(s) who has been appointed legal 
guardian of the children is able and willing to perform the obligations 
of the Homebuyer Ownership Opportunity Agreement in their interest and 
on their behalf, then in order to protect continued occupancy and 
opportunity for acquisition of ownership of the home, the IHA may 
approve the guardian(s) as occupants of the unit with a duty to fulfill 
the homebuyer obligations under the agreement.


Sec. 950.511  Homebuyers' association (HBA).

    (a) General. (1) The homebuyers' association (HBA) is an 
incorporated organization composed of all homebuyers and homeowners. 
Each Turnkey III development shall have an HBA, unless the homes are on 
scattered sites (noncontiguous lots throughout a multi-block area with 
no common property), or the number of homes in the development may be 
too few to support an HBA. For such cases, a modified form of 
homebuyers association or a less formal organization may be desirable. 
This decision shall be made jointly by the IHA and the homebuyers.
    (2) The functions of the HBA shall be set forth in its articles of 
incorporation and by-laws. The IHA shall assist the HBA in its 
organization and operation to the extent possible.
    (b) Funding. The IHA may provide noncash contributions to the HBA, 
such as office space, as well as cash contributions, which shall be 
provided for in the annual operating budgets of the IHA. The cash 
contributions shall be in an amount provided for in the IHA budget and 
shall be subject to any HUD restrictions on funding.


Sec. 950.512  Homeowner's association (HOA).

    A ``homeowners' association'' means an association comprised of 
homeowners, to which the IHA conveys ownership of common property, and 
which thereafter has responsibilities with respect to the common 
property. Only residents who have acquired title to their homes are 
members of the HOA.


Sec. 950.513  Break-even amount and application of monthly payments.

    (a) Definition. The term ``break-even amount'' as used herein means 
the minimum average monthly amount required to provide funds for the 
amounts budgeted for operating expenses, the EHPA, and the NRMR. A 
separate break-even amount is established for each size and type of 
dwelling unit, as well as for the project as a whole. The break-even 
amount for EHPA and NRMR will vary by size and type of dwelling unit. 
Similar variations may occur for operating expenses. The break-even 
amount does not include the monthly allowance for utilities that the 
homebuyer pays directly.
    (b) Application of monthly payments. The IHA shall apply the 
homebuyer's monthly payment as follows:
    (1) To the credit of the homebuyer's EHPA;
    (2) To the credit of the homebuyer's NRMR; and
    (3) For payment of monthly operating expense, including 
contributions to the operating reserve.
    (c) Excess over break-even. When the homebuyer's required monthly 
payment exceeds the applicable break-even amount, the excess shall 
constitute additional project income and shall be deposited and used in 
the same manner as other project income.
    (d) Deficit in monthly payment. When the homebuyer's required 
monthly payment is less than the applicable break-even amount, the 
deficit shall be applied as a reduction of that portion of the monthly 
payment designated for operating expense (i.e., as a reduction of 
project income). In all cases, the homebuyer payment shall be 
sufficient to cover the EHPA and the NRMR, which shall be credited with 
the amount included in the break-even amount for these accounts.


Sec. 950.515  Monthly operating expense.

    (a) Definition and categories of monthly operating expense. The 
term ``monthly operating expense'' means the monthly amount needed for 
the following purposes:
    (1) Administration. Administrative salaries, travel, legal 
expenses, office supplies, etc.;
    (2) Homebuyer services. IHA expenses in the achievement of social 
goals, including costs such as salaries, publications, payments to the 
HBA to assist its operation, contracts, and other costs;
    (3) Utilities. Those utilities (such as water), if any, to be 
furnished by the IHA as part of operating expense;
    (4) Routine maintenance of common property. For community building, 
grounds, and other common areas, if any. The amount required for 
routine maintenance of common property depends upon the type of common 
property included in the development and the extent of the IHA's 
responsibility for maintenance;
    (5) Protective services. The cost of supplemental protective 
services paid by the IHA for the protection of persons and property;
    (6) General expense. Premiums for fire and other insurance, 
payments in lieu of taxes to the local taxing body, collection losses, 
payroll taxes, etc.;
    (7) Nonroutine maintenance of common property (contribution to 
operating reserve). Extraordinary maintenance of equipment applicable 
to the community building and grounds, [[Page 18233]] and unanticipated 
items for nondwelling structures.
    (b) Monthly operating expense rate. (1) The monthly operating 
expense rate to be included in the break-even amount for each fiscal 
year shall be established on the basis of the IHA's operating budget 
for that fiscal year. The operating budget may be revised during the 
course of the fiscal year in accordance with HUD regulations, 
contracts, and handbooks.
    (2) If it is subsequently determined that the actual operating 
expense for a fiscal year was more or less than the amount provided by 
the monthly operating expense established for that fiscal year, the 
rate of monthly operating expenses to be established for the next 
fiscal year may be adjusted to account for the differences.
    (c) Posting of monthly operating expense statement. A statement 
showing the budgeted monthly amount allocated in the current operating 
expense category shall be provided to the HBA, and copies shall be 
provided to homebuyers upon request.


Sec. 950.517  Earned Home Payments Account (EHPA).

    (a) Credits to the account. The IHA shall establish and maintain a 
separate EHPA for each homebuyer. Since the homebuyer is responsible 
for maintaining the home, a portion of the required monthly payment 
equal to the IHA's estimate of the monthly cost for such routine 
maintenance, taking into consideration the relative type and size of 
the homeowner's home, shall be set aside in the EHPA. In addition, this 
account shall be credited with:
    (1) Any voluntary payments made pursuant to paragraph (f) of this 
section; and
    (2) Any amount earned through the performance of maintenance as 
provided in paragraph (c) of this section.
    (b) Charges to the account. (1) If for any reason the homebuyer is 
unable or fails to perform any item of required maintenance, the IHA 
shall arrange to have the work done in accordance with the procedures 
established by the IHA and the HBA, and the cost thereof shall be 
charged to the homebuyer's EHPA. Inspections of the home shall be made 
jointly by the IHA and HBA.
    (2) To the extent NRMR expense is attributable to the negligence of 
the homebuyer as determined by the HBA and approved by the IHA (see 
Sec. 950.519), the cost thereof shall be charged to the EHPA.
    (c) Additional equity through maintenance of common property.
    Homebuyers may earn addition EHPA credits by providing in whole or 
in part any of the maintenance necessary to the common property of the 
development. When such maintenance is to be provided by the homebuyer, 
this may be done and credit earned therefore only pursuant to a prior 
written agreement between the homebuyer and the IHA (or the homeowners' 
association, depending on who has responsibility for maintenance of the 
property involved), covering the nature and scope of the work and the 
amount of credit the homebuyer is to receive. In such cases, the agreed 
amount shall be charged to the appropriate maintenance account and 
credited to the homebuyer's EHPA upon completion of the work.
    (d) Investment of excess. (1) When the aggregate amount of all EHPA 
balances exceeds the estimated reserve requirements for 90 days, the 
IHA shall notify the HBA and shall invest the excess in Federally 
insured savings accounts, Federally insured credit unions, and/or 
securities approved by HUD, and in accordance with any recommendations 
made by the HBA. If the HBA wishes to participate in the investment 
program, it should submit periodically to the IHA a list of HUD-
approved securities, bonds, or obligations that the association 
recommends for investment by the IHA of the funds in the EHPAs. 
Interest earned on the investment of such funds shall be prorated and 
credited to each homebuyer's EHPA in proportion to the amount in each 
such reserve account.
    (2)(i) Periodically, but not less often than annually, the IHA 
shall prepare a statement showing:
    (A) The aggregate amount of all EHPA balances,
    (B) The aggregate amount of investments (savings accounts and/or 
securities) held for the account of all the homebuyers' EHPAs, and
    (C) The aggregate uninvested balance of all the homebuyers' EHPAs.
    (ii) This statement shall be made available to any authorized 
representative of the HBA.
    (e) Voluntary payments. To enable the homebuyer to acquire title to 
the home within a shorter period, the homebuyer may make payments over 
and above the required monthly payments. Such voluntary payments shall 
be credited to the homebuyer's EHPA.
    (f) Delinquent monthly payments. Under exceptional circumstances as 
determined by the HBA and the IHA, a homebuyer's EHPA may be used to 
pay the delinquent required monthly payments, provided the amount used 
for this purpose does not seriously deplete the account and provided 
that the homebuyer agrees to cooperate in such counseling as may be 
made available by the IHA or the HBA.
    (g) Annual statement to homebuyer. The IHA shall provide an annual 
statement to each homebuyer specifying the amounts in the EHPA and the 
NRMR. Any maintenance or repair done on the dwelling by the IHA that is 
chargeable to the EHPA or to the NRMR shall be accounted for through a 
work order, a copy of which shall be sent to the homebuyer.
    (h) Withdrawal and assignment. The homebuyer shall have no right to 
assign, withdraw, or in any way dispose of the funds in its EHPA except 
as provided in this section or in Sec. 950.525.
    (i) Application of EHPA upon vacating of dwelling. (1) In the event 
a homebuyer agreement is terminated the IHA shall charge against the 
homebuyer's EHPA the amounts required to pay:
    (i) The amount due the IHA, including the monthly payments the 
homebuyer is obligated to pay up to the date the homebuyer vacates;
    (ii) The monthly payment for the period the home is vacant, not to 
exceed 60 days from the date of notice of intention to vacate, or if 
the homebuyer fails to give notice of intention to vacate, 60 days from 
the date the home is put in good condition for the next occupant; and
    (iii) The cost of any routine maintenance, and of any nonroutine 
maintenance attributable to the negligence of the homebuyer, required 
to put the home in good condition for the next occupant.
    (2) If the EHPA balance is not sufficient to cover all of these 
charges, the IHA shall require the homebuyer to pay the additional 
amount due. If the amount in the account exceeds these charges, the 
excess shall be paid to the homebuyer.
    (3) Settlement with the homebuyer shall be made promptly after the 
actual cost of repairs to the dwelling has been determined, provided 
that the IHA shall make every effort to make such settlement within 30 
days from the date the homebuyer vacates.


Sec. 950.519  Nonroutine Maintenance Reserve (NRMR).

    (a) Purpose of reserve. The IHA shall establish and maintain a 
separate NRMR for each home, using a portion of the homebuyer's monthly 
payment. The purpose of the NRMR is to provide funds for the nonroutine 
maintenance of the home, which consists of the infrequent and costly 
items of maintenance and replacement shown on the Nonroutine 
Maintenance Schedule [[Page 18234]] for the home. The NRMR shall not be 
used for nonroutine maintenance of common property, or for nonroutine 
maintenance relating to the home to the extent such maintenance is 
attributable to the homebuyer's negligence or to defective materials or 
workmanship.
    (b) Amount of reserve. The amount of the monthly payments to be set 
aside for NRMR shall be determined by the IHA, on the basis of the 
Nonroutine Maintenance Schedule showing the amount likely to be needed 
for nonroutine maintenance of the home during the term of the Homebuyer 
Ownership Opportunity Agreement, taking into consideration the type of 
construction and dwelling equipment. The IHA shall prepare this 
schedule and reexamine it annually.
    (c) Charges to NRMR. (1) The IHA shall provide the nonroutine 
maintenance necessary for the home, and the cost thereof shall be 
funded as provided in paragraph (c)(2) of this section. Such 
maintenance may be provided by the homebuyer but only pursuant to a 
prior written agreement with the IHA covering the nature and scope of 
the work and the amount of credit the homebuyer is to receive. The 
amount of any credit shall, upon completion of the work, be credited to 
the homebuyer's EHPA and charged as provided in paragraph (c)(2) of 
this section.
    (2) The cost of nonroutine maintenance shall be charged to the NRMR 
for the home except that:
    (i) To the extent such maintenance is attributable to the fault or 
negligence of the homebuyer, the cost shall be charged to the 
homebuyer's EHPA after consultation with the HBA if the homebuyer 
disagrees; and
    (ii) To the extent such maintenance is attributable to defective 
materials or workmanship not covered by the warranty, or even though 
covered by the warranty if not paid for thereunder through no fault or 
negligence of the homebuyer, the cost shall be charged to the 
appropriate operating expense account of the Project.
    (3) In the event the amount charged against the NRMR exceeds the 
balance therein, the difference (deficit) shall be made up from 
continuing monthly credits to the NRMR based upon the homebuyer's 
monthly payments. If there is still a deficit when the homebuyer 
acquires title, the homebuyer shall pay such deficit at settlement (see 
paragraph (d)(2) of this section).
    (d) Transfer of NRMR. (1) In the event the homebuyer agreement is 
terminated, the homebuyer shall not receive any balance or be required 
to pay any deficit in the NRMR. When a subsequent homebuyer moves in, a 
credit balance in the NRMR shall continue to be applicable to the home 
in the same amount as if the preceding homebuyer had continued in 
occupancy.
    (2) In the event the homebuyer purchases the home, and there 
remains a balance in the NRMR, the IHA shall pay such balance to the 
homeowner at settlement. In the event the homebuyer purchases and there 
is a deficit in the NRMR, the homebuyer shall pay such deficit to the 
IHA at settlement.
    (e) Investment of excess. (1) When the aggregate amount of the NRMR 
balances for all the homes exceeds the estimated reserve requirements 
for 90 days, the IHA shall invest the excess in Federally insured 
savings accounts, Federally insured credit unions, and/or securities 
approved by HUD. Income earned on the investment of such funds shall be 
prorated and credited to each homebuyer's NRMR in proportion to the 
amount in each reserve account.
    (2) (i) Periodically, but not less often than annually, the IHA 
shall prepare a statement showing:
    (A) The aggregate amount of all NRMR balances,
    (B) The aggregate amount of investments (savings accounts and/or 
securities) held for the account of the NRMRs, and
    (C) The aggregate uninvested balance of the NRMRs.
    (ii) The IHA shall make a copy of this statement available to any 
authorized representative of the HBA.


Sec. 950.521  Operating reserve.

    (a) Purpose of the reserve. To the extent that total operating 
receipts (including subsidies for operations) exceed total operating 
expenditures of the project, the IHA shall establish an operating 
reserve in connection with its annual operating budgets for the 
project. The purpose of this reserve is to provide funds for:
    (1) The infrequent but costly items of nonroutine maintenance and 
replacements of common property, taking into consideration the types of 
items that constitute common property, such as nondwelling structures 
and equipment, and in certain cases, common elements of dwelling 
structures;
    (2) Nonroutine maintenance for the homes to the extent such 
maintenance is attributable to defective materials or workmanship not 
covered by warranty;
    (3) Working capital, including funds to cover a deficit in a 
homebuyer's NRMR until such deficit is offset by future monthly 
payments by the homeowner or a settlement in the event the homebuyer 
should purchase;
    (4) A deficit in the operation of the project for a fiscal year, 
including any deficit resulting from monthly payments totaling less 
than the break-even amount for the project;
    (5) Nonroutine maintenance of vacated homes with insufficient NRMR 
balances to put them in suitable condition for reoccupancy by 
subsequent homeowners; and
    (6) The cost of utilities on a temporary basis for an individual 
unit by way of a utility reimbursement when a homebuyer has 
insufficient tenant income to cover even the utilities.
    (b) Nonroutine maintenance of common property (contribution to 
operating reserve. The amount under this heading to be included in 
operating expense (and in the break-even amount) established for the 
fiscal year shall be determined by the IHA, on the basis of estimates 
of the monthly amount needed to accumulate an adequate reserve for the 
items described in paragraph (a)(1) of this section. This contribution 
to the operating reserve shall be made only during the period the IHA 
is responsible for the maintenance of any common property; during such 
period, the amount shall be determined on the basis of the requirements 
of all common property in the development.
    (c) Transfer to homeowners' association. Where a Turnkey III 
development includes common property, the IHA shall be responsible for 
and shall retain custody of the operating reserve until the homeowners 
acquire voting control of the homeowners' association. When the 
homeowners acquire voting control, the homeowners' association shall 
then assume full responsibility for management and maintenance of 
common property under a plan, agreed upon by the IHA and the homeowners 
association, and the IHA shall transfer to the homeowners' association 
a portion of the operating reserve then held by the IHA. This provision 
shall not apply when there is no common property or when there is no 
duly organized and functioning homeowners association.
    (d) Disposition of reserve. Following the end of the fiscal year in 
which the last home has been conveyed by the IHA, the balance of the 
operating reserve held by the IHA shall be retained by the IHA in a 
replacement reserve if an ACC amendment has been executed implementing 
loan forgiveness, provided that the aggregate amount of payments by the 
IHA under this paragraph (d) shall not exceed the aggregate amount of 
annual [[Page 18235]] contributions paid by HUD with respect to the 
development.


Sec. 950.523  Operating subsidy.

    HUD may pay operating subsidy, subject to the availability of funds 
for this purpose and at HUD's sole discretion, to cover an operating 
deficit in an operating budget. However, operating subsidy or project 
funds may not be used to establish or maintain the homebuyer reserve 
accounts.


Sec. 950.525  Purchase price and methods of purchase.

    (a) Purchase price. The purchase price for the initial and 
subsequent homebuyer shall be determined by the IHA.
    (b) Purchase price schedule. On the date when the homebuyer 
agreement is signed, the IHA shall provide the homebuyer with a 
Purchase Price Schedule, showing the monthly declining purchase price 
over the term of the HOOA agreement (a period not less than 15 years or 
more than 25 as determined by the IHA, at an interest rate determined 
by the IHA). The IHA may choose to forego charging interest and 
calculate the payment with an interest rate of zero.
    (c) Methods of purchase. (1) The homebuyer may achieve ownership 
when the amount in the EHPA, plus such portion of the NRMR as the 
homebuyer wishes to use for the purchase, is equal to the unamortized 
balance purchase price as shown at that time on the homebuyer's 
purchase price schedule plus all incidental costs (the costs incidental 
to acquiring ownership, including but not limited to the costs for a 
credit report, field survey, title examination, title insurance, 
inspections, the fees for attorneys other than the IHA's attorney, 
mortgage application, closing and recording, and the transfer taxes and 
loan discount payment, if any). If for any reason title to the home is 
not conveyed to the homebuyer during the month in which the combined 
total in the EHPA and designated portion of the NRMR equals the 
purchase price, the balance of the purchase price shall be fixed as the 
amount specified for that month, and the homebuyer shall be refunded:
    (i) The net additions, if any, credited to the EHPA after that 
month; and
    (ii) Such part of the monthly payments made by the homebuyer after 
the balance of the purchase price has been fixed that exceeds the 
break-even amount attributable to the unit.
    (2) Where the sum of the unamortized balance of the purchase price 
and incidental costs is greater than the amounts in the homebuyer's 
EHPA and NRMR, the homebuyer may achieve ownership by obtaining 
financing for or otherwise paying the excess amount. The unamortized 
balance of the purchase price shall be the amount shown on the 
homebuyer's purchase price schedule for the month in which the 
settlement date for the purchase occurred.
    (3) Period required to achieve ownership. The maximum period for 
achieving ownership shall be 30 years, but depending upon increases in 
the homebuyer's income and the amount of credit the homebuyer can 
accumulate in the EHPA and NRMR, the period may be shortened 
accordingly.
    (4) Residual receipts. After payment in full of the IHA's debt, if 
there are any subsequent homebuyers who have not acquired ownership of 
their homes, the IHA shall retain all residual receipts from the 
operation of the development in a replacement reserve.
    (5) IHA financing. The IHA may, at its discretion, provide 
financing for purchases by homebuyers, or assist with financing, by 
such methods and on such terms and conditions as may agreeable to the 
IHA and the homebuyer
    (6) Transfer of title to homebuyer. When the homebuyer is to obtain 
ownership, the parties shall mutually agree upon a closing date. On the 
closing date, the homebuyer shall pay the required amount of money to 
the IHA and receive a deed for the home.


Sec. 950.529  Termination of Homebuyer Ownership Opportunity Agreement.

    (a) Termination by IHA. (1) In the event the homebuyer should 
breach the Homebuyer Ownership Opportunity Agreement by failure to make 
the required monthly payment, by misrepresentation or withholding 
information in applying for admission or in connection with any 
subsequent reexamination of income and family composition, by failure 
to comply with any of the other homebuyer obligations under the 
agreement, by loss of homeownership potential (beyond a temporary, 
unforeseen change in circumstances), an income that requires outright 
purchase, the IHA may terminate the agreement 30 days after giving the 
homebuyer notice of its intention to do so in accordance with paragraph 
(a)(2) of this section.
    (2) Notice of termination by the IHA shall be in writing. Such 
notice shall state:
    (i) The reason for termination;
    (ii) That the homebuyer may respond to the IHA, in writing or in 
person, within a specified reasonable period of time regarding the 
reason for termination;
    (iii) That in such response the homebuyer may be represented by the 
HBA;
    (iv) That the IHA will consult the HBA concerning this termination;
    (v) That unless the IHA rescinds or modifies the notices, the 
termination shall be effective at the end of the 30-day notice period; 
and
    (vi) That, in the case of termination as a result of loss of 
homeownership potential when the homebuyer is otherwise in compliance 
with the agreement, the family will be offered a transfer to a rental 
unit (whether or not in concert with a conversion of that unit to the 
rental program). If a rental unit of appropriate size is available, the 
family will be notified of a transfer to that unit. If no other unit is 
then available and the homebuyer's current unit is not to be converted 
to rental, the family will be notified that it may remain in place 
until an appropriate rental unit becomes available (in which case the 
unit remains under the Turnkey III project). Otherwise, the notice 
shall state that the transfer shall occur as soon as a suitable rental 
unit is available for occupancy, but no earlier than 30 days from the 
date of the notice. The notice shall also state that if the homebuyer 
should refuse to move under such circumstances, the family may be 
required to vacate the homebuyer unit, without further notice.
    (b) Termination by the homebuyer. The homebuyer may terminate the 
Homebuyer Ownership Opportunity Agreement by giving the IHA 30 days 
notice in writing of the intention to terminate and vacate the home. In 
the event that the homebuyer vacates the home without notice to the 
IHA, the agreement shall be terminated automatically, and the IHA may 
dispose of, in any manner deemed suitable by it, any items of personal 
property left by the homebuyer in the home.
    (c) Transfer to the rental program. In the event of termination of 
the Homebuyer Ownership Opportunity Agreement by the IHA or by the 
homebuyer with adequate notice, the homebuyer may be transferred to a 
suitable unit in the rental program, in accordance with Sec. 950.503 or 
terminated from occupancy. If the homebuyer is transferred to the 
rental program, the amount in the homeowner's EHPA shall be paid in 
accordance with Sec. 950.517(i).

Subpart H--Lead-Based Paint Poisoning Prevention


Sec. 950.551  Purpose and applicability.

    The purpose of this subpart is to implement the provisions of the 
Lead-Based Paint Poisoning Prevention Act, 42 U.S.C. 4821-4846, by 
establishing [[Page 18236]] procedures to eliminate as far as 
practicable the immediate hazards from the presence of paint which may 
contain lead in IHA-owned housing assisted under the United States 
Housing Act of 1937. This subpart applies to IHA-owned low-income 
housing projects, including Turnkey III, Mutual Help, and conveyed 
Lanham Act and Public Works Administration projects, and to section 23 
Leased Housing Bond-Financed projects. This subpart does not apply to 
projects under the section 23 Leased Housing Non-Bond-Financed Program, 
the section 10(c) Leased Housing Program, or the section 23 and section 
8 Housing Assistance Payments programs. This subpart is promulgated in 
accordance with the authorization granted in 24 CFR 35.24(b)(4) and 
supersedes, with respect to all housing to which it applies, the 
requirements prescribed by subpart C of 24 CFR part 35.


Sec. 950.553  Testing and abatement applicable to development.

    (a) Pre-acquisition testing. With respect to development, all 
existing properties constructed before 1978 (or substantially 
rehabilitated before 1978) and proposed to be acquired for family 
projects (whether or not they will need rehabilitation) shall be tested 
for lead-based paint on applicable surfaces (as defined in subpart A of 
this part).
    (b) Pre-occupancy abatement. If units containing lead-based paint 
are acquired, compliance with parts 35 and this subpart is required, 
and abatement shall be completed before occupancy.
    (c) Compliance with guidelines. It is strongly encouraged, but not 
required, that all such properties be tested in accordance with the 
Lead-Based Paint Interim Guidelines for Hazard Identification and 
Abatement in Public and Indian Housing (hereafter Lead-Based Paint 
Interim Guidelines), which were published at 55 FR 14555 and 55 FR 
39874 (1990), as periodically amended or updated, and other future 
official departmental issuances related to lead-based paint, before any 
irrevocable commitment is made to acquire the property. Properties that 
have already been tested in accordance with the Lead-Based Paint 
Poisoning Prevention Act as amended by the Housing and Community 
Development Act of 1987 need not be tested again. If lead-based paint 
is found in a property to be acquired, the cost of testing and 
abatement shall be considered when making the cost comparison to 
justify new construction, as well as when meeting maximum total 
development cost limitations.


Sec. 950.555  Testing and abatement applicable to modernization.

    (a) Applicability of requirements--(1) General. With respect to 
modernization, the IHA shall comply with the Lead-Based Paint Poisoning 
Prevention Act (42 U.S.C. 4821-4846) and HUD implementing regulations 
(24 CFR part 35 and this subpart H). The five-year funding request plan 
for CIAP (as described in Sec. 950.610) shall be amended to include the 
schedule for lead-based paint testing and abatement. Random testing 
shall be completed by December 6, 1994 (42 U.S.C. 4822(d)(2)(B)). 
Testing and abatement shall be completed with respect to all family 
projects constructed or substantially rehabilitated before 1978 
approved for (or applications for) comprehensive and homeownership 
modernization; other pre-1978 family projects not undergoing 
comprehensive and homeownership modernization; and special purpose 
modernization. Any previous testing or abatement work that was done in 
accordance with HUD's implementing regulations, effective June 6, 1988, 
or the Lead-Based Paint Poisoning Prevention Act as amended by the 
Housing and Community Development Act of 1987 shall not be redone to 
comply with the requirements of this section.
    (2) Special Purpose. The requirements for lead-based paint testing 
and abatement apply to the following three categories of special 
purpose modernization: vacant unit reduction; accessibility for 
handicapped (for any dwelling in such housing in which any child who is 
less than 7 years of age resides or is expected to reside); and cost 
effective energy efficiency measures. In the case of funding for 
accessibility for the handicapped and cost-effective energy efficiency 
measures, LBP testing and abatement shall be performed only when the 
rehabilitation involves removal of walls, doors, and windows. The HUD 
Area ONAP may determine on a case-by-case basis whether lead-based 
paint testing and abatement should be allowed for an IHA requesting 
special purpose modernization for physical improvements to replace or 
repair major equipment systems or structural elements (such as, the 
exterior of buildings). With regard to lead-based paint testing for 
special purpose modernization, if the project has already been randomly 
sampled before May 15, 1991, using the criteria found in the June 6, 
1988 regulations (see paragraph (a)(1) of this section) or after May 
15, 1991, using the criteria outlined in paragraph (b) of this section. 
If lead-based paint is found as a result of previous random testing or 
current testing, it must be abated.
    (b) Which standards apply--(1) Comprehensive, special purpose, and 
homeownership modernization in progress. With respect to family 
projects approved for comprehensive, special purpose, and homeownership 
modernization (assisted under section 14 of the Act) that may contain 
lead-based paint for which funds were reserved by HUD by May 15, 1991, 
the following standards apply:
    (i) IHAs that awarded any construction contract (including 
architectural and engineering (A&E) contracts) before April 1, 1990, 
are subject to the provisions regarding random testing and abatement in 
effect at the time of award.
    (ii) IHAs that advertise for bid or award a construction contract 
(including A&E contracts) or plan to start force account work on or 
after April 1, 1990, excluding those contracts solely for emergency 
work items, shall not execute these contracts until random testing as 
described in this section has taken place and any necessary abatement 
as described in this section is included in the modernization budget.
    (2) Applications for comprehensive, special purpose, and 
homeownership modernization projects. With respect to applications for 
family projects for comprehensive, special purpose, and homeownership 
modernization (assisted under section 14 of the Act) that may contain 
lead-based paint, no construction contracts awarded on or after April 
1, 1990 (including A&E contracts and force account work), excluding 
those contracts solely for emergency work items, shall be executed 
until random testing as described in this section has taken place and 
any necessary abatement as described in this section is included in the 
modernization budget.
    (3) Lead-based paint modernization; other family projects not 
undergoing comprehensive, special purpose, or homeownership 
modernization. Any pre-1978 family project (assisted under section 14 
of the Act) not undergoing comprehensive, special purpose, or 
homeownership modernization (as covered in paragraphs (b)(1) and (2) of 
this section) including a pre-1978 family project that previously has 
been modernized with comprehensive, special purpose, or homeownership 
modernization grants under previous regulations shall be randomly 
tested as described in this section, and abated as described in this 
section if lead-based paint is found, unless testing and abatement was 
previously done in [[Page 18237]] accordance with paragraph (a) of this 
section.
    (c) Testing--(1) Random testing. Random testing as described in 
this paragraph (c)(1) is an eligible cost under lead-based paint 
modernization and is a planning cost as described in Sec. 950.605(d). 
Interior common areas to be sampled include IHA-owned or operated child 
care facilities.
    (i) Initial random test. IHAs shall use random testing on family 
projects (including homeownership units) constructed or substantially 
rehabilitated before 1978. It is strongly recommended, but not 
required, that IHAs use the random testing methodology set forth in the 
lead-based paint interim guidelines, as periodically amended or 
upgraded, and other future outstanding departmental issuances in effect 
at the time of testing. Random testing shall be scheduled or 
prioritized by age of the family projects and whether the family 
projects are known to have lead-based paint or the presence of previous 
elevated blood levels (EBLs).
    (ii) Followup. If evidence of lead-based paint is found in units 
that were in the random sample, the IHA is required to:
    (A) Test the corresponding surfaces where lead-based paint was 
found in other units of the universe being tested; or
    (B) Abate all like surfaces in that universe without further 
testing.
    (2) Universal testing. For scattered site family projects involving 
single-unit structures that are not contiguous or were built and/or 
rehabilitated at different times, the IHA shall cause each unit to be 
tested for lead-based paint.
    (d) Abatement. Abatement shall be performed in accordance with 
Sec. 950.570. Abatement within a comprehensive and homeownership 
modernization project should be prioritized in relation to the 
immediacy of the hazards to children under seven years of age.

    (Information collection requirements contained in this section 
were approved by the Office of Management and Budget under control 
number 2577-0090).


Sec. 950.560  Notification.

    (a) General LBP Hazard Notification for all Residents. Tenants in 
IHA-owned low-income public housing projects constructed before 1978 
shall be notified:
    (1) That the property was constructed before 1978;
    (2) That the property may contain lead-based paint;
    (3) Of the hazards of lead-based paint;
    (4) Of the symptoms and treatment of lead-based paint poisoning;
    (5) Of the precautions to be taken to avoid lead-based paint 
poisoning (including maintenance and removal techniques for eliminating 
such hazards); and
    (6) Of the advisability and availability of blood lead level 
screening for children under seven years of age. Tenants shall be 
advised to notify the IHA if a child is identified as having an 
elevated lead blood level (EBL) condition.
    (b) Lead-Based Paint Hazard Notification for Applicants and 
prospective purchasers. A notice of the dangers of lead-based paint 
poisoning and a notice of the advisability and availability of blood 
lead level screening for children under seven years of age shall be 
provided to every applicant family at the time of application. The 
applicant family shall be advised, if screening is utilized and an EBL 
condition identified, to notify the IHA.
    (c) Notification of Positive Lead-Based Paint Test Results. In the 
event that an IHA-owned project constructed or substantially 
rehabilitated before 1978 is tested and the test results using an x-ray 
fluorescence analyzer (XRF) are identified as having a lead content 
greater than or equal to 1.0 mg/cm2, or is tested by laboratory 
chemical analysis (atomic absorption spectroscopy (AAS)) and found to 
contain .5% lead by weight or more, the IHA shall provide written 
notification of such result to the current residents, applicants, 
prospective purchasers, and homebuyers of such units in a timely 
manner. The IHA shall retain written records of the notification.


Sec. 950.565  Maintenance obligation; defective paint surfaces.

    In family projects constructed or substantially rehabilitated 
before 1978, the IHA shall visually inspect units for defective paint 
surfaces as part of routine periodic unit inspections. If defective 
paint surfaces are found, covering or removal of the defective paint 
spots as described in Sec. 35.24(b)(2) shall be required. Treatment 
shall be completed within a reasonable period of time.


Sec. 950.570  Procedures involving EBLs.

    (a) Procedures where a current resident child has an EBL. When a 
child residing in an IHA-owned low-income housing project has been 
identified as having an EBL, the IHA shall:
    (1) Test all surfaces in the unit and applicable surfaces of any 
IHA-owned and operated child care facility if used by the EBL child for 
lead-based paint and abate the surfaces found to contain lead-based 
paint. Testing of exteriors and interior common areas (including non-
dwelling IHA facilities that are commonly used by the EBL child under 
seven years of age) will be done as considered necessary and 
appropriate by the IHA and HUD; or
    (2) Transfer the family with an EBL child to a post-1978 or to a 
previously tested unit that was found to be free of lead-based paint 
hazards or in which such hazards have been abated as described in this 
section.
    (b) Procedures where a non-resident child using an IHA-owned or 
operated child care facility has an EBL. When a non-resident child 
using an IHA-owned or operated child care facility has been identified 
as having an EBL, the IHA shall test all applicable surfaces of the 
IHA-owned or operated child care facility and abate the surfaces found 
to contain lead-based paint.
    (c) Testing. Testing shall be completed within five days after 
notification to the IHA of the identification of the EBL child. A 
qualified inspector or laboratory shall certify in writing the precise 
results of the inspection. Testing services available from State, 
local, or tribal health or housing agencies or an organization 
recognized by HUD shall be utilized to the extent available. If the 
results equal or exceed a level of 1 mg/cm2 or .5% by weight, the 
results shall be provided to the tenant or the family of the EBL child 
using the IHA-owned or operated child care facility. Testing will be 
considered an eligible modernization cost under subpart I of this part 
only upon IHA certification that testing services are otherwise 
unavailable.
    (d) Hazard abatement requirements--(1) Abatement actions. Hazard 
abatement actions shall be carried out in accordance with the following 
requirements and order of priority:
    (i) Unit housing a child with an EBL. Any surface in the unit found 
to contain lead-based paint shall be treated. Where full treatment of a 
unit housing an EBL child cannot be completed within five days after 
positive testing, emergency intervention actions (including removing 
defective lead-based paint and scrubbing surfaces after such removal 
with strong detergents) shall be taken within such time. Full treatment 
of a unit housing an EBL child shall be completed within 14 days after 
positive testing, unless funding sources are not immediately available. 
In such event, the IHA may use its operating reserves and, when 
necessary, may request reimbursement from the current fiscal year CIAP 
funds, or request the reprogramming of previously approved CIAP 
funds. [[Page 18238]] 
    (ii) IHA-owned or operated child care facility used by a child with 
an EBL. Any applicable surface found to contain lead-based paint shall 
be treated.
    (iii) Interior common areas (including nondwelling IHA facilities 
that are commonly used by EBL children under seven years of age) and 
exterior surfaces of projects in which children with EBLs reside. 
Abatement shall be provided to all surfaces containing lead-based 
paint.
    (2) Abatement methods. IHAs shall select a safe and cost effective 
treatment for surfaces found to contain lead-based paint, including 
clean-up procedures, and are strongly encouraged, but not required, to 
follow those methods specified in the Lead-Based Paint Interim 
Guidelines, and other future official departmental issuances relating 
to lead-based paint abatement in effect at the time the surfaces are to 
be abated. Certain prohibited abatement methods are set forth in 
Sec. 35.24(b)(2)(ii) of this title. Final inspection and certification 
after treatment shall be made by a qualified inspector, industrial 
hygienist, or local health official based on clearance levels specified 
in HUD departmental issuances and guidelines.
    (3) Tenant protection. The IHA shall take appropriate action to 
protect tenants including children with EBLs, other children, and 
pregnant women, from hazards associated with abatement procedures, and 
is strongly encouraged, but not required, to take actions more fully 
outlined in the Lead-Based Paint Interim Guidelines and other future 
official departmental issuances related to tenant protection in effect 
at the time the abatement procedure is undertaken. Tenant relocation 
may be accomplished with CIAP assistance.
    (4) Disposal of lead-based paint debris. The IHA shall dispose of 
lead-based paint debris in accordance with applicable local, State, or 
Federal requirements. Additional information covering disposal 
practices is contained in the Lead-Based Paint Interim Guidelines and 
other future official departmental issuances relating to lead-based 
paint. In any event, the Environmental Protection Agency (EPA) has 
primary responsibility for waste disposal regulations and procedures. 
(see, e.g., 40 CFR parts 260 through 271.)
    (e) Records. The IHA shall maintain records on which units, common 
areas, exteriors, and IHA child care facilities have been tested, 
results of the testing, and the condition of painted surfaces by 
location in or on the unit, interior common area, exterior surface, or 
IHA child care facility. The IHA shall report information regarding 
such testing, in accordance with such requirements as shall be 
prescribed by HUD. The IHA shall also maintain records of abatement 
provided under this subpart, and shall report information regarding 
such abatement, and its compliance with the requirements of 24 CFR part 
35 and Sec. 950.555, in accordance with such requirements as shall be 
prescribed by HUD. If records establish that a unit, an IHA child care 
facility, an exterior or interior common area was tested or treated in 
accordance with the standards prescribed in this subpart, that unit, 
child care facility, exterior or interior common area is not required 
to be re-tested or re-treated.

(Information collection requirements contained in paragraph (e) were 
approved by the Office of Management and Budget under control number 
2577-0090)


Sec. 950.575   Compliance with tribal, State and local laws.

    (a) IHA responsibilities. Nothing in this subpart is intended to 
relieve an IHA of any responsibility for compliance with tribal, State, 
or local laws, ordinances, codes, or regulations governing lead-based 
paint testing or hazard abatement. The IHA shall maintain records 
evidencing compliance with applicable tribal, State, or local 
requirements, and shall report information concerning such compliance, 
in accordance with such requirements as shall be prescribed by HUD.
    (b) HUD responsibility. If HUD determines that a tribal, State, or 
local law, ordinance, code, or regulation provides for lead-based paint 
testing or hazard abatement in a manner that provides a comparable 
level of protection from the hazards of lead-based paint poisoning to 
that provided by the requirements of this subpart and that adherence to 
the requirements of this subpart would be duplicative or otherwise 
cause inefficiencies, HUD may modify or waive the requirements of this 
subpart in such a manner as may be appropriate to promote efficiency 
while ensuring such comparable level or protection.

(Information collection requirements contained in this section were 
approved by the Office of Management and Budget under OMB Control 
Number 2577-0090).


Sec. 950.580   Monitoring and enforcement.

    IHA compliance with the requirements of this subpart H will be 
included in the scope of HUD monitoring of IHA operations. 
Noncompliance with any requirement of this subpart may subject an IHA 
to sanctions provided under the Annual Contributions Contract or to 
enforcement by other means authorized by law.


Sec. 950.585   Insurance coverage.

    For the requirements concerning an IHA's obligation to obtain 
reasonable insurance coverage with respect to the hazards associated 
with testing for and abatement of lead-based paint, see Sec. 950.195.

Subpart I--Modernization Program

General Provisions


Sec. 950.600   Purpose and applicability.

    (a) Purpose. The purpose of this section is to set forth the 
policies and procedures for the Modernization program, authorizing HUD 
to provide financial assistance to Indian Housing Authorities (IHAs) 
to:
    (1) Improve the physical condition and upgrade the management and 
operation of existing Indian housing developments;
    (2) Assure that such developments continue to be available to serve 
low-income families;
    (3) Assess the risks of lead-based paint poisoning through the use 
of professional risk assessments that include dust and soil sampling 
and laboratory analysis in all developments constructed before 1980 
that are, or will be occupied by families; and
    (4) Take effective interim measures to reduce and contain the risks 
of lead-based paint poisoning recommended in such professional risk 
assessments.
    (b) Applicability. (1) The sections under the undesignated heading 
``General Provisions'' applies to all modernization under this subpart. 
The sections under the undesignated heading ``Comprehensive Improvement 
Assistance Program'' (CIAP) set forth the requirements and procedures 
for the CIAP for IHAs that own or operate fewer than 250 Indian housing 
units. An IHA that qualifies for participation in the Comprehensive 
Grant Program (CGP) is not eligible to participate in the CIAP. The 
sections under the undesignated heading ``Comprehensive Grant program 
(CGP)'' set forth the requirements and procedures for the CGP for IHAs 
that own or operate 250 or more Indian housing units. For purposes of 
the 250 or more unit threshold for participation in the CGP, and for 
the formula allocation under Sec. 950.601, an existing rental, Mutual 
Help, or section 23 bond-financed unit under the ACC shall count as one 
unit; and a unit under the Turnkey III program shall count as one-
fourth of a unit. An IHA that has already qualified to participate in 
the CGP because it owns or operates 250 or more units may elect to 
continue to [[Page 18239]] participate in the CGP so long as it owns or 
operates at least 200 units.
    (2) This subpart applies to IHA-owned low-income Indian housing 
developments (including developments managed by a Resident Management 
Corporation pursuant to a contract with the IHA), and to Section 23 
Leased Housing Bond-Financed developments, for which IHAs request 
assistance under the CIAP or CGP. This subpart also applies to the 
implementation of modernization programs which were approved before FFY 
1992. Rental developments that are planned for conversion to 
homeownership under sections 5(h), 21, or 301 of the Act, but that have 
not yet been sold by an IHA, continue to qualify for assistance under 
this part. This subpart does not apply to developments under the 
Section 23 Leased Housing Non-Bond Financed program, the Section 10(c) 
Leased program, or the Section 23 or Section 8 Housing Assistance 
Payments programs.
    (c) Transition. Any amount that HUD has obligated to an IHA under 
CIAP shall be used for the purposes for which the funding was provided, 
or for purposes consistent with an approved action plan submitted by 
the IHA under the CGP, as the IHA determines to be appropriate.
    (d) Other. See subpart A of this part for applicable requirements, 
other than the Act, that apply to modernization under this subpart I.


Sec. 950.601   Allocation of funds under section 14.

    (a) General. This section describes the process for allocating 
modernization funds to the aggregate of IHAs and PHAs participating in 
the CIAP (i.e., agencies that own or operate fewer than 250 units), and 
to individual IHAs and PHAs participating in the CGP (i.e., agencies 
that own or operate 250 or more units). The program requirements 
governing PHA participation in the CIAP and CGP are contained in 24 CFR 
part 968.
    (b) Set-aside for emergencies and disasters. For each FFY, HUD 
shall reserve from amounts approved in the appropriation act for grants 
under this part and part 968 of this title, $75 million (which shall 
include unused reserve amounts carried over from previous FFYs), which 
shall be made available to IHAs and PHAs for modernization needs 
resulting from natural and other disasters, and from emergencies. HUD 
shall replenish this reserve at the beginning of each FFY so that it 
always begins with a $75 million balance. Any unused funds from 
previous years will remain in the reserve until allocated. The 
requirements governing the reserve for disasters and emergencies and 
the procedures by which an IHA may request such funds are set forth in 
Sec. 950.667.
    (c) Set-aside for credits for mod troubled PHAs under 24 CFR part 
968, subpart C. (1) General. After deducting amounts for the reserve 
for natural and other disasters and for emergencies under paragraph (b) 
of this section, HUD shall set aside no more than five percent of the 
remaining amount for the purpose of providing credits to PHAs under 24 
CFR part 968, subpart C that were formerly designated as mod troubled 
agencies under the Public Housing Management Assessment Program (PHMAP) 
at 24 CFR part 901. The purpose of this set-aside is to compensate such 
PHAs for amounts previously withheld by HUD because of their prior 
designation as a mod troubled agency.
    (2) Nonapplicability to IHAs. Since the PHMAP performance 
indicators under 24 CFR part 901 do not apply to IHAs, these agencies 
cannot be deemed mod troubled for purposes of the CGP. Hence, IHAs are 
not subject to any reduction in funding under section 14(k)(5)(a) of 
the Act, nor do they participate in the set-aside of credits 
established under paragraph (c)(1) of this section.
    (d) Formula allocation based on relative needs. After determining 
the amounts to be reserved under paragraphs (b) and (c) of this 
section, HUD shall allocate the amount remaining pursuant to the 
formula set forth in paragraphs (e) and (f) of this section, which are 
designed to measure the relative backlog and accrual needs of IHAs and 
PHAs.
    (e) Allocation for backlog needs. HUD shall allocate half of the 
formula amount under paragraph (d) of this section based on the 
relative backlog needs of IHAs and PHAs, as follows:
    (1) Determination of backlog need. (i) Statistically reliable data. 
Where HUD determines that the data concerning the categories of backlog 
need identified under paragraph (e)(4) of this section are 
statistically reliable for individual IHAs and PHAs with 250 or more 
units, or the aggregate of IHAs and PHAs with fewer than 250 units not 
participating in the formula funding portion of the modernization 
program, it will base its allocation on direct estimates of the 
statutory categories of backlog need, based on the most recently 
available, statistically reliable data.
    (ii) Statistically reliable data are unavailable. Where HUD 
determines that statistically reliable data concerning the categories 
of backlog need identified under paragraph (e)(4) of this section are 
not available for individual IHAs and PHAs with 250 or more units, it 
will base its allocation of funds under this section on estimates of 
the categories of backlog need using:
    (A) The most recently available data on the categories of backlog 
need under paragraph (e)(4) of this section;
    (B) Objectively measurable data concerning the following IHA or 
PHA, community, and development characteristics:
    (1) The average number of bedrooms in the units in a development 
(Weighted at 2858.7);
    (2) The proportion of units in a development available for 
occupancy by very large families (Weighted at 7295.7);
    (3) The extent to which units for families are in high-rise 
elevator developments (Weighted at 5555.8);
    (4) The age of the developments, as determined by the DOFA date 
(date of full availability). In the case of acquired developments, HUD 
will use the DOFA date unless the IHA provides HUD with the actual date 
of construction, in which case HUD will use the age of the development 
(or for scattered sites, the average age of all the buildings), subject 
to a 50 year cap. (Weighted at 206.5);
    (5) In the case of a large agency, the number of units with 2 or 
more bedrooms (Weighted at .433);
    (6) The cost of rehabilitating property in the area (Weighted at 
27544.3);
    (7) For family developments, the extent of population decline in 
the unit of general local government determined on the basis of the 
1970 and 1980 censuses (Weighted at 759.5); and
    (C) An equation constant of 1412.9.
    (2) Calibration of backlog need for developments constructed prior 
to 1985. The estimated backlog need, as determined under either 
paragraphs (e)(1)(i) or (e)(1)(ii) of this section, shall be adjusted 
upward for developments constructed prior to 1985 by a constant ratio 
of 1.5 to more accurately reflect the costs of modernizing the 
categories of backlog need under paragraph (e)(4) of this section, for 
the Indian housing stock as of 1991.
    (3) Deduction for prior modernization. HUD shall deduct from the 
estimated backlog need, as determined under either paragraphs (e)(1)(i) 
or (e)(1)(ii) of this section, amounts previously provided to an IHA or 
PHA for modernization, using one of the following methods:
    (i) Standard deduction for prior CIAP and MROP. HUD shall deduct 60 
percent of the CIAP funds made available on an IHA-wide or PHA-wide 
basis from FFY 1984 to 1991, and 40 percent of the funds made available 
on [[Page 18240]] a development-specific basis for the Major 
Reconstruction of Obsolete Projects (MROP) (not to exceed the estimated 
formula need for the development), subject to a maximum 50 percent 
deduction of an IHA's or PHA's total need for backlog funding;
    (ii) Newly constructed units. Units with a DOFA date of October 1, 
1991 or thereafter will be considered to have a zero backlog; or
    (iii) Acquired developments. Developments acquired by an IHA with 
major rehabilitation, with a DOFA date of October 1, 1991 or 
thereafter, will be considered to have a zero backlog.
    (4) Categories of backlog need. The most recently available data to 
be used under either paragraphs (e)(1)(i) or (e)(1)(ii) of this section 
shall pertain to the following categories of backlog need:
    (i) Backlog of needed repairs and replacements of existing physical 
systems in Indian housing developments;
    (ii) Items that shall be added to developments to meet HUD's 
modernization standards under Sec. 950.603, and State, local and tribal 
codes; and
    (iii) Items that are necessary or highly desirable for the long-
term viability of a development, in accordance with HUD's modernization 
standards.
    (f) Allocation for accrual needs. HUD shall allocate the other half 
remaining under the formula allocation under paragraph (d) of this 
section based upon the relative accrual needs of IHAs and PHAs, 
determined as follows:
    (1) Statistically reliable data. If HUD determines that 
statistically reliable data are available concerning the categories of 
need identified under paragraph (f)(3) of this section for individual 
IHAs and PHAs with 250 or more units and for the aggregate of IHAs and 
PHAs with fewer than 250 units, it shall base its allocation of 
assistance under this section on the needs that are estimated to have 
accrued since the date of the last objective measurement of backlog 
needs under paragraph (e)(1)(i) of this section; or
    (2) Statistically reliable data are unavailable. If HUD determines 
that statistically reliable data concerning the categories of need 
identified under paragraph (f)(3) of this section are not available for 
individual IHAs and PHAs with 250 or more units, it shall base its 
allocation of assistance under this section on estimates of accrued 
need using:
    (i) The most recently available data on the categories of backlog 
need under paragraph (f)(3) of this section;
    (ii) Objectively measurable data concerning the following IHA or 
PHA, community, and development characteristics:
    (A) The average number of bedrooms in the units in a development 
(Weighted at 100.1);
    (B) The proportion of units in a development available for 
occupancy by very large families (Weighted at 356.7);
    (C) The age of the developments (Weighted at 10.4);
    (D) The extent to which the buildings in developments of an agency 
average fewer than 5 units (Weighted at 87.1.);
    (E) The cost of rehabilitating property in the area (Weighted at 
679.1);
    (F) The total number of units of each IHA or PHA that owns or 
operates 250 or more units (Weighted at .0144); and
    (iii) An equation constant of 602.1.
    (3) Categories of need. The data to be provided under either 
paragraph (f)(1) or (f)(2) of this section shall pertain to the 
following categories of need:
    (i) Backlog of needed repairs and replacements of existing physical 
systems in Indian housing developments; and
    (ii) Items that shall be added to developments to meet HUD's 
modernization standards under Sec. 950.603, and State, local, and 
tribal codes.
    (g) Allocation for CIAP. The formula amount determined under 
paragraphs (e) and (f) of this section for IHAs and PHAs with fewer 
than 250 units shall be allocated to IHAs in accordance with the 
requirements under the undesignated heading of this subpart 
``Comprehensive Improvement Assistance Program'' (CIAP) and to PHAs in 
accordance with the requirements of 24 CFR part 968, subpart B.
    (h) Allocation for CGP. The formula amount determined under 
paragraphs (e) and (f) of this section for IHAs with 250 or more units 
shall be allocated in accordance with the requirements under the 
undesignated heading of this subpart ``Comprehensive Grant Program,'' 
and for PHAs in accordance with the requirements of 24 CFR part 968, 
subpart C. An IHA that is eligible to receive a grant under the CGP may 
appeal the amount of its formula allocation under this section in 
accordance with the requirements set forth in Sec. 950.669(b). An IHA 
that is eligible to receive modernization funds under the CGP because 
it owns or operates 250 or more units, is disqualified from receiving 
assistance under the CIAP under this part.
    (i) Use of formula allocation. Any amounts allocated to an IHA 
under paragraphs (e) and (f) of this section may be used for any 
eligible activity under this subpart, notwithstanding that the 
allocation amount is determined by allocating half based on the 
relative backlog needs and half based on the relative accrual needs of 
IHAs and PHAs.
    (j) Calculation of number of units. For purposes of determining 
under this section the number of units owned or operated by an IHA or 
PHA, and the relative modernization needs of IHAs and PHAs, HUD shall 
count as one unit each existing rental, Mutual Help, and section 23 
Bond-Financed unit under the ACC, except that it shall count as one-
fourth of a unit each existing unit under the Turnkey III program. New 
development units that are added to an IHA's or PHA's inventory will be 
added to the overall unit count so long as they are under ACC amendment 
and have reached DOFA by the first day in the FFY in which the formula 
is being run. Any increase in units (reaching DOFA and under ACC 
amendment) as of the beginning of the FFY shall result in an adjustment 
upwards in the number of units under the formula. New units reaching 
DOFA after this date will be counted for formula purposes as of the 
following FFY.
    (k) Demolition, disposition, and conversion of units. (1) General. 
Where an existing unit under an ACC is demolished, disposed of, or 
converted into a larger or smaller unit, HUD shall not adjust the 
amount the IHA or PHA receives under the formula, unless more than one 
percent of the units are affected on a cumulative basis. Where more 
than one percent of the existing units are demolished, disposed of, or 
converted, HUD shall reduce the formula amount for the IHA or PHA over 
a 3-year period to reflect removal of the units from the ACC.
    (2) Determination of one percent cap. In determining whether more 
than one percent of the units are affected on a cumulative basis, HUD 
will compare the units eligible for funding in the initial year under 
formula funding with the number of units eligible for funding for the 
current year under formula funding, and shall base its calculations on 
the following:
    (i) Increases in the number of units resulting from the conversion 
of existing units will be added to the overall unit count so long as 
they are under ACC amendment by the first day in the FFY in which the 
formula is being run;
    (ii) Units that are lost as a result of demolition, disposition, or 
conversion shall not be offset against units subsequently added to an 
IHA's or PHA's inventory;
    (iii) For purposes of calculating the number of converted units, 
HUD shall regard the converted size of the unit as [[Page 18241]] the 
appropriate unit count (e.g., a unit that originally was counted as one 
unit under paragraph (j) of this section, but which later was converted 
into two units, shall be counted as two units under the ACC).
    (3) Phased-in reduction of units. (i) Reduction less than one 
percent. If HUD determines that the reduction in units under paragraph 
(k)(2) of this section is less than one percent, the IHA or PHA will be 
funded as though no change had occurred.
    (ii) Reduction greater than one percent. If HUD determines that the 
reduction in units under paragraph (k)(2) of this section is greater 
than one percent, the number of units on which formula funding is based 
will be the number of units reported as eligible for funding for the 
current program, plus two-thirds of the difference between the initial 
year and the current year in the first year, plus one-third of the 
difference in the second year, and at the level of the current year in 
the third year.
    (iii) Exception. A unit that is conveyed under the Mutual Help or 
Turnkey III programs will result in an automatic (rather than a phased-
in) reduction in the unit count. Paid-off Mutual Help or Turnkey III 
units continue to be counted until they are conveyed.
    (4) Subsequent reductions in unit count. (i) Once an IHA's or PHA's 
unit count has been fully reduced under paragraph (k)(3)(ii) of this 
section to reflect the new number of units under the ACC, this new 
number of units will serve as the base for purposes of calculating 
whether there has been a one percent reduction in units on a cumulative 
basis.
    (ii) A reduction in formula funding, based upon additional 
reductions to the number of an IHA's or PHA's units, will also be 
phased in over a 3-year period, as described in paragraph (k)(2) of 
this section.


Sec. 950.602   Special requirements for Turnkey III and Mutual Help 
developments.

    (a) Modernization costs. Modernization work on a Mutual Help or 
Turnkey III unit shall not increase the purchase price or amortization 
period of the home.
    (b) Eligibility of paid-off and conveyed units for assistance. (1) 
Paid-off units. A Mutual Help or Turnkey III unit, which is paid off 
but has not been conveyed at the time work is included for it in the 
CIAP application or CGP Annual Statement, is eligible for any physical 
improvements provided under Sec. 950.615 or Sec. 950.666. However, in 
accordance with the provisions of Sec. 950.440(e)(8), an IHA may 
perform nonemergency work on a paid-off Mutual Help unit only after all 
delinquencies are repaid.
    (2) Conveyed units. Where modernization work has been approved 
prior to conveyance, the IHA may complete the work even if title to the 
unit is subsequently conveyed before the work is completed. However, 
once conveyed, the unit is not eligible for additional or future 
assistance. An IHA shall not use funds provided under this subpart for 
the purpose of modernizing units if the modernization work was not 
approved before conveyance of title.
    (c) Other. The homebuyer family shall be in compliance with its 
financial obligations under its homebuyer agreement in order to be 
eligible for nonemergency physical improvements, with the exception of 
work necessary to meet statutory and regulatory requirements, (e.g., 
accessibility for disabled persons, lead-based paint testing, interim 
containment, professional risk assessment, and abatement) and the 
correction of development deficiencies. Notwithstanding the above 
requirement, an IHA may, with prior HUD approval, complete nonemergency 
physical improvements on any homeownership unit if the IHA demonstrates 
that, due to economies of scale or geographic constraints, substantial 
cost savings may be realized by completing all necessary work in a 
development at one time.


Sec. 950.603   Modernization and energy conservation standards.

    (a) All improvements funded under this subpart, which may include 
alterations, betterments, additions, replacements, or nonroutine 
maintenance, shall meet the HUD modernization standards, described in 
paragraph (b) of this section; comply with lead-based paint testing and 
abatement requirements in subpart H of this part; and provide decent, 
safe, and sanitary living conditions in IHA-owned and IHA-operated 
housing. All improvements funded under this part shall meet the HUD 
energy conservation standards for cost-effective energy conservation 
measures in such developments, described in paragraphs (c) and (d) of 
this section.
    (b) The modernization standards are comprised of both mandatory and 
development-specific standards. The mandatory standards are intended to 
provide decent, safe, and sanitary living conditions in Indian housing, 
including corrections of violations of basic health and safety codes, 
and to address all deficiencies, including those related to deferred 
maintenance. The development-specific standards permit an IHA to 
undertake improvements that are necessary or highly desirable for the 
long-term physical and social viability of a development, which 
includes site and building security. The modernization standards are 
contained in HUD Handbook 7485.2, as revised, Public and Indian Housing 
Modernization Standards, and in other documents cited in the Handbook.
    (c) The energy conservation standards are standards for the 
installation of cost-effective energy conserving improvements, 
including solar energy systems. The energy conservation standards 
provide for the conducting or updating of energy audits, including 
cost-benefit analyses of energy saving opportunities, in order to 
determine which measures will be cost effective in conserving energy. 
The energy conservation standards are contained in the HUD Workbook, 
Energy conservation for Housing, and in other documents cited in the 
Workbook.
    (d) Life-cycle cost-effective energy performance standards 
established by HUD to reduce the operating costs of Indian housing 
developments over the estimated life of the buildings shall apply to 
developments modernized under this subpart. These standards are 
contained in HUD Handbook 7418.1, as revised, Life-Cycle Cost Analysis 
for Utility Combinations.

Comprehensive Improvement Assistance Program (For IHAs that Own or 
Operate Fewer than 250 Indian Housing Units)


Sec. 950.609   Purpose.

    The purpose of these sections under the undesignated heading 
``Comprehensive Improvement Assistance Program'' (CIAP) is to set forth 
the policies and procedures for the CIAP under which IHAs that own or 
operate fewer than 250 units of Indian housing may receive financial 
assistance for the modernization of Indian housing developments, 
including Emergency and Other Modernization. Funding for this program 
is provided under section 5(c) of the Act (42 U.S.C. 1437c(c)), 
pursuant to section 14(k) of the Act (42 U.S.C. 1437l(k)) (see 
Sec. 950.601 for the formula allocation process for the aggregate of 
CIAP agencies under this subpart I).


Sec. 950.615   Eligible costs.

    (a) Demonstration of viability. Except in the case of emergency 
work, an IHA shall only expend funds on a development for which the IHA 
has determined, and HUD agrees, that the completion of the improvements 
and replacements will reasonably ensure the long-term physical and 
social viability [[Page 18242]] of the development at a reasonable 
cost, as defined in Sec. 950.102.
    (b) Physical improvement costs for rental and Mutual Help 
developments. Eligible costs include alterations, betterments, 
nondwelling additions, replacements, and nonroutine maintenance that 
are necessary to meet the modernization and energy conservation 
standards prescribed in Sec. 950.603. The modernization standards 
include mandatory and development specific work. The mandatory 
standards may be exceeded only when the IHA and HUD determine that it 
is necessary or highly desirable for the long-term physical and social 
viability of the individual development. If demolition or disposition 
is proposed, the IHA shall comply with subpart M of this part. 
Additional dwelling space may be added to existing units.
    (c) Turnkey III developments. (1) General. Eligible physical 
improvement costs for existing Turnkey III developments are limited to 
work items under Emergency Modernization or Other Modernization that 
are not the responsibility of the homebuyer families, and that are 
related to health and safety, correction of development deficiencies, 
physical accessibility, energy audits and cost-effective energy 
conservation measures, or lead-based paint testing, interim 
containment, professional risk assessment, and abatement. In addition, 
eligible costs include management improvements under the modernization 
type of Other Modernization.
    (2) Ineligible costs. Nonroutine maintenance or replacements, 
dwelling additions, and items that are the responsibility of the 
homebuyer families are ineligible costs.
    (3) Exception for vacant or non-homebuyer-occupied Turnkey III 
units. (i) Notwithstanding the requirements of paragraph (c)(1) of this 
section, an IHA may carry out Other Modernization in a Turnkey III 
development, whenever a Turnkey III unit becomes vacant or is occupied 
by a nonhomebuyer family. An IHA that intends to use funds under this 
paragraph shall identify in its CIAP application the estimated number 
of units proposed for Other Modernization and subsequent sale. In 
addition, an IHA shall certify that the IHA has homebuyers who are both 
eligible for homeownership, in accordance with the requirements of this 
part, and who have demonstrated their intent to be placed into each of 
the Turnkey III units proposed for Other Modernization.
    (ii) Before an IHA may be approved for Other Modernization of a 
unit under this paragraph, it shall first deplete any Earned Home 
Payments Account (EHPA), or Non-Routine Maintenance Reserve (NRMR) 
pertaining to the unit, and request the maximum operating subsidy. Any 
increase in the value of a unit caused by its Other Modernization under 
this paragraph shall be reflected solely by its subsequent appraised 
value, and not by an automatic increase in its purchase price.
    (d) Demolition and conversion costs. Eligible costs include:
    (1) Demolition of dwelling units or nondwelling facilities, for 
which HUD has approved the demolition under subpart M of this part, and 
related costs, such as clearing and grading the site after demolition 
and subsequent site improvement to benefit the remaining portion of the 
existing development; and
    (2) Conversion of existing dwelling units to different bedroom 
sizes or to nondwelling use.
    (e) Management improvement costs. (1) General. Management 
improvements that are development-specific or IHA-wide in nature are 
eligible costs if needed to upgrade the operation of the IHA's 
developments, sustain physical improvements at those developments, or 
correct management deficiencies. Management improvements and planning 
costs may be funded as a single modernization project.
    (2) Ineligible costs. An IHA's ongoing operating expenses, 
including direct provision of social services through either contract 
or force account labor, are ineligible management improvement costs. In 
addition, if an approved modernization program includes management 
improvements that involve ongoing costs, HUD is not obligated to 
provide continued funding or additional operating subsidy after the end 
of the implementation period of the management improvements. An IHA is 
responsible for finding other funding sources, reducing its ongoing 
management costs, or terminating the management activities.
    (3) Eligible costs. Eligible costs include:
    (i) General management costs. Eligible general management costs 
include, but are not limited to: management, financial, and accounting 
control systems of the IHA, rent collection, and maintenance.
    (ii) Economic development costs. Economic development activities, 
such as job training and resident employment, for the purpose of 
carrying out activities related to the eligible management and physical 
improvements are eligible costs, as approved by HUD. HUD encourages 
IHAs, to the greatest extent feasible, to hire residents as trainees, 
apprentices, or employees to carry out the modernization program under 
this subpart I.
    (iii) Resident management costs. Technical assistance to a resident 
council or resident management corporation (RMC), as defined in subpart 
O of this part, in order to determine the feasibility of the resident 
management entity or assist in its formation is an eligible cost.
    (iv) Resident homeownership costs. The study of the feasibility of 
converting rental to homeownership units, as well as the preparation of 
an application for conversion to homeownership, is an eligible cost.
    (f) Drug elimination costs. Drug elimination activities involving 
management or physical improvements are eligible costs, as specified by 
HUD.
    (g) Administrative costs. Administrative costs necessary for the 
planning (planning costs can be funded as a single modernization 
project), design, implementation, and monitoring of the physical and 
management improvements are eligible costs, and include the following:
    (1) The salaries of nontechnical and technical IHA personnel 
assigned full-time or part-time to modernization are eligible costs 
only if the scope and volume of the work are beyond that which could 
reasonably be expected to be accomplished by such personnel in the 
performance of their nonmodernization duties. An IHA shall properly 
apportion to the appropriate program budget any direct charges for the 
salaries of assigned full- or part-time staff (e.g., to the CIAP or 
operating budget);
    (2) IHA contributions to employee benefit plans on behalf of 
nontechnical and technical IHA personnel are eligible costs in direct 
proportion to the amount of salary charged to the CIAP; and
    (3) Other administrative costs, such as telephone and facsimile, as 
specified by HUD.
    (h) Architectural/engineering and consultant fees. Fees for 
planning, preparation of needs assessments, and other required 
documents, detailed design work, assistance in the preparation of 
construction and bid documents, lead-based paint professional risk 
assessments and testing are eligible costs.
    (i) Relocation and moving costs. Relocation and other relocation 
assistance for permanent and temporary relocation are eligible costs, 
when this assistance is required by Sec. 950.117.
    (j) Cost limitations. (1) Management improvements. Management 
improvement costs shall not exceed 10 [[Page 18243]] percent of the 
CIAP funds available to an Area ONAP in a particular FFY.
    (2) Planning costs. Planning costs are costs incurred before HUD 
approval of the CIAP application and that are related to developing the 
CIAP application or carrying out eligible modernization planning, such 
as detailed design work, preparation of solicitations, and lead-based 
paint professional risk assessment and testing. Planning costs may be 
funded as a single modernization project. If an IHA incurs planning 
costs without prior HUD approval, an IHA does so with the full 
understanding that the costs may not be reimbursed upon approval of the 
CIAP application. Planning costs shall not exceed five percent of the 
CIAP funds available to an Area ONAP in a particular FFY.
    (3) Program benefit. If the physical or management improvement will 
benefit programs other than Indian Housing, such as Section 8, local 
renewal, eligible costs are limited to the amount directly attributable 
to the Indian Housing Program.
    (k) Ineligible costs. An IHA shall not make luxury improvements, or 
carry out any other ineligible activities, as specified by HUD.


Sec. 950.618   Procedures for obtaining approval of a modernization 
program.

    (a) HUD notification. After modernization funds for a particular 
FFY become available, HUD shall publish in the Federal Register a 
notice of funding availability (NOFA) and the time frame for submission 
of applications.
    (b) IHA consultation with local officials and residents/homebuyers. 
An IHA shall develop the application in consultation with local 
officials, residents, and homebuyers, as set forth in Sec. 950.624.
    (c) IHA application. An IHA shall submit to HUD an application, in 
a form prescribed by HUD, which shall include:
    (1) A general description of IHA development(s) (including the 
current physical condition, for each development for which the IHA is 
requesting funds, or for all the IHA's developments) and physical and 
management improvement needs (to meet the Secretary's standards in 
Sec. 950.603), general description of major work categories (e.g., 
kitchens, bathrooms) required to correct identified deficiencies and 
estimated costs, including a statement concerning consultation with 
local officials and residents and viability of the development(s). The 
application will also identify a cost estimate for the equipment 
systems or structural elements that would normally be replaced over the 
remaining period of the annual contributions contract or during the 30-
year period beginning on the date of submission of the application.
    (2) For management improvements, the application shall identify the 
management improvement need, including a general description of the 
work required for correction and an estimated cost. Management areas 
for which needs should be identified include, but are not limited to, 
the following:
    (i) The management, financial, and accounting control systems of 
the IHA;
    (ii) The adequacy and qualifications of personnel employed by such 
IHA (in the management and operation of such developments) for each 
category of employment; and
    (iii) The adequacy and efficacy of resident programs and services 
in such developments, the security of each such development and its 
residents, policies and procedures of the IHA for the selection and 
eviction of residents in such developments, and other policies and 
procedures of such IHA relating to such developments, as specified by 
the Secretary; and
    (3) Any other documents, as may be required by HUD.
    (d) Completeness review. To be eligible for selection, an 
application shall be received by the Area ONAP within the time period 
specified in the NOFA and shall be complete. In order to determine 
whether an application is complete, responsive to the NOFA, and 
acceptable for technical processing, the Area ONAP shall perform an 
initial completeness review upon receipt of the application. To make 
the above determination, the Area ONAP shall use the following 
criteria:
    (1) The application was received by HUD at the appropriate address 
by the date and time specified in the NOFA and was complete and 
responsive (excluding exhibits that are certifications); or
    (2) If an application is determined to be incomplete or to have 
missing certifications, the IHA shall be advised in writing of any 
deficiencies or any inconsistencies. The missing information is to be 
submitted within a specified period of time from the date of HUD's 
written notification. This is not additional time to substantially 
revise the application. Deficiencies that may be corrected at this time 
are those such as inadvertently omitted documents, clarifications of 
previously submitted material, and other changes that are not of such a 
nature as to improve the competitive position of the application. The 
IHA shall acceptably correct deficiencies (including furnishing missing 
certifications) within the time specified in the NOFA.
    (e) Eligibility review. (1) Eligibility for processing. To be 
eligible for processing, based on the general description of its 
developments' condition and general statement of physical and 
management improvement needs, and the Area ONAP's knowledge of the 
development's conditions, the work items, particularly emergency work 
items, shall appear to be eligible and needed.
    (2) Eligibility review on reduced scope. When the following 
conditions exist, the IHA will be reviewed on a reduced scope:
    (i) Where the IHA owes funds to HUD as a result of excess 
development, modernization, or operating funds previously provided, and 
the IHA has not repaid the funds or has not entered into a repayment 
agreement, or is not meeting its obligations under a repayment 
agreement, the IHA is eligible for processing for Emergency 
Modernization only.
    (ii) Where the IHA has not complied with Fair Housing and Equal 
Opportunity (FHEO) requirements as set forth in Sec. 950.115, as 
evidenced by an action, finding, or determination as described in 
paragraphs (e)(2)(ii)(A) through (E) of this section, unless the IHA is 
implementing a voluntary compliance agreement or settlement agreement 
designed to correct the area(s) of noncompliance, the IHA is eligible 
for processing only for Emergency Modernization or for work needed to 
remedy civil rights deficiencies.
    (A) A pending proceeding against the IHA based upon a charge of 
discrimination issued under the Fair Housing Act. A charge of 
discrimination is a charge under section 810(g)(2) of the Fair Housing 
Act (42 U.S.C. 3610(g)(2)), issued by HUD's General Counsel or legally 
authorized designee;
    (B) A pending civil rights suit against the IHA, referred by HUD's 
General Counsel and instituted by the Department of Justice;
    (C) Outstanding HUD findings of IHA noncompliance with civil rights 
statutes and executive orders under Sec. 950.115, or implementing 
regulations, as a result of formal administrative proceedings, unless 
the IHA is implementing a HUD-approved resident selection and 
assignment plan or compliance agreement designed to correct the area(s) 
of noncompliance;
    (D) A deferral of the processing of applications from the IHA 
imposed by [[Page 18244]] HUD under title VI of the Civil Rights Act of 
1964 (42 U.S.C. 2000d) and Sec. 950.115, 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), or under section 504 of the 
Rehabilitation Act of 1973 (29 U.S.C. 794) and HUD's implementing 
regulations (24 CFR 8.57); or
    (E) An adjudication of a violation under any of the authorities 
under Sec. 950.115 in a civil action filed against the IHA by a private 
individual, unless the IHA is implementing a HUD-approved resident 
selection and assignment plan or compliance agreement designed to 
correct the area(s) of noncompliance.
    (3) FHEO Division review. The processing office shall request the 
appropriate FHEO Division of the Regional Office to identify any IHAs 
with equal opportunity-related problems. After consulting with Regional 
FHEO, as appropriate, and reviewing its own files, the FHEO Division 
shall identify each IHA by the following categories and provide any 
other relevant information within the requested time frame:
    (i) There are no known equal opportunity-related problems;
    (ii) There are known equal opportunity-related problems, as 
identified; or
    (iii) There are circumstances as set forth in paragraph (e)(2) of 
this section.
    (f) Technical processing. When an application is determined to be 
complete and responsive to the NOFA and eligible for processing, 
technical processing, consisting of the following, shall be 
accomplished:
    (1) The Area ONAP shall categorize the eligible IHAs and their 
developments into two processing groups: Group 1 for Emergency 
Modernization, and Group 2 for Other Modernization. IHA developments 
may be included in both groups, and the same development may be in each 
group. The IHA only needs to submit one application that includes needs 
that the Area ONAP will process under Group 1 or Group 2. However, the 
IHA can submit Emergency Modernization applications whenever needed. 
Group 2 developments are subject to the long-term viability and 
reasonable cost analysis. Preference will be given to IHAs that request 
assistance for developments having conditions that threaten the health 
or safety of the residents or having a significant number of vacant, 
substandard units; and that have demonstrated a capability of carrying 
out the activities proposed. Within Group 2, the Secretary may give 
priority to compliance with statutory, regulatory, and court-ordered 
deadlines.
    (2) The Area ONAP will evaluate the Group 2 IHAs and developments 
to determine eligibility and acceptability based on the technical 
review factors in paragraph (g) of this section. Based on these 
factors, the Area ONAP shall determine the applications that, in its 
judgment, are approvable. Selections then shall be made in accordance 
with paragraph (h) of this section.
    (g) Technical review factors. The technical review factors for 
assistance include:
    (1) Extent and urgency of need, including need to comply with 
statutory, regulatory, or court-ordered deadlines;
    (2) Extent of vacancies;
    (3) IHA's modernization capability;
    (4) IHA's management capability;
    (5) Degree of resident involvement in IHA operations;
    (6) Degree of IHA activity in resident initiatives, including 
resident management, economic development, and drug elimination 
efforts;
    (7) Degree of resident employment;
    (8) Local government support for proposed modernization; and
    (9) Such additional factors as the Secretary determines necessary 
and appropriate.
    (h) Rating and ranking. The Area ONAP shall rate and rank each 
application in Group 2 on the basis of its assessment of the 
application using the technical review factors set forth in paragraph 
(g) of this section and in the NOFA. The Area ONAP shall identify for 
joint review selection the highest IHA ranking applications in Group 2 
in descending order and other Group 2 IHAs with lower ranking 
applications but with high priority needs, which most reasonably 
approximate the amount of modernization which can be funded. High 
priority needs are nonemergency needs, but related to: health or 
safety; vacant, substandard units; structural or system integrity; or 
compliance with statutory, regulatory, or court-ordered deadlines. All 
Group 1 applications would be automatically selected for joint review.
    (i) Joint review. HUD shall notify each IHA whose application has 
been selected for further processing as to whether the joint review 
will be conducted on-site or off-site (e.g., by telephone or in-office 
meeting). The purpose of the joint review is to discuss the proposed 
modernization program, as set forth in the application, and determine 
the size of the grant, if any, to be awarded. If the IHA has not 
included all its developments in the CIAP application, HUD may not, as 
a result of joint review, consider funding any nonemergency work at 
excluded developments or subsequently approve use of leftover funds at 
excluded developments. An IHA shall prepare for the joint review by 
preparing a draft CIAP budget, and reviewing the other items to be 
covered during the joint review, as prescribed by HUD. If conducted on-
site, the joint review may include an inspection of the proposed 
physical work. IHAs not selected for joint review will be advised in 
writing of the reasons for nonselection.
    (j) HUD awards. Upon completion of the joint review, HUD shall 
adjust the amounts to be awarded, as necessary, based on information 
obtained at Joint Review, including the information received as a 
result of the FHEO review and completion of the environmental review, 
and announce the IHAs selected for CIAP grants (subject to their 
submission of an approvable CIAP budget and any other required 
documents). HUD would request the funded IHA to submit a CIAP budget, 
including an implementation schedule, a resolution by the IHA Board of 
Commissioners (approving the CIAP budget and containing certifications 
required by HUD), and any other necessary documents.
    (k) ACC amendment. After HUD approval of the CIAP budget, HUD and 
the IHA shall enter into an ACC amendment in order for the IHA to 
requisition modernization funds. The ACC amendment shall require low-
income use of the housing for not less than 20 years from the date of 
the ACC amendment (subject to sale of homeownership units in accordance 
with the terms of the ACC). HUD has the authority to condition an ACC 
amendment (e.g., to require an IHA to hire a modernization coordinator 
or contract administrator to a administer its modernization program).
    (l) Declaration of trust. An IHA shall execute and file for record 
a Declaration of Trust as provided under the ACC to protect the rights 
and interests of HUD throughout the 20-year period during which the IHA 
is obligated to operate its developments in accordance with the ACC, 
the Act, and HUD regulations and requirements. A Declaration of Trust 
is not required for Mutual Help units.


Sec. 950.624  Resident and homebuyer participation.

    (a) Resident participation. For a rental development only, the IHA 
shall establish a Partnership Process, as defined in Sec. 950.102, to 
develop, implement, and monitor the CIAP. Before submission of the 
application, an IHA shall consult with the residents, the 
[[Page 18245]] resident organization, or the RMC (see subpart O of this 
part) of the development being proposed for modernization regarding its 
intent to submit an application for CIAP funds. An IHA shall give 
residents a reasonable opportunity to present their views on the 
proposed modernization program and alternatives to it, and give full 
and serious consideration to resident recommendations. An IHA shall 
respond in writing to the residents, the resident organization, or the 
RMC, indicating its acceptance or rejection of resident 
recommendations, consistent with HUD requirements and the IHA's own 
determination of efficiency, economy, and need. After HUD approval of 
the modernization program, an IHA shall inform the residents, the 
resident organization, or the RMC of the approved work items and its 
progress during implementation. If HUD does not approve the 
modernization program, an IHA shall so inform the residents, the 
resident organization, or the RMC.
    (b) Homebuyer participation: Turnkey III and Mutual Help. For a 
homeownership development only, before submission of the application, 
an IHA shall consult with the homebuyer families of the development 
proposed for modernization regarding its intent to submit an 
application for CIAP funds. An IHA shall give the homebuyer families a 
reasonable opportunity to present their views on the proposed 
modernization program and alternatives to it, and give full and serious 
consideration to their recommendations. An IHA shall respond in writing 
to the homebuyer families, indicating its acceptance or rejection of 
their recommendations, consistent with HUD requirements and the IHA's 
own determination of efficiency, economy, and need. After HUD approval 
of the modernization program, an IHA shall inform the homebuyer 
families of the approved work items and its progress during 
implementation. If HUD does not approve the modernization program, an 
IHA shall so inform the homebuyer families.


Sec. 950.635  Initiation of modernization activities.

    After HUD has approved the modernization program and entered into 
an ACC amendment with the IHA, an IHA shall undertake the modernization 
activities and expenditures set forth in its approved CIAP budget in a 
timely, efficient, and economical manner, subject to the following 
requirement. An IHA shall ensure that there is no duplication between 
the activities carried out with CIAP funds and the activities carried 
out with other funds.


Sec. 950.639  Fund requisitions.

    An IHA shall requisition modernization funds against the approved 
CIAP budget in accordance with procedures prescribed by HUD.


Sec. 950.642  Contracting requirements.

    An IHA shall comply with the prevailing wage rate requirements in 
Secs. 950.120 and 950.172, as well as the Indian Preference 
requirements in Sec. 950.175. In addition, an IHA shall comply with 
State, tribal, and local laws and Federal requirements, as set forth in 
24 CFR part 85, except as follows:
    (a) Architect/engineer and other professional services contracts. 
Notwithstanding 24 CFR 85.36(g), an IHA shall comply with HUD 
requirements to either:
    (1) If the proposed contract amount exceeds the HUD-established 
threshold, submit the contract for prior HUD approval before execution 
or issuance; or
    (2) If the proposed contract amount does not exceed the HUD-
established threshold, certify that the scope of work is consistent 
with any agreements reached with HUD, and that the amount is 
appropriate and does not exceed the HUD-approved CIAP budget amount.
    (b) Assurance of completion. For each construction contract over 
$25,000, the contractor shall furnish a performance and payment bond 
for 100 percent of the contract price or, notwithstanding 24 CFR 
85.36(h), a 20 percent cash escrow, or a 25 percent letter of credit 
or, as may be required by law, separate performance and payment bonds, 
each for 50 percent or more of the contract price.
    (c) Construction solicitations. Notwithstanding 24 CFR 85.36(g), an 
IHA shall comply with HUD requirements to either:
    (1) If the estimated contract amount exceeds the HUD-established 
threshold, submit a complete construction solicitation for prior HUD 
approval before issuance; or
    (2) If the estimated contract amount does not exceed the HUD-
established threshold, certify receipt of the required architect's/
engineer's certification that the construction documents accurately 
reflect HUD-approved work and meet the modernization and energy 
conservation standards and that the construction solicitation is 
complete and includes all mandatory items.
    (d) Contract awards. An IHA shall obtain HUD approval of the 
proposed award of a contract if the award exceeds the HUD-approved CIAP 
budget amount or if the procurement meets the criteria set forth in 24 
CFR 85.36(g)(2)(i) through (iv). In all other instances, an IHA shall 
make the award without HUD approval after the IHA has certified that:
    (1) The solicitation and award procedures were conducted in 
compliance with State, tribal, and local laws and Federal requirements;
    (2) The award does not exceed the approved CIAP budget amount and 
does not meet the criteria in 24 CFR 85.36(g)(2) (i) through (iv) for 
prior HUD approval; and
    (3) The contractor is not on the Lists of Parties Excluded from the 
Federal Procurement or Nonprocurement Programs.
    (e) Contract modifications. Notwithstanding 24 CFR 85.36(g), except 
in an emergency endangering life or property, an IHA shall comply with 
HUD requirements to either:
    (1) If the proposed contract modification exceeds the HUD-
established threshold, submit the proposed modification for prior HUD 
approval before issuance; or
    (2) If the proposed contract modification does not exceed the HUD-
established threshold, certify that the proposed modification is within 
the scope of the contract and that any additional costs are within the 
latest HUD-approved CIAP budget or otherwise approved by HUD.
    (f) Construction requirements. An IHA may be required to submit to 
HUD periodic progress reports and construction completion documents for 
prior HUD approval above a HUD-specified amount.
    (g) Previous participation. An IHA shall ensure that the contractor 
is not on the GSA List of Parties Excluded from Federal Procurement and 
Nonprocurement Programs.


Sec. 950.645  On-site inspections.

    It is the responsibility of the IHA, not HUD, to provide, by 
contract or otherwise, adequate and competent supervisory and 
inspection personnel during modernization, whether work is performed by 
contract or force account labor, and with or without the services of an 
architect/engineer, to assure work quality and progress.


Sec. 950.648  Budget revisions.

    An IHA shall not incur any modernization cost in excess of the 
total HUD-approved CIAP budget. An IHA shall submit a budget revision, 
in a form prescribed by HUD, if the IHA plans (within the total 
approved CIAP budget) to incur modernization costs in excess of the 
approved CIAP budget amount for any development. An IHA also shall 
comply with HUD requirements to either:
    (a) Submit the proposed CIAP budget revision for prior HUD approval 
if the [[Page 18246]] IHA plans to delete or substantially revise 
approved work items, add new work items, or incur modernization costs 
in excess of the HUD-established threshold; or
    (b) Certify that the revisions are necessary to carry out the 
approved work and do not result in the approved CIAP budget amount for 
any development being exceeded.


Sec. 950.651  Progress reports.

    For each six-month period, beginning October 1, until completion of 
the modernization program or expenditure of all funds, an IHA shall 
submit a report, in a form prescribed by HUD, to the HUD Area ONAP. 
Where HUD determines that an IHA is having implementation problems, HUD 
may require more frequent reporting. The report shall include:
    (a) Modernization fund obligations and expenditures and progress 
against the approved implementation schedule(s); and
    (b) Management improvement progress, as applicable.


Sec. 950.654  HUD review of IHA performance.

    HUD shall periodically review IHA performance in carrying out its 
approved modernization program to determine compliance with HUD 
requirements, the quality of an IHA's inspections as evidenced by the 
quality of work, and the timeliness of the work. Where deficiencies are 
noted, an IHA shall take corrective action, as directed by HUD.


Sec. 950.657  Fiscal closeout.

    Upon completion or termination of a modernization program, the IHA 
shall submit the actual modernization cost certificate, in a form 
prescribed by HUD, to HUD for review, audit verification, and approval. 
An IHA shall immediately remit any excess funds provided by HUD. The 
audit shall follow the guidelines prescribed in 24 CFR part 44, Non-
Federal Government Audit Requirements. If the audited modernization 
cost certificate indicates that there are still excess funds, an IHA 
shall immediately remit the excess funds as directed by HUD. If the 
audited modernization cost certificate discloses unauthorized or 
ineligible expenditures, an IHA shall take such corrective actions as 
HUD may direct.

Comprehensive Grant Program (For IHAs That Own or Operate 250 or 
More Indian Housing Units)


Sec. 950.660  Purpose.

    (a) The purpose of the Comprehensive Grant Program (CGP) under this 
subpart I is:
    (1) To provide modernization assistance to IHAs that own or operate 
a total of 250 or more units of Indian Housing on a reliable and more 
predictable basis; to enable them to operate, upgrade, modernize, and 
rehabilitate Indian housing developments; to ensure their continued 
availability for low-income families as decent, safe, and sanitary 
housing;
    (2) To provide considerable discretion to IHAs to decide the 
specific improvements, the manner of their execution, and the timing of 
the expenditure of funds;
    (3) To simplify significantly the program of Federal assistance for 
capital improvements in Indian housing developments;
    (4) To provide increased opportunities and incentives for more 
efficient management of Indian housing developments; and
    (5) To give IHAs greater control in planning and expending funds 
for modernization, rehabilitation, maintenance, and improvement of 
Indian housing developments to benefit low-income families.
    (b) The purpose of the sections under the undesignated heading 
``Comprehensive Grant Program'' (CGP) is to set forth the policies and 
procedures for the CGP under which IHAs that own and operate a total of 
250 or more units of Indian housing receive financial assistance on a 
formula grant basis in accordance with Sec. 950.601(e) and (f) for the 
modernization of Indian housing developments.


Sec. 950.666  Eligible costs.

    (a) General. An IHA may use financial assistance received under the 
CGP for the following eligible costs:
    (1) Undertaking activities described in its approved Five-Year Plan 
under Sec. 950.672(d)(5);
    (2) Carrying out emergency work, whether or not the need is 
indicated in the IHA's approved Comprehensive Plan (including Five-Year 
Action Plan) or Annual Submission;
    (3) Funding a replacement reserve to carry out eligible activities 
in future years, subject to the restrictions set forth in paragraph (f) 
of this section;
    (4) Preparing the Comprehensive Plan and Action Plan under 
Sec. 950.672, including reasonable costs necessary to assist residents 
to participate in a meaningful way in the planning, implementation, and 
monitoring process; and
    (5) Carrying out an audit, in accordance with 24 CFR part 44 and 
Sec. 950.120.
    (b) Demonstration of viability. Except in the case of emergency 
work, an IHA shall only expend funds on a development for which the IHA 
has demonstrated that completion of the improvements and replacements 
identified in the Comprehensive Plan will reasonably ensure the long-
term physical and social viability of the development at a reasonable 
cost or for essential nonroutine maintenance needed to keep the 
property habitable until residents are relocated.
    (c) Physical improvement costs. Eligible costs include alterations, 
betterments, additions, replacements, and nonroutine maintenance that 
are necessary to meet the modernization and energy conservation 
standards prescribed in Sec. 950.603. These mandatory standards may be 
exceeded only when the IHA determines that it is necessary or highly 
desirable for the long-term physical and social viability of the 
individual development. If demolition or disposition is proposed, the 
IHA shall comply with subpart M of this part. Additional dwelling space 
may be added to existing units.
    (d) Costs for Turnkey III developments. (1) General. Eligible 
physical improvement costs for existing Turnkey III developments are 
limited to work items that are not the responsibility of the homebuyer 
families and that are related to health and safety, correction of 
development deficiencies, physical accessibility, energy audits and 
cost-effective energy conservation measures, and lead-based paint 
testing and abatement. In addition, management improvements are 
eligible modernization costs for existing Turnkey III developments.
    (2) Ineligible costs. Nonroutine maintenance or replacements, 
additions, and items that are the responsibility of the homebuyer 
families are ineligible costs.
    (3) Exception for vacant or non-homebuyer-occupied Turnkey III 
units. (i) Notwithstanding the requirements of paragraph (d)(1) of this 
section, an IHA may substantially rehabilitate a Turnkey III unit 
whenever the unit becomes vacant or is occupied by a non-homebuyer 
family. An IHA that intends to use funds under this paragraph shall 
identify in its needs assessment the estimated number of units that the 
IHA is proposing for substantial rehabilitation and subsequent sale. In 
addition, an IHA shall demonstrate in its needs assessment that the IHA 
has homebuyers who are both eligible for homeownership, in accordance 
with the requirements of 24 CFR part 950, Subpart G, and who have 
demonstrated their intent to be placed into each of the Turnkey III 
units proposed to be substantially rehabilitated; [[Page 18247]] 
    (ii) Before an IHA may be approved for the substantial 
rehabilitation of a unit under this paragraph, it shall first deplete 
any Earned Home Payments Account (EHPA) or Non-Routine Maintenance 
Reserve (NRMR) pertaining to the unit, and request the maximum amount 
of operating subsidy. Any increase in the value caused by its 
substantial rehabilitation under this paragraph shall be reflected 
solely by its subsequent appraised value, and not by an automatic 
increase in its selling price.
    (e) Demolition and conversion costs. Eligible costs include:
    (1) Demolition of dwelling units or nondwelling facilities approved 
by HUD under subpart M of this part, and related costs, such as 
clearing and grading the site after demolition and subsequent site 
improvement to benefit the remaining portion of the existing 
development; and
    (2) Conversion of existing dwelling units to different bedroom 
sizes.
    (f) Replacement reserve costs. (1) Funding a replacement reserve to 
carry out eligible activities in future years is an eligible cost, 
subject to the following restrictions:
    (i) Annual CGP funds are not needed for existing needs, as 
identified by the IHA in its needs assessments;
    (ii) A physical improvement requires more funds than the IHA would 
receive under its annual formula allocation; or
    (iii) A management improvement requires more funds than the IHA may 
use under its 20 percent limit for management improvements (except as 
provided in paragraph (m)(1) of this section), and the IHA needs to 
save a portion of its annual grant in order to combine it with a 
portion of subsequent year(s) grants, to fund the work item;
    (2) The IHA shall invest replacement reserve funds so as to 
generate a return equal to or greater than the average 91-day Treasury 
bill rate;
    (3) Interest earned on funds in the replacement reserve will not be 
added to the IHA's income in the determination of an IHA's operating 
subsidy eligibility, but shall be used for eligible modernization 
costs;
    (4) To the extent that its annual formula allocation and any 
unobligated balances of modernization funds are not adequate to meet 
emergency needs, an IHA shall first use its replacement reserve, if 
funded, to meet emergency needs, before requesting funds from the $75 
million reserve. An IHA is not required to use its replacement reserve 
for natural and other disasters.
    (g) Management improvement costs. Management improvements that are 
needed to upgrade the operation of the IHA's developments, sustain 
physical improvements at those developments, or correct management 
deficiencies identified by the IHA in its Comprehensive Plan are 
eligible costs. An IHA's ongoing operating expenses, including direct 
provision of social services through either contract or force account 
labor, are ineligible management improvement costs.
    (1) Economic development activities costs. Economic development 
activities such as job training, resident employment, and resident 
businesses, for the purpose of carrying out activities related to the 
eligible management and physical improvements are eligible costs, as 
approved by HUD. HUD encourages IHAs, to the greatest extent feasible, 
to hire residents as trainees or employees to carry out the 
modernization program under this subpart, and to contract with 
resident-owned businesses for modernization work.
    (2) Resident management costs. Technical assistance to a resident 
organization or resident management corporation (RMC), as defined in 
Sec. 950.962, in order to determine the feasibility of the resident 
management entity or assist in its formation is an eligible cost.
    (3) Resident homeownership costs. The study of the feasibility of 
converting rental to homeownership units, as well as the preparation of 
an application for conversion to homeownership, is an eligible cost.
    (h) Drug elimination costs. Drug elimination activities involving 
management or physical improvements are eligible costs, as specified by 
HUD.
    (i) Administrative costs. Administrative costs necessary for the 
planning, design, implementation, and monitoring of the physical and 
management improvements are eligible costs and include the following:
    (1) The salaries of nontechnical and technical IHA personnel 
assigned full-time or part-time to modernization are eligible costs 
only if the scope and volume of the work are beyond that which could be 
reasonably expected to be accomplished by such personnel in the 
performance of their nonmodernization duties. The IHA shall properly 
apportion to the appropriate program budget any direct charges for the 
salaries of assigned full- or part-time staff (e.g., to the CIAP, CGP, 
or operating budgets);
    (2) IHA contributions to employee benefit plans on behalf of 
nontechnical and technical IHA personnel are eligible costs in direct 
proportion to the amount of salary charged to the CGP; and
    (3) Other administrative costs, such as telephone and facsimile, as 
specified by HUD.
    (j) Audit costs.
    (k) Architectural/engineering and consultant fees. Fees for 
planning, preparation of needs assessments and required documents, 
detailed design work, preparation of construction and bid documents, 
lead-based paint testing, etc., are eligible costs.
    (l) Relocation costs. Relocation costs as a direct result of 
rehabilitation, demolition, or acquisition for a CGP-funded activity 
are eligible costs, as required by Sec. 950.117.
    (m) Cost limitation. (1) Notwithstanding the full fungibility of 
work items in Sec. 950.675(c), an IHA shall not use more than a total 
of 20 percent of its annual grant for management improvement costs in 
account 1408, unless specifically approved by HUD.
    (2) Notwithstanding the full fungibility of work items in 
Sec. 950.675(c), an IHA shall not use more than a total of 10 percent 
of its annual grant on administrative costs in account 1410, excluding 
any costs related to lead-based paint or asbestos testing (whether 
conducted by force account employees or by a contractor), in-house 
architectural/engineering (A/E) work, or other special administrative 
costs required by State, tribal, or local law, unless specifically 
approved by HUD;
    (3) When the physical or management improvement will benefit 
programs other than Indian Housing, such as Section 8, local renewal, 
etc., eligible costs are limited to the amount directly attributable to 
the Indian Housing Program.
    (n) Ineligible costs. An IHA (or an RMC acting on behalf of an IHA) 
shall not make luxury improvements, or carry out any other ineligible 
activities, as specified by HUD.


Sec. 950.667  Reserve for emergencies and disasters.

    (a) Emergencies. (1) Eligibility for assistance. An IHA (including 
an IHA that is determined to be high risk under Sec. 950.135) may 
obtain funds at any time, for any eligible emergency work item as 
defined in Sec. 950.102 (for IHAs participating in CGP) or for any 
eligible emergency work item (described as emergency modernization in 
Sec. 950.102) (for IHAs participating in CIAP), from the reserve 
established under Sec. 950.601(b). However, emergency reserve funds may 
not be provided to an IHA participating in CGP that has the necessary 
funds available from any other source, including its annual formula 
allocation under Sec. 950.601(e) and (f), other unobligated 
modernization [[Page 18248]] funds, and its replacement reserves under 
Sec. 950.666. An IHA is not required to have an approved Comprehensive 
Plan under Sec. 950.672 before it can request emergency assistance from 
this reserve. Emergency reserve funds may not be provided to an IHA 
participating in CIAP unless it does not have the necessary funds 
available from any other source, including unobligated CIAP, and no 
CIAP modernization funding is available from HUD for the remainder of 
the fiscal year.
    (2) Procedure. To obtain emergency funds, an IHA shall submit a 
request, in a form to be prescribed by HUD, that demonstrates that 
without the requested funds from the set-aside under this section, the 
IHA does not have adequate funds available to correct the conditions 
that present an immediate threat to the health or safety of the 
residents. HUD will immediately process a request for such assistance, 
and if it determines that the IHA's request meets the requirements of 
paragraph (a)(1) of this section, it shall approve the request, subject 
to the availability of funds in the reserve.
    (3) Repayment. A CGP IHA that receives assistance for its emergency 
needs from the reserve under Sec. 950.601(b) shall repay such 
assistance from its future allocations of assistance, as available. For 
IHAs participating in the CGP, HUD shall deduct up to 50 percent of an 
IHA's succeeding year's formula allocation under Sec. 950.601(e) and 
(f) to repay emergency funds previously provided by HUD to the IHA. The 
remaining balance, if any, shall be deducted from an IHA's succeeding 
years' formula allocations.
    (b) Natural and other disasters. (1) Eligibility for assistance. An 
IHA (including an IHA that has been determined by HUD not to be 
administratively capable under Sec. 950.135) may request assistance at 
any time from the reserve under Sec. 950.601(b) for the purpose of 
permitting the IHA to respond to a natural or other disaster. To 
qualify for assistance, the disaster shall pertain to an extraordinary 
event affecting only one or a few IHAs, such as an earthquake or 
hurricane. Any disaster declared by the President (or that HUD 
determines would qualify for a Presidential declaration if it were on a 
larger scale) qualifies for assistance under this paragraph. An IHA may 
receive funds from the reserve regardless of the availability of other 
modernization funds or reserves, but only to the extent its needs are 
in excess of its insurance coverage. An IHA is not required to have an 
approved Comprehensive Plan under Sec. 950.672 before it can request 
assistance from the reserve under Sec. 950.601(b).
    (2) Procedure. To obtain funding for natural or other disasters 
under Sec. 950.601(b), an IHA shall submit a request, in a form 
prescribed by HUD, that demonstrates that it meets the requirements of 
paragraph (b)(1) of this section. HUD will immediately process a 
request for such assistance, and if it determines that the request 
meets the requirements under paragraph (b)(1) of this section, it will 
approve the request, subject to the availability of funds in the 
reserve.
    (3) Repayment. Funds provided to an IHA under paragraph (b)(1) of 
this section for natural and other disasters shall be in the form of a 
grant, and are not required to be repaid.


Sec. 950.669  Allocation of assistance.

    (a) Submission of formula characteristics report. In its first year 
of participation in the CGP, each IHA shall verify and provide data to 
HUD, in a form and at a time to be prescribed by HUD, concerning IHA 
and development characteristics, so that HUD can develop the IHA's 
annual funding allocation under the CGP in accordance with 
Sec. 950.601(e) and (f). If an IHA fails to submit to HUD the formula 
characteristics report by the prescribed deadline, HUD will use the 
data that it has available concerning IHA and development 
characteristics for purposes of calculating the IHA's formula share. 
After its first year of participation in the CGP, an IHA is required to 
respond to data transmitted by HUD if there have been changes to its 
inventory from that previously reported, or when requested by HUD. On 
an annual basis, HUD will transmit to the IHA the formula 
characteristics report that reflects the data that will be used to 
determine the IHA's formula share. The IHA will have 30 days to review 
and advise HUD of errors in this HUD report. Necessary adjustments will 
be made to the IHA's data before the formula is run for the current 
FFY. On an annual basis, HUD will transmit to the IHA the formula 
characteristics report that reflects the data that will be used to 
determine the IHA's formula share. The IHA will have at least 30 
calendar days to review and advise HUD of errors in this HUD report. 
Necessary adjustments will be made to the IHA's data before the formula 
is run for the current FFY.
    (b) HUD notification of formula amount; appeal rights. (1) Formula 
amounts notification. After HUD determines an IHA's formula allocation 
under Sec. 950.601(e) and (f) based upon the IHA, development, and 
community characteristics, it shall notify the IHA of its formula 
amount and provide instructions on the Annual Submission in accordance 
with Secs. 950.672(a) and 950.678;
    (2) Appeal based upon unique circumstances. An IHA may appeal in 
writing HUD's determination of its formula amount within 60 calendar 
days of the date of HUD's determination on the basis of ``unique 
circumstances.'' The IHA shall indicate what is unique, specify the 
manner in which it is different from all other IHAs participating in 
the CGP, and provide any necessary supporting documentation. HUD shall 
render a written decision on an IHA's appeal under this paragraph 
within 60 calendar days of the date of its receipt of the IHA's request 
for an appeal. HUD shall publish in the Federal Register a description 
of the facts supporting any successful appeals based upon ``unique 
circumstances.'' Any adjustments resulting from successful appeals in a 
particular FFY under this paragraph shall be made from the subsequent 
years' allocation of funds under this part;
    (3) Appeal based upon error. An IHA may appeal in writing HUD's 
determination of its formula amount within 60 calendar days of the date 
of HUD's determination on the basis of an error. The IHA may appeal on 
the basis of error the correctness of data in the formula 
characteristics report. The IHA shall describe the nature of the error 
and provide any necessary supporting documentation. HUD shall respond 
to the IHA's request within 60 calendar days of the date of its receipt 
of the IHA's request for an appeal. Any adjustment resulting from 
successful appeals in a particular FFY under this paragraph shall be 
made from subsequent years' allocation of funds under this part;
    (c) IHAs determined to be high risk. If an IHA is determined to 
have serious deficiencies in accordance with Sec. 950.135, or if the 
IHA fails to meet, or to make reasonable progress toward meeting, the 
goals previously established in its management improvement plan under 
Sec. 950.135, HUD may designate the IHA as high risk. If HUD designates 
the IHA as high risk with respect to modernization, HUD may withhold 
some or all of the IHA's annual grant; HUD may declare a breach of the 
grant agreement with respect to all or some of the IHA's functions, so 
that the IHA or a particular function of the IHA may be administered by 
another entity; or HUD may take other sanctions authorized by law or 
regulation. [[Page 18249]] 
    (d) Obligation of formula funding. All formula funding should be 
obligated within two years of approval. However, due to the size of the 
grant, complexity of the work, and other factors, the IHA may propose, 
and HUD may approve, a longer time period.


Sec. 950.672  Comprehensive Plan (including Five-Year Action Plan).

    (a) Submission. As soon as possible after modernization funds first 
become available for allocation under this subpart, HUD shall notify 
IHAs in writing of their formula amount. For planning purposes, IHAs 
may use the amount they received under CGP in the prior year in 
developing their Comprehensive Plan, or they may wait for the annual 
HUD notification of formula amount under Sec. 950.669(b)(1).
    (b)(1) Resident participation. An IHA is required to develop, 
implement, monitor, and annually amend portions of its Comprehensive 
Plan in consultation with residents of the developments covered by the 
Comprehensive Plan, and with democratically elected resident groups. In 
addition, the IHA shall also consult with resident management 
corporations (RMCs) to the extent that an RMC manages a development 
covered by the Comprehensive Plan. The IHA, in partnership with the 
residents, shall develop and implement a process for resident 
participation that ensures that residents are involved in a meaningful 
way in all phases of the CGP. Such involvement shall include 
implementing the Partnership Process as a critical element of the CGP.
    (2) Establishment of Partnership Process. The IHA, in partnership 
with the residents of the developments covered by the plan, and with 
democratically elected resident groups, shall establish a Partnership 
Process to develop and implement the goals, needs, strategies, and 
priorities identified in the Comprehensive Plan. After residents have 
organized to participate in the CGP, they may decide to establish a 
volunteer advisory group of experts in various professions to assist 
them in the CGP Partnership Process. The Partnership Process shall be 
designed to achieve the following:
    (i) To assure that residents are fully briefed and involved in 
developing the content of, and monitoring the implementation of, the 
Comprehensive Plan including, but not limited to, the physical and 
management needs assessments, viability analysis, Five-Year Action 
Plan, and Annual Statement. If necessary, the IHA shall develop and 
implement capacity building strategies to ensure meaningful resident 
participation in CGP. Such technical assistance efforts for residents 
are eligible management improvement costs under CGP;
    (ii) To enable residents to participate, on an IHA-wide or area-
wide basis, in ongoing discussions of the Comprehensive Plan and 
strategies for its implementation, and in all meetings necessary to 
ensure meaningful participation.
    (3) Public notice. Within a reasonable amount of time before the 
advance meeting for residents and duly elected resident organizations 
under paragraph (b)(4) of this section, and the public hearing under 
paragraph (b)(5) of this section, the IHA shall provide public notice 
of the advance meeting and the public hearing in a manner determined by 
the IHA and which ensures notice to all duly elected resident 
organizations;
    (4) Advance meeting for residents and duly elected resident 
organizations. The IHA shall hold, within a reasonable amount of time 
before the public hearing under paragraph (b)(5) of this section, a 
meeting for residents and duly elected resident organizations at which 
the IHA shall explain the components of the Comprehensive Plan. The 
meeting shall be open to all residents and duly elected resident 
organizations;
    (5) Public Hearing. The IHA shall hold at least one public hearing, 
and any appropriate number of additional hearings, to present 
information on the Comprehensive Plan/Annual Submission and the status 
of prior approved programs. The public hearing shall provide ample 
opportunity for residents, duly elected resident organizations, local 
government officials, and other interested parties to express their 
priorities and concerns. The IHA shall give full consideration to the 
comments and concerns of residents, local government officials, and 
other interested parties.
    (c) Local government participation. An IHA shall consult with 
appropriate local government officials with respect to the development 
of the Comprehensive Plan. In the case of an IHA with developments in 
multiple jurisdictions, the IHA may meet this requirement by consulting 
with an advisory group representative of all the jurisdictions. At a 
minimum, such consultation shall include providing such officials with:
    (1) Advance written notice of the public hearing required under 
paragraph (b)(5) of this section;
    (2) A copy of the summary of total preliminary estimated costs to 
address physical needs by each development and management/operations 
needs IHA-wide, a specific description of the IHA's process for 
maximizing the level of participation by residents, a summary of the 
general issues raised on the plan by residents and others during the 
public comment process, and the IHA's response to the general issues. 
IHA records, such as minutes of planning meetings or resident surveys, 
shall be maintained in the IHA's files and made available to residents, 
resident organizations, and other interested parties upon request.
    (d) Contents of Comprehensive Plan. The Comprehensive Plan shall 
identify all of the physical and management improvements needed for an 
IHA and all of its developments, and that represent needs eligible for 
funding under Sec. 950.666. The plan shall also include preliminary 
estimates of the total cost of these improvements. The plan shall set 
forth general strategies for addressing the identified needs, and 
highlight any special strategies, such as major redesign or partial 
demolition of a development, that are necessary to ensure the long-term 
physical and social viability of the development. Each Comprehensive 
Plan shall contain the following elements:
    (1) Summaries. An IHA shall include as part of its Comprehensive 
Plan the following summaries:
    (i) A summary of total preliminary estimated costs to address 
physical needs by each development and management needs IHA-wide; and
    (ii) A specific description of the IHA's process for maximizing the 
level of participation by residents during the development, 
implementation, and monitoring of the Comprehensive Plan, a summary of 
the general issues raised on the plan by residents and others during 
the public comment process, and the IHA's response to the general 
issue. IHA records, such as minutes of planning meetings or resident 
surveys, shall be maintained in the IHA's files and made available to 
residents, duly elected resident organizations, and other interested 
parties, upon request.
    (2) Physical needs assessment. (i) Requirements. The physical needs 
assessment identifies all of the work that an IHA would need to 
undertake to bring each of its developments up to the modernization and 
energy conservation standards, as required by section 14(e)(1)(A)(ii) 
of the Act, to comply with lead-based paint testing and abatement 
requirements under Sec. 950.120(g), and to comply with other program 
requirements under Sec. 950.120. The physical needs assessment is 
completed without regard to the availability of funds, and shall 
include the following information with respect to each of an IHA's 
developments: [[Page 18250]] 
    (A) A brief summary of the physical improvements necessary to bring 
each development to a level at least equal to the modernization 
standards contained in HUD Handbook 7485.2 (Public and Indian Housing 
Modernization Standards), and to the energy conservation and life-cycle 
cost-effective performance standards, as required in Sec. 950.603, to 
comply with the Lead-Based Testing and Abatement requirements under 
Sec. 950.120(g). The IHA should also indicate the relative urgency of 
need. If the IHA has no physical improvement needs at a particular 
development at the time it completes its Comprehensive Plan, it shall 
so indicate. Similarly, if the IHA intends to demolish, partially 
demolish, convert, or dispose of a development (or units within a 
development), it shall so indicate in the summary of physical 
improvements;
    (B) The replacement needs of equipment systems and structural 
elements that will be required to be met (assuming routine and timely 
maintenance is performed) during the period covered by the action plan;
    (C) A preliminary estimate of the cost to complete the physical 
work;
    (D) The projected FFY in which the IHA anticipates that the 
development will meet the modernization and energy conservation 
standards;
    (E) In addition, the IHA shall provide with respect to vacant or 
non-homebuyer-occupied Turnkey III units, the estimated number of units 
that the IHA is proposing for substantial rehabilitation and subsequent 
sale, in accordance with Sec. 950.666(d)(3).
    (ii) Sources of data. The IHA shall identify in its needs 
assessment the sources from which it derived data to develop the 
physical needs assessment under this paragraph (d)(3), and shall retain 
such source documents in its files.
    (3) Management needs assessment. (i) Requirements. The plan shall 
include a comprehensive assessment of the improvements needed to 
upgrade the management and operation of the IHA and of each viable 
development, so that decent, safe, and sanitary living conditions will 
be provided. The management needs assessment shall include the 
following, with the relative urgency of need indicated:
    (A) An identification of the most current needs related to the 
following areas (to the extent that any of these needs is addressed in 
a HUD-approved management improvement plan, the IHA may simply include 
a cross-reference to these documents):
    (1) The management, financial, and accounting control systems of 
the IHA;
    (2) The adequacy and qualifications of personnel employed by the 
IHA in the management and operation of its developments, for each 
significant category of employment;
    (3) The adequacy and efficacy of:
    (i) Resident programs and services;
    (ii) Resident and development security;
    (iii) Resident selection and eviction;
    (iv) Occupancy;
    (v) Maintenance;
    (vi) Resident management and resident capacity building programs;
    (vii) Resident opportunities for employment and business 
development and other self-sufficiency opportunities for residents; and
    (viii) Homeownership opportunities for residents.
    (B) Any additional deficiencies identified through audits and HUD 
monitoring reviews that are not addressed under paragraph (d)(3)(i)(A) 
of this section. To the extent that any of these is addressed in a HUD-
approved management improvement plan, the IHA may include a cross-
reference to these documents;
    (C) Any other management and operations needs that the IHA wants to 
address at the IHA-wide or development level;
    (D) An IHA-wide preliminary cost estimate for addressing all the 
needs identified in the management needs assessment, without regard to 
the availability of funds; and
    (E) The projected FFY in which the IHA anticipates that all 
identified management deficiencies will be corrected.
    (ii) Sources of data. The IHA shall identify in its needs 
assessment the sources from which it derived data to develop the 
management needs assessment under this paragraph, and shall retain such 
source documents in its files.
    (4) Demonstration of long-term physical and social viability. (i) 
General. The plan shall include, on a development-by-development basis, 
an analysis of whether completion of the improvements and replacements 
identified under paragraphs (d)(2) and (d)(3) of this section will 
reasonably ensure the long-term physical and social viability, 
including achieving structural/system soundness and full occupancy of 
the development at a reasonable cost. For cost reasonableness, the IHA 
may choose to use the 90 percent of Total Development Cost (TDC) 
approach (the preliminary estimate of hard costs for work proposed at 
the development is 90 percent or less of TDC) or a cost reasonableness 
approach related to the cost of individual work items as indicated by 
National cost indices, adjusted by local conditions and the IHA's own 
recent procurement experience. The IHA shall keep documentation in its 
files to support its reasonable cost determinations of each major work 
item (e.g., kitchen cabinets, exterior doors). HUD will review cost 
reasonableness as part of its review of the Annual Submission and the 
Performance and Evaluation Report. As necessary, HUD will review the 
IHA's documentation in support of its cost reasonableness;
    (ii) Determination of non-viability. When an IHA's analysis of a 
development, under paragraph (d) of this section, establishes that 
completion of the identified improvements and replacements will not 
result in the long-term physical and social viability of the 
development at a reasonable cost, the IHA shall not expend CGP funds 
for the development, except for emergencies and essential nonroutine 
maintenance necessary to maintain habitability until residents can be 
relocated. The IHA shall specify in its Comprehensive Plan the actions 
it proposes to take with respect to the nonviable development (e.g., 
demolition or disposition under 24 CFR part 950, subpart M).
    (5) Five-Year Action Plan. (i) General. The Comprehensive Plan 
shall include a rolling Five-Year Action Plan to carry out the 
improvements and replacements (or a portion thereof) identified under 
paragraphs (d)(2) and (d)(3) of this section. In developing its Five-
Year Action Plan, the IHA shall assume that the current year funding or 
formula amount will be available for each year of its Five-Year Action 
Plan, whichever the IHA is using for planning purposes, plus the IHA's 
estimate of the funds that will be available from other sources, such 
as State, local, and tribal governments. All activities specified in an 
IHA's Five-Year Action Plan are contingent upon the availability of 
funds.
    (ii) Requirements. Under the action plan, an IHA shall indicate how 
it intends to use the funds available to it under the CGP to address 
the deficiencies, or a portion of the deficiencies, identified under 
its physical and management needs assessments, as follows:
    (A) Physical condition. With respect to the physical condition of 
an IHA's developments, an IHA shall indicate in its action plan how it 
intends to address, over a five-year period, the deficiencies (or a 
portion of the deficiencies) identified in its physical needs 
assessment so as to bring each of its developments up to a level at 
least equal to the modernization and energy [[Page 18251]] conservation 
standards. This would include specifying the work to be undertaken by 
the IHA in major work categories (e.g., kitchens, electrical systems, 
etc.); establishing priorities among the major work categories by 
development and year based upon the relative urgency of need; and 
estimating the cost of each of the identified major work categories. In 
addition, an IHA shall estimate the FFY in which it anticipates that 
the development will meet the modernization and energy conservation 
standards. In developing its action plan, an IHA shall give priority to 
the following:
    (1) Activities required to correct emergency conditions;
    (2) Activities required to meet statutory (or other legally 
mandated) requirements;
    (3) Activities required to meet the needs identified in the Section 
504 needs assessment within the regulatory timeframes; and
    (4) Activities required to complete lead-based paint testing and 
abatement requirements.
    (B) Management and operations. An IHA shall address in its action 
plan the management and operations deficiencies (or a portion of the 
deficiencies) identified in its management needs assessment, as 
follows:
    (1) With respect to the management and operations needs of the IHA, 
the IHA shall identify how it intends to address with CGP funds, if 
necessary, the deficiencies (or a portion thereof) identified in its 
management needs assessment, including work identified through audits, 
HUD monitoring reviews, and self-assessments (this would include 
establishing priorities based upon the relative urgency of need);
    (2) A preliminary IHA-wide cost estimate, by major work category.
    (iii) Procedure for maintaining current Five-Year Action Plan. The 
IHA shall maintain a current Five-Year Action Plan by annually amending 
its Five-Year Action Plan, in conjunction with the Annual Submission;
    (6) Local government statement. The Comprehensive Plan shall 
include a statement signed by the chief executive officer of the 
appropriate governing body (or in the case of an IHA with developments 
in multiple jurisdictions, from the CEO of each such jurisdiction), 
certifying as to the following:
    (i) The IHA developed the Comprehensive Plan/Five-Year Action Plan 
or amendments thereto in consultation with officials of the appropriate 
governing body and with development residents covered by the 
Comprehensive Plan/Five-Year Action Plan, in accordance with the 
requirements of Sec. 950.672(b) and (c);
    (ii) The Comprehensive Plan/Five-Year Action Plan or amendments 
thereto are consistent with the appropriate governing body's assessment 
of its low-income housing needs and that the appropriate governing body 
will cooperate in providing resident programs and services; and
    (iii) The IHA's proposed drug elimination activities are 
coordinated with, and supportive of, local drug elimination strategies 
and neighborhood improvement programs, if applicable.
    (7) IHA resolution. The plan shall include a resolution adopted by 
the IHA Board of Commissioners, and signed by the Board Chairman of the 
IHA, approving the Comprehensive Plan or any amendments thereto and 
certifying that:
    (i) The IHA will comply with all policies, procedures, and 
requirements prescribed by HUD for modernization, including 
implementation of the modernization in a timely, efficient, and 
economical manner;
    (ii) IHA has established controls to assure that any activity 
funded by the CGP is not also funded by any other HUD program, thereby 
preventing duplicate funding of any activity;
    (iii) The IHA will not provide to any development more assistance 
under the CGP than is necessary to provide affordable housing, after 
taking into account other government assistance provided;
    (iv) The proposed physical work will meet the modernization and 
energy conservation standards under Sec. 950.603;
    (v) The proposed activities in the Five-Year Action Plan/Annual 
Statement are consistent with the proposed or approved Comprehensive 
Plan of the IHA;
    (vi) The IHA will comply with applicable civil rights requirements 
under Sec. 950.115, and, when applicable, will carry out the 
Comprehensive Plan in conformity with title VI of the Civil Rights Act 
of 1964 (42 U.S.C. 2000d), the Fair Housing Act (42 U.S.C. 3601-3619), 
and section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794);
    (vii) The IHA will, to the greatest extent feasible, give 
preference to the award of modernization contracts to Indian 
organizations and Indian-owned economic enterprises under Sec. 950.175;
    (viii) The IHA has provided to HUD any documentation that HUD has 
requested to carry out its review under the National Environmental 
Policy Act (NEPA) and other related authorities in accordance with 24 
CFR 950.120(a) and (b), and will not obligate, in any manner, the 
expenditure of CGP funds, or otherwise undertake the activities 
identified in its Comprehensive Plan/Annual Statement, until the IHA 
receives written notification from HUD indicating that HUD has complied 
with its responsibilities under NEPA and other related authorities;
    (ix) The IHA will comply with the wage rate requirements under 
Sec. 950.120(c) and (d);
    (x) The IHA will comply with the relocation assistance and real 
property acquisition requirements under Sec. 950.117;
    (xi) The IHA will comply with the requirements for physical 
accessibility under Sec. 950.115(d);
    (xii) The IHA will comply with the requirements for access to 
records and audits under Sec. 950.120(e);
    (xiii) The IHA will comply with the uniform administrative 
requirements under Sec. 950.120(f);
    (xiv) The IHA will comply with lead-based paint testing and 
abatement requirements under Sec. 950.120(g);
    (xv) The IHA has complied with the requirements governing tribal 
government and resident participation in accordance with 
Secs. 950.672(b), 950.678(d), and 950.684, and has given full 
consideration to the priorities and concerns of tribal government and 
residents, including comments that were ultimately not adopted, in 
preparing the Comprehensive Plan/Five-Year Action Plan and any 
amendments thereto;
    (xvi) The IHA will comply with the special requirements of 
Sec. 950.666(d) with respect to a homeownership development; and
    (xvii) The IHA will comply with section 3 of the Housing and Urban 
Development Act of 1968, as amended, and make best efforts, consistent 
with existing Federal, State, and local laws and regulations, to give 
low- and very low-income persons, training and employment opportunities 
generated by CGP assistance, and to make best efforts, consistent with 
existing Federal, State, and local laws and regulations, to award 
contracts for work to be performed in connection with CGP assistance to 
business concerns that provide economic opportunities for low- and very 
low-income persons.
    (e) Amendments to the Comprehensive Plan. (1) Extension of time for 
performance. An IHA shall have the right to amend its Comprehensive 
Plan (including the action plan) to extend the time for performance 
whenever HUD has not provided the amount of assistance set 
[[Page 18252]] forth in the Comprehensive Plan or has not provided the 
assistance in a timely manner.
    (2) Amendments to needs assessments. The IHA shall amend its plan 
by revising its needs assessments whenever it proposes to carry out 
activities in its Five-Year Action Plan or Annual Statement that are 
not reflected in its current needs assessments (except in the case of 
emergencies). The IHA may propose an amendment to its needs 
assessments, in connection with the submission of its Annual Submission 
(see Sec. 950.678(b)), or at any other time. These amendments shall be 
reviewed by HUD in accordance with Sec. 950.675;
    (3) Six-year revision of Comprehensive Plan. Every sixth year 
following the initial year of participation, the IHA shall submit to 
HUD, with its Annual Submission, a complete update of its Comprehensive 
Plan. An IHA may elect to revise some or all parts of the Comprehensive 
Plan more frequently.
    (4) Annual revision of Five-Year Action Plan. Annually, the IHA 
shall submit to HUD, with its Annual Submission, an update of its Five-
Year Action Plan, eliminating the previous year and adding an 
additional year. The IHA shall identify changes in work categories 
(other than those included in the new fifth year) from the previous 
year Five-Year Action Plan when making this Annual Submission.
    (5) Required submissions. Any amendments to the Comprehensive Plan 
under this section shall be submitted with the IHA resolution under 
Sec. 950.672(d)(7).
    (f) Prerequisite for receiving assistance. (1) Prohibition of 
assistance. No financial assistance, except for emergency work to be 
funded under Secs. 950.601(b) and 950.666(a)(2), and for modernization 
needs resulting from disasters under Sec. 950.601(b), may be made 
available under this subpart unless HUD has approved a Comprehensive 
Plan submitted by the IHA that meets the requirements of Sec. 950.672. 
An IHA that has failed to obtain approval of its Comprehensive Plan by 
the end of the FFY shall have its formula allocation for that year 
(less any formula amounts provided to the IHA for emergencies) added to 
the subsequent year's appropriation of funds for grants under this 
part. HUD shall allocate such funds to IHAs and PHAs participating in 
the CGP in accordance with the formula under Sec. 950.601(e) and (f) in 
the subsequent FFY. An IHA that elects in any FFY not to participate in 
the CGP under this subpart may participate in the CGP in subsequent 
FFYs.
    (2) Requests for emergency assistance. An IHA may receive funds 
from its formula allocation to address emergency modernization needs if 
HUD has not approved an IHA's Comprehensive Plan. To request such 
assistance, an IHA shall submit to HUD a request for funds in such form 
as HUD may prescribe, including any documentation necessary to support 
its claim that an emergency exists. HUD shall review the request and 
supporting documentation to determine if it meets the definition of 
``emergency work,'' as set forth in Sec. 950.102.


Sec. 950.675  HUD review and approval of Comprehensive Plan (including 
action plan).

    (a) Submission of Comprehensive Plan. (1) Upon receipt of a 
Comprehensive Plan from an IHA, HUD shall determine whether:
    (i) The plan contains each of the required components specified at 
Sec. 950.672(d); and
    (ii) If applicable, the IHA has submitted any additional 
information or assurances required as a result of HUD monitoring, 
findings of inadequate IHA performance, audit findings, or civil rights 
compliance findings.
    (2) Acceptance for review. If the IHA has submitted a Comprehensive 
Plan (including the action plan) that meets the criteria specified in 
paragraph (a)(1) of this section, HUD shall accept the Comprehensive 
Plan for review, within 14 calendar days of its receipt in the Area 
ONAP. The IHA shall be notified in writing that the plan has been 
accepted by HUD, and that the 75-day review period is proceeding.
    (3) Time period for review. A Comprehensive Plan that is accepted 
by HUD for review shall be considered to be approved unless HUD 
notifies the IHA in writing, postmarked within 75 calendar days of the 
date of HUD's receipt of the Comprehensive Plan for review, that HUD 
has disapproved the plan. HUD shall not disapprove a Comprehensive Plan 
on the basis that it cannot complete its review within the 75-day 
deadline.
    (4) Rejection of Comprehensive Plan. If an IHA has submitted a 
Comprehensive Plan (including the action plan) that does not meet the 
requirements of paragraph (a)(1) of this section, HUD shall notify the 
IHA within 14 calendar days of its receipt that HUD has rejected the 
plan for review. In such case, HUD shall indicate the reasons for 
rejection, the modifications required to qualify the Comprehensive Plan 
for HUD review, and the deadline date for receipt of any modifications.
    (b) HUD approval of Comprehensive Plan (including action plan). (1) 
A Comprehensive Plan (including the action plan) that is accepted by 
HUD for review in accordance with paragraph (a) of this section shall 
be considered to be approved, unless HUD notifies the IHA in writing, 
postmarked within 75 days of the date of HUD's receipt of the 
Comprehensive Plan for review, that HUD has disapproved the plan, 
indicating the reasons for disapproval, and the modifications required 
to make the Comprehensive Plan approvable. The IHA shall re-submit the 
Comprehensive Plan to HUD, in accordance with the deadline established 
by HUD, which may allow up to 75 calendar days before the end of the 
FFY for HUD review. If the revised plan is disapproved by HUD following 
its resubmission, or the IHA fails to resubmit the plan by the deadline 
established by HUD, any funds that would have been allocated to the IHA 
shall be added to the subsequent year's appropriation of funds for 
grants under this subpart. HUD shall allocate such funds to IHAs and 
PHAs participating in the CGP in accordance with the formula under 24 
CFR 950.601 and 968.103. HUD shall not disapprove a Comprehensive Plan 
on the basis that HUD cannot complete its review under this section 
within the 75-day deadline.
    (2) HUD shall approve the Comprehensive Plan except where it makes 
a determination in accordance with one or more of the following:
    (i) The Comprehensive Plan is incomplete in significant matters. 
HUD determines that the IHA has failed to include all required 
information or documentation in its Comprehensive Plan, e.g, the 
physical needs assessment does not provide all of the information 
required by HUD concerning all of its developments; or the IHA has 
supplied incomplete data on the current condition and other 
characteristics of its developments;
    (ii) Identified needs are plainly inconsistent with facts and data. 
On the basis of available significant facts and data pertaining to the 
physical and operational condition of the IHA's developments or the 
management and operations of the IHA, HUD determines that the IHA's 
identification of modernization needs (see Sec. 950.672(d)(2) and (3)) 
is plainly inconsistent with such facts and data. HUD will take into 
account facts and data such as those derived from recent HUD 
monitoring, audits, and resident comments and will disapprove a 
Comprehensive Plan based on such findings as: [[Page 18253]] 
    (A) Identified physical improvements and replacement are 
inadequate. The completion of the identified physical improvements and 
replacements will not bring all of an IHA's developments to a level at 
least equal to the modernization and energy conservation and life-cycle 
cost-effective standards in Sec. 950.603 (except that a development 
shall meet the energy conservation standards under Sec. 950.603 only 
when they are applicable to the work being performed);
    (B) Identified management improvements are inadequate. The 
identified management and operations improvement needs do not address 
all of an IHA's areas of deficiency, or the completion of those 
improvements would not result in each area of deficiency under an IHA's 
management improvement plan under Sec. 950.135 being brought up to an 
acceptable level of performance; and
    (C) Proposed physical and management improvements fail to address 
identified needs. The proposed physical and management improvements in 
the action plan are not related to the identified needs in the needs 
assessments portion of the Comprehensive Plan, e.g., a heating plant 
renovation is in the action plan, but it was not included in the needs 
assessment for that development.
    (iii) Action plan is plainly inappropriate to meeting identified 
needs. On the basis of the Comprehensive Plan, HUD determines that the 
action plan (see Sec. 950.672(d)(5)) is plainly inappropriate to meet 
the needs identified in the Comprehensive Plan, e.g., the proposed work 
item will not correct the need identified in the needs assessment. HUD 
will take into account the availability of funds. In addition, HUD will 
take into account whether the action plan fails to address work items 
that are needed to correct known emergency conditions or that are 
otherwise needed to meet statutory or other legally mandated 
requirements, as identified by the IHA in its Comprehensive Plan.
    (iv) Inadequate demonstration of long-term viability at reasonable 
cost. HUD determines that the IHA has failed to demonstrate that 
completion of improvements and replacements identified in the 
Comprehensive Plan, as required by Sec. 950.672(d)(2) and (3), will 
reasonably ensure long-term viability of one or more Indian housing 
developments to which they relate at a reasonable cost, as required by 
Sec. 950.672(d)(4).
    (v) Contradiction of local government statement or IHA resolution. 
HUD has evidence that tends to challenge, in a substantial manner, the 
appropriate governing body's statement or IHA resolution contained in 
the Comprehensive Plan, as required in Sec. 950.672(d)(6) and (7). Such 
evidence may include, but is not necessarily limited to:
    (A) Evidence that the IHA failed to implement the Partnership 
Process and to meet the requirements for resident participation, as set 
forth in Sec. 950.672(b). In such cases, HUD shall review the IHA's 
resident participation process and any supporting documentation to 
determine whether the standards for participation under Sec. 950.672(b) 
were met;
    (B) With respect to an IHA established under State law and 
determined to be subject to the requirements of title VI of the Civil 
Rights Act of 1964 (42 U.S.C. 2000d) and the Fair Housing Act (42 
U.S.C. 3601-3619), HUD shall also consider as such evidence the 
following:
    (1) A pending proceeding against the IHA based upon a charge of 
discrimination pursuant to the Fair Housing Act. (For purposes of this 
provision, ``a charge of discrimination'' means a charge, pursuant to 
section 810(g)(2) of the Fair Housing Act (42 U.S.C. 3610(g)(2)), 
issued by the HUD General Counsel, or his or her legally authorized 
designee.);
    (2) A pending civil rights suit against the IHA instituted by the 
Department of Justice;
    (3) Outstanding HUD findings, under Sec. 950.120, of IHA 
noncompliance with civil rights statutes and executive orders or 
implementing regulations, as a result of formal administrative 
proceedings, unless the IHA is implementing a HUD-approved resident 
selection and assignment plan or compliance agreement designed to 
correct the area(s) of noncompliance;
    (4) A deferral of the processing of applications from the IHA 
imposed by HUD under title VI of the Civil Rights Act of 1964 (42 
U.S.C. 2000d), 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), or under section 504 of the Rehabilitation Act of 1973 (29 
U.S.C. 794) and HUD's section 504 regulations (24 CFR 8.57); or
    (5) An adjudication of a violation under any of the authorities 
under Sec. 950.120(a) in a civil action filed against the IHA by a 
private individual, unless the IHA is implementing a HUD-approved 
resident selection and assignment plan or compliance agreement designed 
to correct the area(s) of noncompliance.
    (c) Effect of HUD approval of Comprehensive Plan. After HUD 
approves the Comprehensive Plan (including the Five-Year Action Plan), 
or any amendments to the plan, it shall be binding upon HUD and the 
IHA, until such time as the IHA submits, and HUD approves, an amendment 
to its plan. The IHA is expected to undertake the work set forth in the 
Annual Statement. However, the IHA may undertake any of the work 
identified in any of the other four years of the latest approved Five-
Year Action Plan, current approved Annual Statement or previously 
approved CIAP budgets, without further HUD approval. Actual uses of the 
funds are to be reflected in the IHA Annual Performance and Evaluation 
Report for each grant. See Sec. 950.684. HUD encourages the IHA to 
inform the residents of significant changes (such as changes in scope 
of work or whenever it moves work items within the approved Five-Year 
Action Plan). The IHA shall retain documentation of that information in 
its files. If HUD determines as a result of an audit or monitoring 
findings that an IHA has provided false or substantially inaccurate 
data in its Comprehensive Plan/Annual Submission or has circumvented 
the intent of the program, HUD may condition the receipt of assistance, 
in accordance with Sec. 950.687. Moreover, in accordance with 18 U.S.C. 
1001, any individual or entity who knowingly and willingly makes or 
uses a document or writing containing any false, fictitious, or 
fraudulent statement or entry, in any matter within the jurisdiction of 
any department or agency of the United States, shall be fined not more 
than $10,000 or imprisoned for not more than five years, or both.


Sec. 950.678  Annual Submission of activities and expenditures.

    (a) General. The Annual Submission is a collective term for all 
documents that the IHA shall submit to HUD for review and approval 
before accessing the current FFY grant funds. Such documents include 
the Annual Statement, Work Statements for years two through five of the 
Five-Year Action Plan, local government statement, IHA Board 
Resolution, materials demonstrating the partnership process, and any 
other documents as prescribed by HUD. For planning purposes, an IHA may 
use either the amount of funding received in the current year or the 
actual formula amount provided in HUD's notification under 
Sec. 950.669(b)(1) in developing the Five-Year Action Plan for 
presentation at the resident meetings and public hearing. Work 
Statements cover the second through the fifth years of the Five-Year 
Action Plan and set [[Page 18254]] forth the major work categories and 
costs, by development or IHA-wide, that the IHA intends to undertake in 
each year of years two through five. In preparing these Work 
Statements, the IHA shall assume that the current FFY formula amount 
will be available in each year of years two through five. The Work 
Statements for all five years will be at the same level of detail so 
that the IHA may interchange work items as discussed in 
Sec. 950.672(d)(5)(i). An IHA may budget up to 8 percent of its annual 
grant in a contingency account for cost overruns.
    (b) Submission. After receiving HUD notification of the formula 
amount estimating how much funding will be available from other 
sources, such as State and tribal governments, and determining its 
activities and costs based on the current FFY formula amount, the IHA 
shall submit its Annual Submission.
    (c) Acceptance for review. (1) Upon receipt of an Annual Submission 
from an IHA, HUD shall determine whether:
    (i) The Annual Submission contains each of the required components; 
and
    (ii) The IHA has submitted any additional information or assurances 
required as a result of HUD monitoring, findings of inadequate IHA 
performance, audit findings, and civil rights compliance findings.
    (2) If the IHA has submitted a complete Annual Submission and all 
required information and assurances, HUD will accept the submission for 
review, as of the date of receipt. If the IHA has not submitted all 
required material, HUD will promptly notify the IHA that it has 
disapproved the submission, indicating the reasons for disapproval, the 
modifications required to qualify the Annual Submission for HUD review, 
and the date by which such modifications shall be received by HUD.
    (d) Resident and local government participation. An IHA is required 
to develop its Annual Submission, including any proposed amendments to 
its Comprehensive Plan as provided in Sec. 950.672(e), in consultation 
with officials of the appropriate governing body (or in the case of an 
IHA with developments in multiple jurisdictions, in consultation with 
the CEO of each such jurisdiction or with an advisory group 
representative of all jurisdictions) and with residents and duly 
elected resident organizations of the developments covered by the 
Comprehensive Plan, as follows:
    (1) Public notice. Within a reasonable amount of time before the 
advance meeting for residents under paragraph (d)(2) of this section, 
and the public hearing under paragraph (d)(3) of this section, the IHA 
shall annually provide public notice of the advance meeting and the 
public hearing in a manner determined by the IHA and that ensures 
notice to all duly elected resident organizations;
    (2) Advance meeting with residents. The IHA shall at least annually 
hold a meeting open to all residents and duly elected resident 
organizations. The advance meeting shall be held within a reasonable 
amount of time before the public hearing under paragraph (d)(3) of this 
section. The IHA will provide residents with information concerning the 
contents of the IHA's Five-Year Action Plan (and any proposed 
amendments to the IHA's Comprehensive Plan to be submitted with the 
Annual Submission) so that residents can comment adequately at the 
public hearing on the contents of the Five-Year Action Plan and any 
proposed amendments to the Comprehensive Plan.
    (3) Public hearing. The IHA shall annually hold at least one public 
hearing, and any appropriate number of additional hearings, to present 
information on the Annual Submission and the status of prior approved 
programs. The public hearing shall provide ample opportunity for 
residents of the developments covered by the Comprehensive Plan, 
officials of the appropriate governing body, and other interested 
parties, to express their priorities and concerns. The IHA shall give 
full consideration to the comments and concerns of residents, local 
government officials, and other interested parties in developing its 
Five-Year Action Plan, or any amendments to its Comprehensive Plan.
    (4) Expedited scheduling. IHAs are encouraged to hold the meeting 
with residents and duly elected resident organizations under paragraph 
(d)(2) of this section, and the public hearing under paragraph (d)(3) 
of this section, between July 1 (i.e., after the end of the program 
year--June 30) and September 30, using the formula amount for the 
current FFY. If an IHA elects to use such expedited scheduling, it 
shall explain at the meeting with residents and duly elected resident 
organizations and at the public hearing that the current FFY amount is 
not the actual grant amount for the subsequent year, but is rather the 
amount used for planning purposes. It shall also explain that the Five-
Year Action Plan will be adjusted when HUD provides notification of the 
actual formula amount, and explain which major work categories at which 
developments may be added or deleted to adjust for the actual formula 
amount and that any added work categories/developments will come from 
the Comprehensive Plan.
    (e) Contents of Annual Submission. The Annual Statement for each 
year shall include, for each development or on an IHA-wide basis for 
management improvements or certain physical improvements for which work 
is to be funded out of that year's grant:
    (1) A list of development accounts with an identification of major 
work categories;
    (2) The cost for each major work category, as well as a summary of 
cost by development account;
    (3) The IHA-wide or development-specific management improvements to 
be undertaken during the year;
    (4) For each development and for any management improvements not 
covered by a HUD-approved management improvement plan, a schedule for 
the use of current year funds, including target dates for the 
obligation and expenditure of the funds. In general, HUD expects that 
an IHA will obligate its current year's allocation of CGP funds (except 
for its funded replacement reserves) within two years, and expend such 
funds within three years, of the date of HUD approval, unless longer 
time-frames are approved by HUD due to the size of the grant, the 
complexity of the work, and other factors;
    (5) A summary description of the actions to be taken with non-CGP 
funds to meet physical and management improvement needs that have been 
identified by the IHA in its needs assessments;
    (6) Documentation supporting the IHA's actions in carrying out its 
responsibilities under the National Environmental Policy Act and other 
related authorities in accordance with Sec. 950.120(a) and (b);
    (7) Other information, as specified by HUD and approved by OMB 
under the Paperwork Reduction Act; and
    (8) An IHA resolution approving the Annual Submission or any 
amendments thereto, as set forth in Sec. 950.672(d)(7).
    (f) Additional submissions with Annual Submission. An IHA shall 
submit with the Annual Submission any amendments to the Comprehensive 
Plan, as set forth in Sec. 950.672(e), and such additional information 
as may be prescribed by HUD. HUD shall review any proposed amendments 
to the Comprehensive Plan in accordance with review standards under 
Sec. 950.675(b).
    (g) HUD review and approval of Annual Submission. (1) General. An 
Annual Submission accepted in accordance with paragraph (a) of this 
section shall be considered to be approved, unless HUD notifies the IHA 
[[Page 18255]] in writing, postmarked within 75 calendar days of the 
date that HUD receives the Annual Submission for review under paragraph 
(c) of this section, that HUD has disapproved the Annual Submission, 
indicating the reasons for disapproval, the modifications required to 
make the Annual Submission approvable, and the date by which such 
modifications shall be received by HUD. HUD may request additional 
information (e.g., for eligibility determinations) to facilitate review 
and approval of the Annual Submission during the 75-day review period. 
HUD shall not disapprove an Annual Submission on the basis that HUD 
cannot complete its review under this section within the 75-day 
deadline;
    (2) Bases for disapproval for Annual Submission. HUD shall approve 
the Annual Submission, except when:
    (i) Plainly inconsistent with Comprehensive Plan. HUD determines 
that the activities and expenditures proposed in the Annual Submission 
are plainly inconsistent with the IHA's approved Comprehensive Plan;
    (ii) Contradiction of IHA resolution. HUD has evidence that tends 
to challenge, in a substantial manner, the certifications contained in 
the board resolution, as required by Sec. 950.672(d)(7).
    (h) Amendments to Annual Statement. The IHA shall advise HUD of all 
changes to the IHA's approved Annual Statement in its Performance and 
Evaluation Report submitted under Sec. 950.684. The IHA shall submit to 
HUD for prior approval any additional work categories (except for 
emergency work) that are not within the IHA's approved Five-Year Action 
Plan.
    (i) Failure to obligate formula funding and extension of time for 
performance. (1) Failure to obligate formula funds. If the IHA fails to 
obligate formula funds within the approved or extended time period, the 
IHA may be subject to an alternative management strategy, which may 
involve third-party oversight or administration of the modernization 
function. HUD would only require such action after a corrective action 
order had been issued under Sec. 950.687 and the IHA failed to comply 
with the order. HUD could then require an alternative management 
strategy in a corrective action order. An IHA may appeal in writing the 
corrective action order requiring an alternative management strategy 
within 30 calendar days of that order. HUD Headquarters shall render a 
written decision on an IHA's appeal within 30 calendar days of the date 
of its receipt of the IHA's appeal.
    (2) Extension of time for performance. An IHA may extend the target 
dates for fund obligation and expenditure in the approved Annual 
Statement whenever any delay outside the IHA's control occurs, as 
specified by HUD, and the extension is made in a timely manner. Such 
revision is subject to HUD review under Sec. 950.687(a)(2) as to the 
IHA's continuing capacity. HUD shall not review as to an IHA's 
continuing capacity any revisions to an IHA's Comprehensive Plan and 
related statements when the basis for the revision is that HUD has not 
provided the amount of assistance set forth in the Annual Submission, 
or has not provided such assistance in a timely manner.
    (j) ACC Amendment. After HUD approval of each year's Annual 
Submission, HUD and the IHA shall enter into an ACC amendment to obtain 
modernization funds. The ACC amendment shall require low-income use of 
housing for not less than 20 years from the date of the ACC amendment 
(subject to sale of homeownership units in accordance with the terms of 
the ACC).
    (k) Declaration of Trust. As HUD may require, the IHA shall execute 
and file for record a Declaration of Trust as provided under the ACC to 
protect the rights and interests of HUD throughout the 20-year period 
during which the IHA is obligated to operate its developments in 
accordance with the ACC, the Act, and HUD regulations and requirements. 
A Declaration of Trust is not required for Mutual Help units.


Sec. 950.681  Conduct of modernization activities.

    (a) Initiation of activities. After HUD has approved a Five-Year 
Action Plan and entered into an ACC amendment with the IHA, the IHA 
shall undertake in a timely, efficient, and economical manner the 
modernization activities and expenditures set forth in its approved 
Annual Statement or substitute work categories from within the approved 
Five-Year Action Plan, subject to the following requirements:
    (1) The IHA may undertake the activities using force account or 
contract labor, including contracting with an RMC. If the entirety of 
modernization activity (including the planning and architectural design 
of the rehabilitation) is administered by an RMC, the IHA shall not 
retain for any administrative or other reason, any portion of the CGP 
funds provided, unless the IHA and the RMC provide otherwise by 
contract; and
    (2) All activities shall be monitored by resident groups within the 
framework and intent of the Partnership Process.
    (b) Fund requisitions. To request modernization funds against the 
approved Annual Statement for year one, the IHA shall comply with 
requirements prescribed by HUD.
    (c) Contracting requirements. The IHA shall comply with the wage 
rate requirements in Sec. 950.120. In addition, the IHA shall comply 
with the requirements set forth in subpart B of this part, except as 
follows:
    (1) Assurance of completion. For each construction or equipment 
contract over $25,000, the contractors shall furnish a performance and 
payment bond for 100 percent of the contract price, or, notwithstanding 
24 CFR 85.36(h) and Sec. 950.170, a 20 percent cash escrow, or a 25 
percent letter of credit, or, as may be required by law, separate 
performance and payments bonds, each for 50 percent or more of the 
contract price.
    (2) Previous participation. An IHA shall ensure that the contractor 
is not on the GSA List of Parties Excluded from Federal Procurement and 
Nonprocurement Programs.
    (d) Assurance of nonduplication. The IHA shall ensure that there is 
no duplication between the activities carried out pursuant to the CGP, 
and activities carried out with other funds.
    (e) Fiscal closeout of a comprehensive grant. Upon expenditure by 
an IHA of all funds, or termination by HUD of the activities funded by 
each annual grant, the IHA shall submit the actual modernization cost 
certificate, in a form prescribed by HUD, to HUD for review, audit 
verification, and approval. The audit shall follow the guidelines 
prescribed by 24 CFR part 44, Non-Federal Government Audit 
Requirements. If the audited modernization cost certificate discloses 
unauthorized expenditures, the IHA shall take such corrective actions 
as HUD may direct.


Sec. 950.684  IHA Performance and Evaluation Report.

    (a) Submission. For any FFY in which an IHA has received assistance 
under this subpart, the IHA shall submit a Performance and Evaluation 
Report, in a form and at a time to be prescribed by HUD, describing its 
use of assistance in accordance with the approved Annual Statement. The 
IHA shall make reasonable efforts to notify residents and officials of 
the appropriate governing body of the availability of the draft report, 
make copies available to residents in the development office, and 
provide residents with at least 30 calendar days in which to comment on 
the report.
    (b) Content. The report shall include the following: 
[[Page 18256]] 
    (1) An explanation of how the IHA has used other funds, such as 
Community Development Block Grant program assistance, State or tribal 
assistance, and private funding, for the needs identified in the IHA's 
Comprehensive Plan and for the purposes of this subpart I;
    (2) An explanation of how the IHA has used the CGP funds to address 
the needs identified in its Comprehensive Plan and to carry out the 
activities identified in its approved Five-Year Action Plan, and shall 
specifically address:
    (i) Any funds used for emergency needs not set forth in its Five-
Year Action Plan; and
    (ii) Any changes to the Annual Statement under Sec. 950.678(h);
    (3) The results of the IHA's process for consulting with residents 
on the implementation of the plan;
    (4) The current status of the IHA's obligations and expenditures, 
specifying how the IHA is performing with respect to its implementation 
schedules, and an explanation of any necessary revision to the planned 
target dates;
    (5) A summary of resident, tribal, or local government comments 
received on the report; and
    (6) A resolution by the IHA Board of Commissioners approving the 
Performance and Evaluation Report and containing a certification that 
the IHA has made reasonable efforts to notify residents in the 
development(s) and local government officials of the opportunity to 
review the draft report and to comment on it before its submission to 
HUD, and that copies of the report were provided to residents in the 
development office and to local government officials, or furnished upon 
their request.


Sec. 950.687  HUD review of IHA performance.

    (a) HUD determination. At least annually, HUD shall carry out such 
reviews of the performance of each IHA as may be necessary or 
appropriate to make the determinations required by this paragraph, 
taking into consideration all available evidence.
    (1) Conformity with Comprehensive Plan. HUD will determine whether 
the IHA has carried out its activities under this subpart in a timely 
manner and in accordance with its Comprehensive Plan.
    (i) In making this determination, HUD will review the IHA's 
performance to determine whether the modernization activities 
undertaken during the period under review conform substantially to the 
activities specified in the approved Five-Year Action Plan. HUD will 
also review an IHA's progress against the implementation schedules for 
purposes of determining whether the IHA has carried out its 
modernization activities in a timely manner;
    (ii) HUD will review an IHA's performance to determine whether the 
activities carried out comply with the requirements of the Act, 
including the requirement that the work carried out meets the 
modernization and energy conservation standards in Sec. 950.603, this 
part, and other applicable laws and regulations.
    (2) Continuing capacity. HUD will determine whether the IHA has a 
continuing capacity to carry out its Comprehensive Plan in a timely 
manner. After the first full operational year of CGP, CIAP experience 
will not be taken into consideration except when the IHA has not yet 
had comparable experience under the CGP.
    (i) The primary factors to be considered in arriving at a 
determination that a recipient has a continuing capacity are those 
described in paragraphs (a)(1) and (a)(3) of this section as they 
relate to carrying out the Comprehensive Plan. HUD generally will 
consider an IHA to have a continuing capacity if it determines that the 
IHA has:
    (A) Carried out its activities under the CGP program, as well as 
the CIAP, in a timely manner, taking into account the level of funding 
available and whether the IHA obligates its modernization funds within 
two years from the execution of the ACC amendment and expends such 
modernization funds within three years of ACC amendment execution, or 
such longer period as approved by HUD or as extended by the IHA for 
reasons outside of its control;
    (B) Adequately inspected the funded modernization to assure that 
the physical work is being carried out in accordance with the plans and 
specifications and the modernization and energy conservation standards 
(or in the case of an IHA's performance under CIAP, whether the IHA has 
carried out the physical work in accordance with the HUD-approved 
budget and in conformance with the modernization and energy 
conservation standards) and that any HUD monitoring findings relating 
to the quality of the physical work have been, or are being, resolved);
    (C) Established and maintained internal controls for its 
modernization program in accordance with HUD requirements for financial 
management and accounting, as determined by the fiscal audit;
    (D) Administered its modernization contracts in accordance with a 
HUD-approved procurement policy, which meets the requirements of 24 CFR 
85.36(a) and Sec. 950.160;
    (E) Carried out its activities in accordance with its Comprehensive 
Plan and HUD requirements; and
    (F) Has satisfied, or made reasonable progress toward satisfying, 
the performance standards prescribed in paragraph (a)(3) of this 
section as they relate to activities under the CGP program;
    (ii) HUD will give particular attention to IHA efforts to 
accelerate the progress of the program and to prevent the recurrence of 
past deficiencies or noncompliance with applicable laws and 
regulations.
    (3) Reasonable progress. HUD shall determine whether the IHA has 
satisfied, or has made reasonable progress towards satisfying, the 
following performance standards:
    (i) With respect to the physical condition of each development, 
whether the work items being carried out by the IHA are in conformity 
with the modernization and energy conservation standards in 
Sec. 950.603, and whether the IHA has brought, or is making reasonable 
progress toward bringing, all of its developments to these standards, 
in accordance with its physical needs assessment; and
    (ii) With respect to the management condition of the IHA, whether 
the IHA has achieved, or is making reasonable progress in implementing, 
the work items (specified in its Annual Statement and Five-Year Action 
Plan) that are designed to address deficiencies identified in its 
management needs assessment or through audits or HUD reviews; and
    (iii) In determining whether the IHA has made reasonable progress, 
HUD will take into account the level of funding available and whether 
the IHA obligates its modernization funds within two years from the 
execution of the ACC amendment and expends such modernization funds 
within three years of ACC amendment execution, or such longer period if 
approved by HUD or extended by the IHA for reasons outside of its 
control in an implementation schedule. The IHA shall demonstrate to 
HUD's satisfaction that any lack of timeliness (beyond the time periods 
specified in this paragraph or date specified in a HUD-approved 
implementation schedule) has resulted from factors beyond the IHA's 
control. If the IHA fails to obligate formula funds within the approved 
or extended time period, the IHA may be subject to an alternative 
management strategy which may involve third-party oversight or 
administration of the modernization function. HUD would only require 
such [[Page 18257]] action after a corrective action order had been 
issued under this section and the IHA failed to comply with the order. 
HUD could then require an alternative management strategy in a 
correction action order. An IHA may appeal in writing the corrective 
action order requiring an alternative management strategy within 30 
calendar days of that order. HUD Headquarters shall render a written 
decision on an IHA's appeal within 30 calendar days of the date of its 
receipt of the IHA's appeal.
    (b) Notice of deficiency. Based on HUD reviews of IHA performance 
and findings of any of the deficiencies in paragraph (d) of this 
section, HUD may issue to the IHA a notice of deficiency stating the 
specific program requirements that the IHA has violated and requesting 
the IHA to take any of the actions in paragraph (e) of this section.
    (c) Corrective action order. (1) Based on HUD reviews of IHA 
performance and findings of any of the deficiencies in paragraph (d) of 
this section, HUD may issue to the IHA a corrective action order, 
whether or not a notice of deficiency has previously been issued in 
regard to the specific deficiency on which the corrective action order 
is based. HUD may order corrective action at any time by notifying the 
IHA of the specific program requirements that the IHA has violated, and 
specifying that any of the corrective actions listed in paragraph (e) 
of this section shall be taken. HUD shall design corrective action to 
prevent a continuation of the deficiency, mitigate any adverse effects 
of the deficiency to the extent possible, or prevent a recurrence of 
the same or similar deficiencies.
    (2) Before ordering corrective action, HUD will notify the IHA and 
give it an opportunity to consult with HUD regarding the proposed 
action.
    (3) Any corrective action ordered by HUD shall become a condition 
of the grant agreement.
    (4) If HUD orders corrective action by an IHA in accordance with 
this section, the IHA's Board of Commissioners shall notify affected 
residents of HUD's determination, the bases for the determination, the 
conditioning requirements imposed under this paragraph (c), and the 
consequences to the IHA if it fails to comply with HUD's requirements.
    (d) Basis for corrective action. HUD may order an IHA to take 
corrective action only if HUD determines:
    (1) The IHA has not submitted a performance and evaluation report, 
in accordance with Sec. 950.684;
    (2) The IHA has not carried out its activities under the CGP 
program in a timely manner and in accordance with its Comprehensive 
Plan or HUD requirements, as described in paragraph (a)(1) of this 
section;
    (3) The IHA does not have a continuing capacity to carry out its 
Comprehensive Plan in a timely manner or in accordance with its 
Comprehensive Plan or HUD requirements, as described in paragraph 
(a)(2) of this section;
    (4) The IHA has not satisfied, or has not made reasonable progress 
towards satisfying, the performance standards specified in paragraph 
(a)(3) of this section;
    (5) An audit conducted in accordance with 24 CFR part 44 and 
Sec. 950.120, or pursuant to other HUD reviews (including monitoring 
findings) reveals deficiencies that HUD reasonably believes require 
corrective action;
    (6) The IHA has failed to repay HUD for amounts awarded under the 
CGP program that were improperly expended; or
    (7) The IHA has been determined to be high risk, in accordance with 
Sec. 950.135.
    (e) Types of corrective action. HUD may direct an IHA to take one 
or more of the following corrective actions:
    (1) Submit additional information:
    (i) Concerning the IHA's administrative, planning, budgeting, 
accounting, management, and evaluation functions, to determine the 
cause for an IHA not meeting the standards in paragraphs (a)(1), (2), 
or (3) of this section;
    (ii) Explaining any steps the IHA is taking to correct the 
deficiencies;
    (iii) Documenting that IHA activities were not inconsistent with 
the IHA's annual statement or other applicable laws, regulations, or 
program requirements; and
    (iv) Demonstrating that the IHA has a continuing capacity to carry 
out the Comprehensive Plan in a timely manner;
    (2) Submit detailed schedules for completing the work identified in 
its Annual Statements and report periodically on its progress on 
meeting the schedules;
    (3) Notwithstanding 24 CFR 85.36(g), submit to HUD the following 
documents for prior approval, which may include, but are not limited 
to:
    (i) Proposed agreement with the architect/engineer (prior to 
execution);
    (ii) Complete construction and bid documents (prior to soliciting 
bids);
    (iii) Proposed award of contracts, including construction and 
equipment contracts and management contracts; or
    (iv) Proposed contract modifications prior to issuance, including 
modifications to construction and equipment contracts, and management 
contracts.
    (4) Submit additional material in support of one or more of the 
statements, resolutions, and certifications submitted as part of the 
IHA's Comprehensive Plan, Five-Year Action Plan, or Performance and 
Evaluation Report;
    (5) Submit additional material in support of one or more of the 
statements, resolutions, and certifications submitted as part of the 
IHA's Comprehensive Plan, Five-Year Action Plan, or Performance and 
Evaluation Report;
    (6) Reimburse, from non-HUD sources, one or more program accounts 
for any amounts improperly expended;
    (7) Take such other corrective actions HUD determines appropriate 
to correct IHA deficiencies;
    (8) Submit to an alternative management strategy which may involve 
third-party oversight or administration of the modernization function 
(see Sec. 950.669(d)); and
    (9) Take such other corrective actions HUD determines appropriate 
to correct IHA deficiencies.
    (f) Failure to take corrective action. In cases in which HUD has 
ordered corrective action and the IHA has failed to take the required 
actions within a reasonable time, as specified by HUD, HUD may take one 
or more of the following steps:
    (1) Withhold some or all of the IHA's grant;
    (2) Declare a breach of the ACC grant amendment with respect to 
some or all of the IHA's functions; or
    (3) Any other sanction authorized by law or regulation.
    (g) Reallocation of funds that have been withheld. If HUD has 
withheld for a prescribed period of time some or all of an IHA's annual 
grant, HUD may reallocate such amounts to other IHAs/PHAs under the CGP 
program, subject to approval in appropriations acts. The reallocation 
shall be made to IHAs that HUD has determined to be administratively 
capable under Sec. 950.135, and to PHAs under the CGP program that are 
not designated as either troubled or mod troubled under the PHMAP at 24 
CFR part 901, based upon the relative needs of these IHAs and PHAs, as 
determined under the formula at Sec. 950.601.
    (h) Right to appeal. Before withholding some or all of the IHA's 
annual grant, declaring a breach of the ACC grant amendment, or 
reallocating funds that have been withheld, HUD will notify the IHA and 
give it an opportunity, within a prescribed period [[Page 18258]] of 
time, to present to ONAP Headquarters, in writing, any arguments or 
additional facts and data concerning the proposed action.
    (i) Notification of residents. The IHA's Board of Commissioners 
shall notify affected residents of HUD's final determination to 
withhold funds, declare a breach of the ACC grant amendment, or 
reallocate funds, as well as the basis for, and the consequences 
resulting from, such a determination.
    (j) Recapture. In addition, HUD may recapture for good cause any 
grant amounts previously provided to an IHA, based upon a determination 
that the IHA has failed to comply with the requirements of the CGP 
program. Before recapturing any grant amounts, HUD will notify the IHA 
and give it an opportunity to appeal in accordance with 
Sec. 950.687(h). Any reallocation of recaptured amounts will be in 
accordance with Sec. 950.687(g). The IHA's board of Commissioners shall 
notify affected residents of HUD's final determination to recapture any 
funds.

Subpart J--Operating Subsidy


Sec. 950.701  Purpose and applicability.

    (a) Implementation of section 9(a).   (1) The purpose of this 
subpart is to establish standards and policies for the distribution of 
operating subsidy in accordance with section 9(a) of the United States 
Housing Act of 1937 (42 U.S.C. 1437g(a)). Section 9(a) authorizes the 
Secretary of Housing and Urban Development (HUD) to make annual 
contributions for the operation of IHA-owned rental housing (operating 
subsidy).
    (2) This subpart establishes standards for the cost of providing 
comparable services as determined in accordance with a formula 
representing the operations of a prototype well-managed project, taking 
into account the character and location of the project and the 
characteristics of the families served. These standards, policies, and 
procedures are called the Performance Funding System (PFS), as 
described in this subpart J. The provisions of PFS are intended to 
recognize and give an incentive for efficient and economical management 
and to avoid the expenditure of federal funds to compensate for 
excessive costs attributable to poor or inefficient management. PFS is 
intended to provide the incentive and financial discipline for 
excessively high-cost IHAs to improve their management efficiency.
    (b) Applicability. This subpart is applicable to all IHA-owned 
rental units under Annual Contributions Contracts. This subpart J is 
not applicable to the Section 23 Leased Housing Program, the Section 23 
Housing Assistance Payments Program, the Section 8 Housing Assistance 
Payments Program, the Mutual-Help Program, or the Turnkey III 
Homeownership Opportunity Program. Provisions regarding an operating 
subsidy for the homeownership programs are found in the applicable 
subpart of this rule (subpart E of this part for Mutual Help, and 
subpart G of this part for Turnkey III).


Sec. 950.705  Determination of amount of operating subsidy under PFS.

    The amount of operating subsidy for which each IHA is eligible 
shall be determined as follows: The projected operating income level is 
subtracted from the total expense level (Allowable Expense Level plus 
Utilities Expense Level). These amounts are per-unit per-month dollar 
amounts, and shall be multiplied by the Unit Months Available. 
Transition funding, if applicable, and other costs as specified in 
paragraphs (b) through (e) of Sec. 950.720 are then added to this total 
in order to determine the total amount of operating subsidy for the 
requested budget year, exclusive of consideration of the cost of an 
independent audit. As an independent operating subsidy eligibility 
factor, an IHA may receive operating subsidy in an amount, approved by 
HUD, equal to the actual or estimated cost of the independent audit to 
be prorated to operations of the IHA-owned rental housing (under 
Sec. 950.720(a)). (See Sec. 950.730 regarding adjustments.)


Sec. 950.710  Computation of Allowable Expense Level.

    The IHA shall compute its Allowable Expense Level (AEL) using forms 
prescribed by HUD, as follows:
    (a) Computation of Base Year Expense Level. The Base Year Expense 
Level includes payments in lieu of taxes (PILOT) required by a 
Cooperation Agreement, even if PILOT is not included in the approved 
operating budget for the base year because of a waiver of the 
requirements by the local taxing jurisdiction(s). The Base Year Expense 
Level includes all other operating expenditures as reflected in the 
IHA's operating budget for the base year approved by HUD except the 
following:
    (1) Utilities expense;
    (2) Cost of an independent audit;
    (3) Adjustments applicable to budget years before the base year;
    (4) Expenditures supported by supplemental subsidy payments 
applicable to budget years before the base year;
    (5) All other expenditures that are not normal fiscal year 
expenditures as to amount or as to the purpose for which expended; and
    (6) Expenditures that were funded from a nonrecurring source of 
income.
    (b) Adjustment. In compliance with the six exclusions set forth in 
paragraph (a) of this section, the IHA shall adjust the AEL by 
excluding any of these items from the Base Year Expense Level, if this 
has not already been accomplished. If such adjustment is made in the 
second or some later fiscal year of the PFS, the AEL shall be adjusted 
in the year in which the adjustment is made, but the adjustment shall 
not be applied retroactively. If the IHA does not make these 
adjustments, the HUD Area ONAP shall compute the adjustments.
    (c) Computation of ``Formula Expense Level.'' The IHA shall compute 
its Formula Expense Level (FEL) in accordance with a HUD-prescribed 
formula that estimates the cost of operating an average unit in a 
particular IHA's inventory. The formula takes into account such data as 
the number of two or more bedroom units, ratio of two or more bedroom 
units in high-rise family projects, ratio of units with three or more 
bedrooms, local government wage rates, and number of pre-1940 rental 
units occupied by poor households. It uses weights and a local 
inflation factor assigned each year to derive a Formula Expense Level 
for the current year and the requested budget year. The weights of the 
formula and the formula are subject to updating by HUD.
    (d) Computation of Allowable Expense Level. The IHA shall compute 
its Allowable Expense Level as follows:
    (1) Allowable Expense Level for first budget year under PFS if Base 
Year Expense Level does not exceed the top of the range. The top of the 
range is defined as: FEL plus $10.31 for fiscal years starting before 
April 1, 1992, and FEL multiplied by 1.15 for fiscal years starting on 
or after April 1, 1992. Every IHA whose Base Year Expense Level is less 
than the top limit of the range shall compute its AEL for the first 
budget year under PFS by adding the following to its Base Year Expense 
Level (before adjustment under Sec. 950.730);
    (i) Any increase approved by HUD in accordance with 
Sec. 950.730(a);
    (ii) The increase (decrease) between the Formula Expense Level for 
the base year and the Formula Expense Level for the first budget year 
under PFS; and
    (iii) The sum of the Base Year Expense Level and any amounts 
described in paragraphs (d)(1)(i) and (ii) [[Page 18259]] of this 
section multiplied by the local inflation factor.
    (2) Allowable Expense Level for first budget year under PFS if Base 
Year Expense Level exceeds the top of the range. The top of the range 
is defined as: FEL plus $10.31 for fiscal years starting before April 
1, 1992, and FEL multiplied by 1.15 for fiscal years starting on or 
after April 1, 1992. Every IHA whose Base Year Expense Level exceeds 
the top of the range shall compute its AEL for the first budget year 
under PFS by adding the following to the top of the range (not to its 
Base Year Expense Level, as in paragraph (d)(1) of this section):
    (i) The increase (decrease) between the Formula Expense Level for 
the base year and the Formula Expense Level or the first budget year 
under PFS;
    (ii) The sum of the figure equal to the top of the range and the 
increase (decrease) described in paragraph (d)(2)(i) of this section, 
multiplied by the local inflation factor. (If the Base Year Expense 
Level is above the allowable expense level, computed as provided in 
paragraph (d) of this section, the IHA may be eligible for transition 
funding under Sec. 950.735.)
    (3) Allowable Expense Level for first budget year under PFS for a 
new project. A new project of a new IHA or a new project of an existing 
IHA that the IHA decides to place under a separate ACC, which did not 
have a sufficient number of units available for occupancy in the base 
year to have a level of operations representative of a full fiscal year 
of operation is considered to be a ``new project.'' The AEL for the 
first budget year under PFS for a ``new project'' will be based on the 
AEL for a comparable project, as determined by the HUD Area ONAP. The 
IHA may suggest a project or projects it believes to be comparable.
    (4) Allowable Expense Level for budget years after the first budget 
year under PFS that begins on or after April 1, 1986 and before April 
1, 1992. For each budget year after the first budget year under PFS 
that begin on or after April 1, 1986 and before April 1, 1992, the AEL 
shall be computed as follows:
    (i) The Allowable Expense Level shall be increased by any increase 
to the AEL approved by HUD under Sec. 950.720(c);
    (ii) The AEL for the current budget year also shall be increased 
(or decreased) by either:
    (A) If the IHA has not experienced a change in the number of its 
units in excess of 5 percent or 1,000 units, whichever is less, since 
the last adjustment to the AEL based on paragraph (d)(4)(ii)(B) of this 
section, the AEL shall be increased by one-half of one percent (.5 
percent); or
    (B) If the IHA has experienced a change in the number of units in 
excess of 5 percent or 1,000 units, whichever is less, since the last 
adjustment to the AEL based on this paragraph (d)(4)(ii)(B) of this 
section, it shall use the increase (decrease) between the Formula 
Expense Level for the current budget year and the Formula Expense Level 
for the requested budget year. The IHA characteristics that shall be 
used to compute the Formula Expense Level for the current budget year 
shall be the same as those that were used for the requested budget year 
when the last adjustment to the AEL was made based on this paragraph 
(d)(4)(ii)(B) of this section, except that the number of interim years 
in which the .5 percent adjustment was made under paragraph 
(d)(4)(ii)(A) of this section shall be added to the average age that 
was used for the last adjustment; and
    (iii) The amount computed in accordance with paragraphs (d)(4)(i) 
and (ii) of this section shall be multiplied by the local inflation 
factor.

Example:

    FY 1987. Assume that: (1) The IHA has experienced no change in 
the number of its units;
    (2) The AEL for the IHA's FY 1986 is $64.00; and
    (3) The applicable local inflation factor is 6 percent 
(expressed as 1.06). The AEL for FY 1987 is $68.18, computed as 
follows:

                                                                        
                                                                        
                                                                        
1. Allowable Expense Level for FY 1986.........................   $64.00
2. Delta: Increase (or Decrease) in Formula Expense Level               
 ($64.00  x  .5 percent).......................................      .32
                                                                --------
3. Sum (line 1 plus line 2)....................................    64.32
4. Local Inflation Factor......................................     1.06
                                                                --------
5. Allowable Expense Level for FY 1987 (line 3 multiplied by            
 line 4).......................................................    68.18
                                                                        

    FY 1988. Assume that the IHA has deprogrammed (e.g., demolished 
or sold) a project that represents seven percent of its units, and 
that the last time an adjustment to the AEL was made based on 
paragraph (d)(4)(ii)(B) of this section was in its FY 1985, at which 
time the IHA had the following characteristics for its requested 
budget year: average age of 10 years, average project height of 5 
stories, and average unit size of 4 bedrooms. The Formula Expense 
Level for the current budget year is calculated using 12 years (10 
years plus two years in which the standard .5 percent adjustment was 
used), 5 stories, and 4 bedrooms.
    Also assume that Formula Expense Level calculated based on these 
characteristics is $70.00 and that the IHA average characteristics 
for the requested budget year are now an average age of 8 years, 
average project height of 4 stories and average unit size of 2 
bedrooms, resulting in a Formula Expense Level for the requested 
budget year of $68.00. The Formula Expense Level for the requested 
budget year, therefore, decreases by $2.00. Assuming that the local 
inflation factor is 4.5 percent (expressed as 1.045), the AEL for FY 
1988 is $69.16, computed as follows:

                                                                        
                                                                        
                                                                        
1. Allowable Expense Level for FY 1987.........................   $68.18
2. Delta (or Decrease) in Formula Expense Level................   (2.00)
                                                                --------
3. Sum (line 1 plus line 2)....................................    66.18
4. Local Inflation Factor......................................    1.045
                                                                --------
5. Allowable Expense Level for FY 1988 (line 3 multiplied by            
 line 4).......................................................    69.16
                                                                        

    It should be noted that the Delta in line 2 of the example 
reflects the application of the formula weights, constant, and local 
inflation factor for the requested budget year applied first to the 
IHA characteristics for the current budget year and then to the IHA 
characteristics for the requested budget year, to determine the 
respective Formula Expense Levels. The local inflation factor shown 
on line 4 of the example is the same one used in determining the 
Formula Expense Levels.

    (5) Allowable Expense Level for budget years after the first budget 
year under PFS that begins on or after April 1, 1992. For each budget 
year after the first budget year under PFS that begins on or after 
April 1, 1992, the AEL shall be computed as follows:
    (i) The Allowable Expense Level shall be increased by any increase 
to the AEL approved by HUD under Sec. 950.720(c);
    (ii) The AEL for the Current Budget Year also shall be adjusted as 
follows:
    (A) Increased by one-half of one percent (.5 percent); and
    (B) If the IHA has experienced a change in the number of units in 
excess of 5 percent or 1,000 units, whichever is less, since the last 
adjustment to the AEL based on this paragraph (d)(5)(ii)(B) of this 
section, it shall use the increase (decrease) between the Formula 
Expense Level for the Current Budget Year and the Formula Expense Level 
for the Requested Budget Year. The IHA's characteristics that shall be 
used to compute the Formula Expense Level for the Current Budget Year 
shall be the same as those that applied to the Requested Budget Year 
when the last adjustment to the AEL was made based on this paragraph 
(d)(5)(ii)(B) of this section, except that the number of interim years 
in which the .5 percent adjustment was made under paragraph 
(d)(5)(ii)(A) of this section shall be added to the average age that 
was used for the last adjustment.
    (iii) The amount computed in accordance with paragraphs (d)(5)(i) 
and (ii) of this section shall be multiplied by the Local Inflation 
Factor.
[[Page 18260]]

    (6) Adjustment of Allowable Expense Level for budget years after 
the first budget year under PFS. HUD may adjust the AEL of budget years 
after the first year under PFS under the provisions of Secs. 950.710(b) 
or 950.720(c).


Sec. 950.715  Computation of Utilities Expense Level.

    (a) General. In recognition of the rapid rises that occur in 
utilities costs, the wide diversity among IHAs as to types of utilities 
services used, the manner in which utilities payments are allocated 
between IHAs and tenants, and the fact that utilities rates charged by 
suppliers are beyond the control of the IHA, the PFS treats utilities 
expenses separately from other IHA expenses. Utilities expenses are, 
therefore, excluded from the IHA's Allowable Expense Level, and the PFS 
provides for computation of the amount of operating subsidy for 
utilities costs based upon a calculated utilities expense of each IHA. 
Accordingly, the IHA's Utilities Expense Level for the requested budget 
year shall be computed by multiplying the Allowable Utilities 
Consumption Level (AUCL) per-unit per-month for each utility, 
determined as provided in paragraph (c) of this section, by the 
projected utility rate determined as provided in paragraph (b) of this 
section.
    (b) Utilities rates. (1) The currently applicable rates, with 
consideration of adjustments and pass-throughs, in effect at the time 
the operating budget is submitted to HUD will be used as the utilities 
rates for the requested budget year, except that when the appropriate 
utility commission has, before the date of submission of the operating 
budget to HUD, approved and published rate changes to be applicable 
during the requested budget year, the future approved rates may be used 
as the utilities rates for the entire requested budget year.
    (2) If an IHA takes action, such as a well-head purchase of natural 
gas, or administrative appeals or legal action beyond normal public 
participation in rate-making proceedings to reduce the rate it pays for 
utilities (including water, fuel oil, electricity, and gas), then the 
IHA will be permitted to retain one-half of the cost savings during the 
first 12 months attributable to its actions. Upon determination that 
the action was cost-effective in the first year, the IHA may be 
permitted to retain one-half the annual cost savings for an additional 
period not to exceed six years, if the actions continue to be cost-
effective. See also paragraph (f) of this section and Sec. 950.730(c).
    (c) Computation of ``Allowable Utilities Consumption Level.'' The 
Allowable Utilities Consumption Level (AUCL) used to compute the 
Utilities Expense Level of an IHA for the requested budget year 
generally will be based upon the availability of consumption data. For 
project utilities for which consumption data are available for the 
entire rolling base period, the computation will be in accordance with 
paragraph (c)(1) of this section. If data are not available for the 
entire period, the computation will be in accordance with paragraph 
(c)(2) of this section, unless the project is a new project, in which 
case the computation will be in accordance with paragraph (c)(3) of 
this section. For a project for which the IHA has taken special energy 
conservation measures that qualify for special treatment in accordance 
with paragraph (f)(1) of this section, the computation of the AUCL may 
be made in accordance with paragraph (c)(4) of this section. The AUCL 
for all of an IHA's projects is the sum of the amounts determined using 
all of the paragraphs in this paragraph (c), as appropriate.
    (1) Rolling Base Period System. For project utilities with 
consumption data for the entire rolling base period, the AUCL is the 
average amount consumed per unit per month during the rolling base 
period, adjusted in accordance with paragraph (d) of this section. The 
IHA shall determine the average amount of each of the utilities 
consumed during the rolling base period (i.e., the 36-month period 
ending 12 months prior to the first day of the requested budget year).
    (i) IHA fiscal years affected. The rolling base period shall be 
used to compute the AUCL submitted with the operating budgets. (ii) An 
example of a rolling base is as follows:

------------------------------------------------------------------------
       IHA fiscal year (affected fiscal year)        Rolling base period
------------------------------------------------------------------------
        Beginning                   Ending            Begins      Ends  
------------------------------------------------------------------------
1-1-92...................  12-31-92 (1st year).....    1-1-88   12-31-90
1-1-93...................  12-31-93 (2nd year).....    1-1-89   12-31-91
------------------------------------------------------------------------

    (2) Alternative method if data is not available for the entire 
rolling base period:
    (i) If the IHA has not maintained or cannot recapture consumption 
data regarding a particular utility from its records for the whole 
rolling base period mentioned in paragraph (c)(1) of this section, it 
shall submit consumption data for that utility for the last 24 months 
of its rolling base period to the HUD Area ONAP for approval. If this 
is not possible, it shall submit consumption data for the last 12 
months of its rolling base period. The IHA also shall submit a written 
explanation of the reasons that data for the whole rolling base period 
is unavailable.
    (ii) In those cases when an IHA has not maintained or cannot 
recapture consumption data for a utility for the entire rolling base 
period, comparable consumption for the greatest of either 36, 24, or 12 
months, as needed, shall be used for the utility for which the data is 
lacking. The comparable consumption shall be estimated based upon the 
consumption experienced during the rolling base period of comparable 
project(s) with comparable utility delivery systems and occupancy. The 
use of actual and comparable consumption by each IHA, other than those 
IHAs defined as new projects in paragraph (c)(3) of this section, will 
be determined by the availability of complete data for the entire 36-
month rolling base period. Appropriate utility consumption records, 
satisfactory to HUD, shall be developed and maintained by all IHAs so 
that a 36-month rolling average utility consumption per unit per month 
under paragraph (c)(1) of this section can be determined.
    (iii) If an IHA cannot develop the consumption data for the rolling 
base period or for 12 or 24 months of the rolling base period, either 
from its own project(s) data, or by using comparable consumption data 
the actual per-unit per-month utility expenses stated in paragraph (d) 
of this section shall be used as the Utilities Expense Level.
    (3) Computation of Allowable Utilities Consumption Levels for New 
Projects. (i) A new project, for the purpose of establishing the 
rolling base period and the Utilities Expense Level, is defined as 
either:
    (A) A project that had not been in operation during at least 12 
months of the rolling base period, or a project that enters management 
after the rolling base period and before the end of the requested 
budget year; or
    (B) A project that during or after the rolling base period, has 
experienced conversion from one energy source to another, interruptible 
service, deprogrammed units, a switch from tenant-purchased to IHA-
supplied utilities, or a switch from IHA-supplied to tenant-purchased 
utilities.
    (ii) The actual consumption for new projects shall be determined so 
as not to distort the rolling base period in accordance with a method 
prescribed by HUD.
    (4) Freezing the Allowable Utilities Consumption Level (AUCL). (i) 
[[Page 18261]] Notwithstanding the provisions of paragraphs (c)(1) and 
(c)(2) of this section, if an IHA undertakes energy conservation 
measures that are approved by HUD under paragraph (f) of this section, 
the AUCL for the project and the utilities involved may be frozen 
during the contract period. Before the AUCL is frozen, it shall be 
adjusted to reflect any energy savings resulting from the use of any 
HUD funding. The AUCL is then frozen at the level calculated for the 
year during which the conservation measures initially will be 
implemented, as determined in accordance with paragraph (g) of this 
section.
    (ii) If the AUCL is frozen during the contract period, the annual 
three-year rolling base procedures for computing the AUCL shall be 
reactivated after the IHA satisfies the conditions of the contract. The 
three years of consumption data to be used in calculating the AUCL 
after the end of the contract period will be as follows:
    (A) First year: The energy consumption during the year before the 
year in which the contract ended and the energy consumption for each of 
the two years before installation of the energy conservation 
improvements;
    (B) Second year: The energy consumption during the year the 
contract ended, energy consumption during the year before the contract 
ended, and energy consumption during the year before installation of 
the energy conservation improvements;
    (C) Third year: The energy consumption during the year after the 
contract ended, energy consumption during the year the contract ended, 
and energy consumption during the year before the contract ended.
    (d) Utilities Expense Level when consumption data for the full 
rolling base period is unavailable. If an IHA does not obtain the 
consumption data for the entire rolling base period, or for 12 or 24 
months of the rolling base period, either for its own project(s) or by 
using comparable consumption data as required in paragraph (c)(2) of 
this section, it shall request HUD Area ONAP approval to use actual 
per-unit per-month utility expenses. These expenses shall exclude 
utilities labor and other utilities expenses. The actual per-unit per-
month utility expenses shall be taken from the year-end statement of 
operating receipts and expenditures Form HUD-52599 (Office of 
Management and Budget approval number 2577-0067), prepared for the IHA 
fiscal year that ended 12 months before the beginning of the IHA 
requested budget year (e.g., for an IHA fiscal year beginning January 
1, 1983, the IHA would use data from the fiscal year ended December 31, 
1981). Subsequent adjustments will not be approved for a budget year 
for which the utility expense level is established based upon actual 
per-unit per-month utility expenses.
    (e) Adjustments. IHAs shall request adjustments of utilities 
expense levels in accordance with Sec. 950.730(c), which requires an 
adjustment based upon a comparison of actual experience and estimates 
of consumption and of utility rates.
    (f) Incentives for energy conservation improvements. If an IHA 
undertakes energy conservation measures (including measures to save 
water, fuel oil, electricity , and gas) that are financed by an entity 
other than the Secretary, such as physical improvements financed by a 
loan from a utility or governmental entity, management of costs under a 
performance contract, or a shared savings agreement with a private 
energy service company, the IHA may qualify for one of two possible 
incentives under this part. For an IHA to qualify for these incentives, 
it shall obtain HUD approval. Approval will be based upon a 
determination that payments under the contract can be funded from the 
reasonably anticipated energy cost savings, and the contract period 
does not exceed 12 years.
    (1) If the contract allows the IHA's payments to be dependent on 
the cost savings it realizes, the IHA shall use at least 50 percent of 
the cost savings to pay the contractor. With this type of contract, the 
IHA may take advantage of a frozen AUCL under paragraph (c)(4) of this 
section, and it may use the full amount of the cost savings, as 
described in Sec. 950.730(c)(2)(ii).
    (2) If the contract does not allow the IHA's payments to be 
dependent on the cost savings it realizes, then the AUCL will continue 
to be calculated in accordance with paragraphs (c)(1) through (c)(3) of 
this section, as appropriate; the IHA will be able to retain part of 
the cost savings, in accordance with Sec. 950.730(c)(2)(i); and the IHA 
will qualify for additional operating subsidy eligibility (above the 
amount based on the allowable expense level) to cover the cost of 
amortizing the improvement loan during the term of the contract, in 
accordance with Sec. 950.730(f).


Sec. 950.720  Other costs.

    (a) Costs of independent audits. (1) Eligibility to receive 
operating subsidy for independent audits is considered separately from 
the PFS. However, the IHA shall not request, nor will HUD approve, an 
operating subsidy for the cost of an independent audit if the audit has 
been funded by subsidy in a prior year. The IHA's estimate of cost of 
the independent audit is subject to adjustment by HUD. If the IHA 
requires assistance in determining the amount of cost to be estimated, 
it should contact the HUD Area ONAP.
    (2) An IHA that is required by the Single Audit Act (31 U.S.C. 
7501-7507) (see 24 CFR part 44) to conduct a regular independent audit 
may receive operating subsidy to cover the cost of the audit. The 
amount shall be prorated between the IHA's development cost budget and 
one or all of its operating budgets, as appropriate. The estimated cost 
of an independent audit, applicable to the operations of IHA-owned 
rental housing, is not included in the Allowable Expense Level, but it 
is allowed in full in computing the amount of operating subsidy under 
Sec. 950.705.
    (3) An IHA that is exempt from the audit requirements of the Single 
Audit Act (31 U.S.C. 7501-7507) (see 24 CFR part 44) may receive 
operating subsidy to offset the cost of an independent audit chargeable 
to operations (after the end of the initial operating period) if the 
IHA chooses to have an audit.
    (b) Costs attributable to units approved for deprogramming and 
vacant. (1) Units approved for deprogramming are those for which the 
IHA's formal request has been approved by HUD but for which 
deprogramming has not been completed. Costs for these units may be 
eligible for inclusion, but shall be limited to the minimum services 
and protection necessary to protect and preserve the units until the 
units are deprogrammed. Costs attributable to units temporarily 
unavailable for occupancy because they are utilized for IHA-related 
activities are not eligible for inclusion. In determining the PFS 
operating subsidy, these units shall not be included in the calculation 
of unit months available. Units approved for deprogramming shall be 
listed by the IHA and supporting documentation regarding direct costs 
attributable to such units shall be included as part of the operating 
budget in which the IHA requests operating subsidy for these units. If 
the IHA requires assistance in this matter, it should contact the HUD 
Area ONAP.
    (2) Units approved for nondwelling use to promote economic self-
sufficiency services and anti-drug activities are eligible for 
operating subsidy under the conditions provided in this paragraph 
(b)(2), and the costs attributable to them are to be included in the 
operating budget. If a unit [[Page 18262]] satisfies the conditions 
stated in paragraphs (b)(2) (i) through (v) of this section, it will be 
eligible for subsidy at the rate of the AEL for the number of months 
the unit is devoted to such use. Approval will be given for a period of 
no more than three years. Renewal of the approval to allow payments 
after that period may be made only if the IHA can demonstrate that no 
other sources for paying the nonutility operating costs of the unit are 
available:
    (i) The unit shall be used for either economic self-sufficiency 
activities directly related to maximizing the number of employed 
residents or for anti-drug programs directly related to ridding the 
development of illegal drugs and drug-related crime. The activities 
shall be directed toward and for the benefit of residents of the 
development.
    (ii) The IHA shall demonstrate that space for the service or 
program is not available elsewhere in the locality and that the space 
used is safe and suitable for its intended use or that resources are 
committed to make the space safe and suitable.
    (iii) The IHA shall demonstrate satisfactorily that other funding 
is not available to pay for the nonutility operating costs. All rental 
income generated as a result of the activity shall be reported as 
income in the operating subsidy calculation.
    (iv) Operating subsidy may be approved for only one site (involving 
one or more contiguous units) per Indian housing development for 
economic self-sufficiency services or anti-drug programs, and the 
number of units involved should be the minimum necessary to support the 
service or program. Operating subsidy for any additional sites per 
development can only be approved by HUD Headquarters.
    (v) The IHA shall submit a certification with its Performance 
Funding System calculation that the units are being used for the 
purpose for which they were approved and that any rental income 
generated as a result of the activity is reported as income in the 
operating subsidy calculation. The IHA shall maintain specific 
documentation of the units covered. Such documentation should include a 
listing of the units and project/management control numbers.
    (c) Costs attributable to changes in Federal law or regulation. In 
the event that HUD determines that enactment of a Federal law or 
revision in HUD or other Federal regulations have caused or will cause 
a significant increase in expenditures of a continuing nature above the 
Allowable Expense Level and Utilities Expense Level, and upon a 
determination that sufficient other funds are not available to cover 
the required expenditures, HUD may in HUD's sole discretion decide to 
prescribe a procedure under which the IHA may apply for or may receive 
an increase in operating subsidy.
    (d) Costs beyond the control of the IHA. Costs attributable to 
unique circumstances that are beyond the control of the IHA and were 
not reflected in the IHA's Base Year Expense Level may be considered 
for supplemental operating subsidy funding. When costs were reflected 
in the IHA's Base Year Expense Level, but the rate of increase for such 
costs is greater than the prescribed PFS inflation rate(s), then the 
increase in excess of that provided by the inflation rate may be 
considered for supplemental operating subsidy funding. The IHA shall 
submit to the HUD Area ONAP complete documentation relating to those 
cost items that it claims to be beyond its control. Such documentation 
shall not be submitted as part of the requested operating budget, but 
shall be submitted separately as an addendum to the budget. The IHA 
also shall show that these additional costs cannot be funded from its 
own resources. In the event that excess funds are available after 
making all payments approvable under Secs. 950.705 and 950.720 of this 
chapter, HUD may, in HUD's sole discretion, solicit, evaluate, and 
approve or disapprove, in full or in part, these requests for 
additional operating subsidy for costs beyond the control of the IHA.
    (e) Costs resulting from combination of two or more units. When an 
IHA redesigns or rehabilitates a project and combines two or more units 
into one larger unit, and the combination of units results in a unit 
that houses at least the same number of people as were previously 
served, the AEL for the requested year shall be multiplied by the 
number of unit months not included in the requested year's unit months 
available as a result of these combinations that have occurred since 
the Base Year. The number of people served in a unit will be based on 
the formula [(2  x  No. of bedrooms) minus 1], which yields the average 
number of people that would be served. An efficiency unit will be 
counted as a one bedroom unit for purposes of this calculation.
    (f) User fee. Additional operating subsidy will be provided to IHAs 
for payment of an annual User Fee separate from the PFS. An IHA 
operating a rental program shall pay an annual User Fee to 
municipalities, which may include tribal, city, county governments or 
other political subdivisions that provide any roads, water supply, 
sewage facilities, electrical systems, or fuel distribution systems. 
The annual User Fee will be paid in an amount equal to 10 percent of 
the applicable shelter rent, minus the utility allowance; or $150, 
whichever is greater, for each rental housing unit covered by this 
section.
    (g) Funding for resident organization expenses. In accordance with 
the provisions of 24 CFR Part 950, 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.


Sec. 950.725  Projected operating income level.

    (a) Policy. PFS determines the amount of operating subsidy for a 
particular IHA based in part upon a projection of the actual dwelling 
rental income and other income for the particular IHA. The projection 
of dwelling rental income is obtained by computing the average monthly 
dwelling rental charge per unit for the IHA, and projecting this amount 
for the requested budget year by applying an upward trend factor 
(subject to updating) of three percent, and multiplying this amount by 
the projected occupancy percentage for the requested budget year. 
Nondwelling income is projected by the IHA subject to adjustment by 
HUD. There are special provisions for projection of dwelling rental 
income for new projects.
    (b) Computation of projected average monthly dwelling rental 
income. The projected average monthly dwelling rental income per unit 
for the IHA is computed as follows:
    (1) Average monthly dwelling rental charge per unit. The dollar 
amount of the average monthly dwelling rental charge per unit shall be 
computed on the basis of the total dwelling rental charges (total of 
the adjusted rent roll amounts) for all project units, as shown on the 
rent roll control and analysis of dwelling rent charges, which the IHA 
is required to maintain, for the first day of the month that is six 
months before the first day of the requested budget year, except that 
if a change in the total of the rent rolls has occurred in a subsequent 
month that is before the beginning of the requested budget year and 
before the submission of the requested budget year operating budget, 
the IHA shall use the latest changed rent roll for the purpose of the 
computation. This aggregate dollar amount shall be divided by the 
[[Page 18263]] number of occupied dwelling units as of the same date.
    (2) Three percent increase. The average monthly dwelling rental 
charge per unit, computed under paragraph (b)(1) of this section, is 
increased by three percent to obtain the projected average monthly 
dwelling rental charge per unit of the IHA for the requested budget 
year.
    (3) Projected occupancy percentage. The IHA shall determine its 
projected percentage of occupancy for all project units (projected 
occupancy percentage) as follows:
    (i) High occupancy IHAs. If the IHA's actual occupancy percentage 
(see Sec. 950.760) is equal to or greater than 97 percent, the IHA's 
projected occupancy percentage is 97 percent.
    (ii) High occupancy IHAs exclusive of scheduled modernization. If 
the IHA's actual occupancy percentage (see Sec. 950.760) is less than 
97 percent solely because of vacant, on-schedule modernization units 
described in paragraph (b)(3)(v) of this section, the IHA's projected 
occupancy percentage is its actual occupancy percentage. An IHA may 
also use its actual occupancy percentage as its projected occupancy 
percentage if the IHA has five or fewer vacant units other than vacant, 
on-schedule modernization units described in paragraph (b)(3)(v) of 
this section.
    (iii) Low occupancy IHAs with an approved Comprehensive Occupancy 
Plan (COP). If the IHA has an actual occupancy percentage (see 
Sec. 950.760) less than 97 percent and more than five vacant units, not 
solely because of vacant, on-schedule modernization units described in 
paragraph (b)(3)(v) of this section, and if the IHA has a HUD-approved 
COP, the IHA's projected occupancy percentage is determined under 
Sec. 950.770(g).
    (iv) Low Occupancy IHAs without an approved COP. (A) The IHA shall 
use 97 percent as its projected occupancy percentage, if the IHA:
    (1) Has an actual occupancy percentage (see Sec. 950.760) less than 
97 percent and has more than five vacant units, not solely because of 
vacant, on-schedule modernization units described in paragraph 
(b)(3)(v) of this section; and the IHA:
    (2)(i) Has completed the term of its approved COP but has not 
achieved a 97 percent actual occupancy percentage or has not had five 
or fewer vacant units other than vacant, on-schedule modernization 
units described in paragraph (b)(3)(v) of this section; or
    (ii) Is authorized to submit a COP but elects not to submit one; or
    (iii) Submits a COP that is disapproved by HUD.
    (B) Notwithstanding the requirement in paragraph (b)(3)(iv)(A) of 
this section that 97 percent be the projected occupancy percentage, a 
low occupancy IHA that satisfies all the conditions described in 
paragraph (b)(3)(iv)(A)(2)(i) of this section, may adjust the 97 
percent projected occupancy percentage to discount units that are 
vacant for reasons beyond its control, as provided in Sec. 950.770(h).
    (v) Vacant, on-schedule modernization units. Vacant, on-schedule 
modernization units are vacant units in an otherwise occupiable project 
that has received funding for modernization through the Comprehensive 
Improvement Assistance Program (subpart I of this part) or other 
sources; and for which:
    (A) It is expected that the vacant units will be occupied on 
completion of modernization work;
    (B) The IHA has a schedule for carrying out the modernization that 
is acceptable to HUD; and
    (C) The modernization work is on schedule.
    (4) Projected average monthly dwelling rental income. The projected 
occupancy percentage under paragraph (b)(3) of this section shall be 
multiplied by the projected average monthly dwelling rental charge 
under paragraph (b)(2) of this section to obtain the projected monthly 
dwelling rental income per unit.
    (c) Projected average monthly dwelling rental charge per unit for 
new projects. The projected average monthly dwelling rental charge for 
new projects that were not available for occupancy during the budget 
year before the requested budget year and that will reach the end of 
the initial operating period (EIOP) within the first nine months of the 
requested budget year, shall be calculated as follows:
    (1) If the IHA has another project or projects under management 
that are comparable in terms of elderly and nonelderly tenant 
composition, the IHA shall use the projected average monthly dwelling 
rental charge for such project or projects.
    (2) If the IHA has no other projects that are comparable in terms 
of elderly and nonelderly tenant composition, the HUD Area ONAP will 
provide the projected average monthly dwelling rental charge for such 
project or projects, based on comparable projects located in the area.
    (d) Estimate of additional dwelling rental income. After 
implementation of the provisions of any legislation enacted or any HUD 
administrative action taken after the effective date of these 
regulations, which affects rent paid by tenants of projects, each IHA 
shall submit a revision of its annual operating budget showing an 
estimate of any change in rental income that it anticipates as the 
result of the implementation of said provisions. HUD shall have 
complete discretion to adjust the projected average monthly dwelling 
rental charge per unit to reflect the IHA's estimate of change, or in 
the absence of this submission, to reflect HUD's estimate of such 
change. HUD also shall have complete discretion to reduce or increase 
the operating subsidy approved for the IHA current fiscal year in an 
amount equivalent to the change in the rental income.
    (e) IHA's estimate of income other than dwelling rental income. (1) 
Investment income. IHAs with an estimated average cash balance of less 
than $20,000, excluding investment income earned from a funded 
replacement reserve under Sec. 950.666(f), shall make a reasonable 
estimate of investment income for the Requested Budget Year. IHAs with 
an estimated average cash balance of $20,000 or more, excluding 
investment income earned from a funded replacement reserve under 
Sec. 950.666(f), shall estimate interest on general fund investments 
based on the estimated average yield for 91-day Treasury bills for the 
IHA's Requested Budget Year (yield information will be provided by 
HUD). The determination of average cash balance will allow a deduction 
of $10,000, plus $10 per unit for each unit over 1,000, subject to a 
total maximum deduction of $250,000. In all cases, the estimated 
investment income amount shall be subject to HUD approval. (See 
Sec. 950.730(b)).
    (2) Other income. All IHAs shall estimate other income based on 
past experience and a reasonable projection for the requested budget 
year, which estimate shall be subject to HUD approval.
    (3) Total. The estimated total amount of income from investments 
and other income, as approved, shall be divided by the number of unit 
months available to obtain a per-unit per-month amount. Such amount 
shall be added to the projected average dwelling rental income per unit 
to obtain the projected operating income level. This amount shall not 
be subject to the provisions regarding program income in 24 CFR 85.25.
    (f) Required adjustments to estimates. The IHA shall submit year-
end adjustments of projected operating income levels in accordance with 
Sec. 950.730(b), which covers investment income. [[Page 18264]] 


Sec. 950.730  Adjustments.

    Adjustment information submitted to HUD under this section shall be 
accompanied by an original or revised operating budget.
    (a) Adjustment of Base Year Expense Level. (1) Eligibility. An IHA 
with projects that have been in management for at least one full fiscal 
year, for which operating subsidy is being requested under the formula 
for the first time, may, during its first budget year under PFS, 
request HUD to increase its Base Year Expense Level. Included in this 
category are existing IHAs requesting subsidy for a project or projects 
in operation at least one full fiscal year under separate ACC for which 
operating subsidy has never been paid, except for IPA audit costs. This 
request may be granted by HUD, in its discretion, only when the IHA 
establishes to HUD's satisfaction that the Base Year Expense Level 
computed under Sec. 950.710(a) will result in operating subsidy at a 
level insufficient to support a reasonable level of essential services. 
The approved increase cannot exceed the per-unit per-month amount by 
which the top of the range exceeds the Base Year Expense Level or 
$10.31.
    (2) Procedure. An IHA that is eligible for an adjustment under 
paragraph (a)(1) of this section may only make a request for such 
adjustment once for projects under a particular ACC, at the time it 
submits the operating budget for the first budget year under PFS. Such 
request shall be submitted to the HUD Area ONAP, which will review, 
modify as necessary, and approve or disapprove the request. A request 
under this paragraph shall include a calculation of the amount per-unit 
per-month of requested increase in the Base Year Expense Level, and 
shall show the requested increase as a percentage of the Base Year 
Expense Level.
    (b) Adjustments to estimated investment income. An IHA that has an 
estimated average cash balance of at least $20,000 shall submit a year-
end adjustment to the estimated amount of investment income that was 
used to determine subsidy eligibility at the beginning of the IHA's 
fiscal year. The amount of the adjustment will be the difference 
between the estimate and a target investment income amount based on the 
actual average yield on 91-day Treasury bills for the IHA's fiscal year 
being adjusted and the actual average cash balance available for 
investment during the IHA's fiscal year, computed in accordance with 
HUD requirements. HUD will provide the IHA with the actual average 
yield on 91-day Treasury bills for the IHA's fiscal year. Failure of an 
IHA to submit the required adjustment of investment income by the date 
due may, in the discretion of HUD, result in the withholding of 
approval of future obligation of operating subsidies until the 
adjustment is received.
    (c) Adjustments to Utilities Expense Level. An IHA receiving 
operating subsidy under Sec. 950.705, excluding those IHAs that receive 
operating subsidy solely for IPA audit (Sec. 950.720(a)), shall submit 
a year-end adjustment regarding the Utility Expense Level approved for 
operating subsidy eligibility purposes. This adjustment, which will 
compare the actual utility expense and consumption for the IHA fiscal 
year to the estimates used for subsidy eligibility purposes, shall be 
submitted on forms prescribed by HUD. This request shall be submitted 
to the HUD Area ONAP by a deadline established by HUD, which will be 
during the IHA fiscal year following the IHA fiscal year for which an 
operating subsidy was received by the IHA, exclusive of a subsidy 
solely for IPA audit costs. Failure to submit the required adjustment 
of the Utilities Expense Level by the due date may, in the discretion 
of HUD, result in the withholding of approval of future obligation of 
operating subsidies until it is received. Adjustments under this 
subsection normally will be made in the IHA fiscal year following the 
year for which the adjustment is applicable, except as provided in 
paragraph (c)(5) of this section or unless a repayment plan is 
necessary as noted in paragraph (d) of this section.
    (1) Rates. (i) A decrease in the utilities expense level because of 
decreased utility rates--to the extent funded by operating subsidy--
will be deducted by HUD from future operating subsidy payments. 
However, when the rate reduction covering utilities, such as water, 
fuel oil, electricity, and gas, is directly attributable to action by 
the IHA, such as well-head purchase of natural gas, or administrative 
appeals or legal action beyond normal public participation in 
ratemaking proceedings, then the IHA will be permitted to retain one-
half of the cost savings attributable to its actions for the first 
year, and upon determination that the action was cost-effective in the 
first year, for up to an additional six years, as long as the actions 
continue to be cost-effective, and the other one-half of the cost 
savings will be deducted from operating subsidy otherwise payable.
    (ii) An increase in the utilities expense level because of 
increased utility rates--to the extent funded by operating subsidy--
will be fully funded by increased operating subsidy, subject to 
availability of funds.
    (2) Consumption. (i) Generally, 50 percent of any decrease in the 
Utilities Expense Level attributable to decreased consumption after 
adjustment for any utility rate change, will be retained by the IHA; 50 
percent will be offset by HUD against subsequent payment of operating 
subsidy.
    (ii) However, in the case of an IHA whose energy conservation 
measures have been approved by HUD as satisfying the requirements of 
Sec. 950.715(f)(1), the IHA may retain 100 percent of the savings from 
decreased consumption after payment of the amount due the contractor 
until the term of the financing agreement is completed. The decreased 
consumption is to be determined by adjusting for any utility rate 
changes. The savings realized shall be applied in the following order:
    (A) Retention of up to 50 percent of the total savings from 
decreased consumption to cover training of IHA employees, counseling of 
tenants, IHA management of the cost reduction program, and any other 
eligible costs; and
    (B) Prepayment of the amount due the contractor under the contract.
    (iii) Fifty percent of the increase in the Utilities Expense Level 
attributable to increased consumption will be funded by increased 
operating subsidy payments, subject to the availability of funds.
    (3) Emergency adjustments. In emergency cases, when an IHA 
establishes to HUD's satisfaction that a severe financial crisis would 
result from a utility rate increase, the IHA may submit to HUD an 
adjustment covering only the rate increase at any time during the IHA's 
Current Budget Year. Unlike the adjustments mentioned in paragraphs 
(c)(1) and (c)(2) of this section, the IHA shall submit this adjustment 
to the HUD Area ONAP by revision of the original submission of the 
estimated Utility Expense Level for the fiscal year to be adjusted.
    (4) Documentation. The IHA shall retain supporting documentation 
substantiating the requested adjustments pending HUD audit.
    (d) Requests for adjustments to projected average monthly dwelling 
rental income. The IHA may make requests for adjustments to projected 
average monthly dwelling rental income as follows:
    (1) Criteria for granting request. An IHA may request an adjustment 
to projected average monthly dwelling rental income under PFS if the 
IHA can establish to HUD's satisfaction that the projected amount 
computed under Sec. 950.725 was not attained because of 
[[Page 18265]] circumstances beyond the control of the IHA, such as a 
substantial increase in general unemployment in the locality, or 
because of a revision of the IHA's rent schedule that has been approved 
by HUD. The IHA shall also demonstrate to HUD's satisfaction that it 
has established and is effectively implementing tenant selection 
criteria in compliance with HUD requirements. HUD shall have complete 
discretion to approve completely, approve in part, or deny any 
requested adjustments to projected average monthly dwelling rental 
income.
    (2) Procedure. The IHA shall submit a request for an adjustment 
under this subsection to the HUD Area ONAP by a deadline established by 
HUD, which will be within twelve months following the IHA's fiscal year 
being adjusted. In emergency cases, however, when an IHA establishes to 
HUD's satisfaction that decreased rental income would result in a 
severe financial crisis, the IHA may submit a request for adjustments 
to HUD at an earlier time.
    (e) Energy conservation financing. If HUD has approved an energy 
conservation contract under Sec. 950.715(f)(2), then the IHA is 
eligible for additional operating subsidy each year of the contract to 
amortize the cost of the energy conservation measures under the 
contract, subject to a maximum annual limit equal to the cost savings 
for that year (and a maximum contract period of 12 years).
    (1) Each year, the energy cost savings would be determined as 
follows:
    (i) The consumption level that would have been expected if the 
energy conservation measure had not been undertaken would be adjusted 
for the Heating Degree Days experience for the year, and for any change 
in utility rate.
    (ii) The actual cost of energy (of the type affected by the energy 
conservation measure) after implementation of the energy conservation 
measure would be subtracted from the expected energy cost, to produce 
the energy cost savings for the year. (See also paragraph (c)(2)(ii) of 
this section for retention of consumption savings.)
     (2) If the cost savings for any year during the contract period is 
less than the amount of operating subsidy to be made available under 
this paragraph (e) to pay for the energy conservation measure in that 
year, the deficiency will be offset against the IHA's operating subsidy 
eligibility for the IHA's next fiscal year.
    (3) If energy cost savings are less than the amount necessary to 
meet amortization payments specified in a contract, the contract term 
may be extended (up to the 12-year limit) if HUD determines that the 
shortfall is the result of changed circumstances rather than a 
miscalculation or misrepresentation of projected energy savings by the 
contractor or IHA. The contract term may only be extended to 
accommodate payment to the contractor and associated direct costs.
    (f) Formal review process (1992). (1) Eligibility for 
consideration. Any IHA with an established Allowable Expense Level may 
request to use a revised Allowable Expense Level for its requested 
budget year that starts on or after April 1, 1992 (and ends during 
calendar year 1993).
    (2) Eligibility for adjustment. (i) If an IHA's AEL for the budget 
year that ends during calendar year 1992 is either less than 85 percent 
of the Formula Expense Level or more than 115 percent of the Formula 
Expense Level, as calculated using the revised formula and the 
characteristics for the IHA and its community, then the IHA's AEL for 
the budget year that ends during calendar year 1993 is subject to 
adjustment at the IHA's request. The revised formula expense level for 
the fiscal year ending during calendar year 1992 is the IHA's value of 
the following formula, after updating by the local inflation factors 
from FY 1989 to the requested budget year.
    (ii) The revised formula is the sum of the following six numbers:
    (A) The number of pre-1940 rental units occupied by poor households 
in 1980 as a percentage of the 1980 population of the community 
multiplied by a weight of 7.954. This Census-based statistic applies to 
the county of the IHA, except that, if the IHA has 80 percent or more 
of its units in an incorporated city of more than 10,000 persons, it 
uses city-specific data. County data will exclude data for any 
incorporated cities of more than 10,000 persons within its boundaries.
    (B) The Local Government Wage Rate multiplied by a weight of 
116.496. The wage rate used is a figure determined by the Bureau of 
Labor Statistics. It is a county-based statistic, calibrated to a unit-
weighted IHA standard of 1.0. For multi-county IHAs, the local 
government wage is unit-weighted. For this formula, the local 
government wage index for a specific county cannot be less than 85 
percent or more than 115 percent of the average local government wage 
for counties of comparable population and metro/non-metro status, on a 
state-by-state basis. In addition, for counties of more than 150,000 
population in 1980, the local government wage cannot be less than 85 
percent or more than 115 percent of the wage index of private 
employment determined by the Bureau of Labor Statistics and the 
rehabilitation cost index of labor and materials determined by the R.S. 
Means Company.
    (C) The lesser of the current number of the IHA's two or more 
bedroom units available for occupancy, or 15,000 units, multiplied by a 
weight of .002896.
    (D) The current ratio of the number of the IHA's two or more 
bedroom units available for occupancy in high-rise family projects to 
the number of all the IHA's units available for occupancy multiplied by 
a weight of 37.294. For this indicator, a high-rise family project is 
defined as averaging 1.5 or more bedrooms per unit available for 
occupancy, averaging 35 or more units available for occupancy per 
building, and containing at least one building with units available for 
occupancy that is five or more stories high.
    (E) The current ratio of the number of the IHA's three or more 
bedroom units available for occupancy to the number of all the IHA's 
units available for occupancy multiplied by a weight of 22.303.
    (F) An equation calibration constant of -.2344.
    (3) Procedure. If an IHA wants to request a revision to its AEL, it 
should determine whether its AEL for the fiscal year ending in calendar 
year 1992 (for purposes of this section, the ``unrevised AEL'') is 
either less than 85 percent of the Formula Expense Level or more than 
115 percent of the Formula Expense Level. Then, in lieu of using the 
unrevised AEL as the basis for developing the IHA's AEL and operating 
budget for the fiscal year ending in calendar year 1993, the IHA will 
use 85 percent of the FEL (if this is higher than the unrevised AEL) or 
115 percent of the FEL (if this is lower than the unrevised AEL). If an 
IHA has submitted its original operating budget before the publication 
of a change to the PFS handbook containing forms and instructions 
necessary to implementation of this regulatory change, the IHA shall 
submit a revision to its operating budget with calculations based on 
the new AEL. If an IHA requests such revision of its AEL in connection 
with submission of an operating budget and its current AEL is within 85 
to 115 percent of the FEL, HUD will not adjust the AEL. If an IHA 
requests revision and its AEL is not within 85 to 115 percent of the 
FEL, HUD will increase it to 85 percent or decrease it to 115 percent. 
The revised Allowable Expense Levels approved by HUD will be put into 
effect for the IHA's budget year that begins on or after April 1, 1992 
(and thus ends in calendar year 1993). [[Page 18266]] 
    (g) Additional HUD-initiated adjustments. Notwithstanding any other 
provisions of this subpart, HUD may at any time make an upward or 
downward adjustment in the amount of the IHA's operating subsidy as 
result of data subsequently available to HUD that alters projections 
upon which the approved operating subsidy was based. Normally 
adjustments shall be made in total in the IHA fiscal year in which the 
needed adjustment is determined; however, if a downward adjustment 
would cause a severe financial hardship on the IHA, the HUD Area ONAP 
may establish a recovery schedule that represents the minimum number of 
years needed for repayment.


Sec. 950.735  Transition funding for excessive high-cost IHAs.

    If an IHA's Base Year Expense Level exceeds its Allowable Expense 
Level, computed as provided in Sec. 950.710, for any budget year under 
PFS, the IHA may be eligible for transition funding. Transition funding 
shall be an amount not to exceed the difference between the Base Year 
Expense Level and the Allowable Expense Level for the requested budget 
year, multiplied by the number of units months available. HUD shall 
have the right to discontinue payment of all or part of the transition 
funding in the event HUD at any time determines that the IHA has not 
achieved a satisfactory level of management efficiency, or is not 
making efforts satisfactory to HUD to improve its management 
performance.


Sec. 950.740  Operating reserves.

    The IHA shall maintain an operating reserve in an amount sufficient 
for working capital purposes, estimated future nonroutine maintenance 
requirements for IHA-owned administrative facilities, common property 
and dwelling units, payment of advanced insurance premiums, 
unanticipated project requirements, and other eligible uses as 
determined by the IHA.


Sec. 950.745  Operating budget submission and approval.

    (a) Required documentation. (1) An IHA shall prepare an operating 
budget each fiscal year in a manner prescribed by HUD. The board of 
commissioners shall review and approve the budget by resolution. Each 
fiscal year, the IHA shall submit to the Area ONAP the approved board 
resolution and the necessary HUD-required PFS calculation forms.
    (2) The Area ONAP may direct an IHA to submit a complete operating 
budget if the IHA has been issued a corrective action order with 
respect to financial management. If such action is necessary, the Area 
ONAP will notify the IHA prior to the beginning of the fiscal year.
    (b) HUD operating budget review. (1) The HUD Area ONAP will perform 
a detailed review on IHA operating budgets that are subject to HUD 
review and approval. If the HUD Area ONAP finds that an operating 
budget is incomplete, includes illegal or ineligible expenditures, 
mathematical errors, errors in the application of accounting 
procedures, or is otherwise unacceptable, the HUD Area ONAP may at any 
time require the submission by the IHA of further information regarding 
an operating budget or operating budget revision.
    (2) When the IHA no longer is operating in a manner that threatens 
the future serviceability, efficiency, economy, or stability of the 
housing, HUD will notify the IHA that it no longer is required to 
submit an operating budget to HUD for review and approval.


Sec. 950.750  Payment procedure for operating subsidy under PFS.

    (a) General. Subject to the availability of funds, payments of 
operating subsidy under PFS shall be made generally by electronic funds 
transfers, based on a schedule submitted by the IHA and approved by 
HUD, reflecting the IHA's projected cash needs. The schedule may 
provide for several payments per month. If an IHA has an unanticipated, 
immediate need for disbursement of approved operating subsidy, it may 
make an informal request to HUD to revise the approved schedule. 
(Requests by telephone are acceptable.)
    (b) Payments procedure. In the event that the amount of operating 
subsidy has not been determined by HUD as of the beginning of an IHA's 
budget year under these PFS regulations in this subpart, annual, 
monthly, or quarterly payments of operating subsidy shall be made, as 
provided in paragraph (a) of this section, based upon the amount of the 
IHA's operating subsidy for the previous budget year or such other 
amount as HUD may determine to be appropriate.
    (c) Availability of funds. In the event that insufficient funds are 
available to make payments approvable under PFS for operating subsidy 
payable by HUD, HUD shall have complete discretion to revise, on a pro 
rata basis or other basis established by HUD, the amounts of operating 
subsidy to be paid to IHAs.


Sec. 950.755  Payments of operating subsidy conditioned upon 
reexamination of income of families in occupancy.

    (a) Policy. The income and composition of each family shall be 
reexamined at least annually (see Sec. 950.315). IHAs shall be in 
compliance with this reexamination requirement to be eligible to 
receive full operating subsidy payments.
    (b) IHAs in compliance with requirements. Each submission of the 
original operating budget for a fiscal year shall be accompanied by a 
certification by the IHA that it is in compliance with the annual 
income reexamination requirements and that rents have been or will be 
adjusted in accordance with subpart D of this part.
    (c) IHAs not in compliance with requirements. Any IHA not in 
compliance with the annual income reexamination requirement at the time 
of operating budget submission shall furnish to the HUD Area ONAP a 
copy of the procedure it is using to attain compliance and a statement 
of the number of families that have undergone reexamination during the 
twelve months preceding the date of the operating budget submission, or 
the revision thereof. If, on the basis of such submission, or any other 
information, the Area ONAP Director determines that the IHA is not 
substantially in compliance with the annual income reexamination 
requirement, HUD shall withhold payments to which the IHA might 
otherwise be entitled under this part, equal to his or her estimate of 
the loss of rental income to the IHA resulting from its failure to 
comply with those requirements.


Sec. 950.760  Determining actual occupancy percentage.

    (a) For each requested budget year beginning on or after July 1, 
1986, the IHA shall determine the percentage of occupancy for all 
project units included in the unit months available (actual occupancy 
percentage), at its option, either:
    (1) For the last day of the month that ends six months before the 
beginning of the requested budget year; or
    (2) Based on the average occupancy during the month ending six 
months before the beginning of the requested budget year.
    (b) If the IHA elects to use an average, it shall maintain a record 
of its computation of its actual occupancy percentage. The actual 
occupancy percentage shall be adjusted to reflect expected changes in 
occupancy because of modernization, new development, demolition, or 
disposition in order to reflect the expected average occupancy 
[[Page 18267]] rate throughout the year. If, after that date, there are 
changes, up or down, in occupancy because of modernization, new 
development, demolition, or disposition not reflected in the 
adjustment, the IHA shall submit a budget revision to reflect the 
actual change in occupancy due to these actions.


Sec. 950.770  Comprehensive Occupancy Plan (COP) requirements.

    (a) IHAs that may submit a Comprehensive Occupancy Plan (COP). An 
IHA may prepare and submit a COP to HUD in accordance with the 
provisions of this section:
    (1) For its first requested budget year beginning on or after July 
1, 1986, if the IHA has an actual occupancy percentage (Sec. 950.760) 
less than 97 percent, and has more than five vacant units, not solely 
because of vacant, on-schedule modernization units (as defined in 
Sec. 950.725(b)(3)(v)); or
    (2) For a requested budget year beginning on or after July 1, 1987, 
if:
    (i) The IHA projects an actual occupancy percentage (Sec. 950.760) 
for the requested budget year of less than 97 percent and has more than 
five vacant units, other than vacant, on-schedule modernization units;
    (ii) The IHA is not currently a low occupancy IHA, that is, the IHA 
had an actual occupancy percentage determined under Sec. 950.760 for 
the current requested budget year that equalled or exceeded 97 percent 
or had five or fewer vacant units other than vacant, on-schedule 
modernization units; and
    (iii) The IHA is not currently under a COP.
    (b) Comprehensive Occupancy Plan content. A COP shall provide a 
general IHA-wide strategy for returning to occupancy or deprogramming 
all vacant units and a specific strategy for returning to occupancy or 
deprogramming units for each project that has an occupancy percentage 
of less than 97 percent.
    (1) The general IHA-wide strategy for returning to occupancy or 
deprogramming all vacant units shall specify management actions the IHA 
is taking or intends to take to eliminate vacancies, such as revised 
occupancy policies, actions to reduce time to return vacated units to 
occupancy, and identification of the need to use the exception for 
nonelderly tenants in elderly projects, and shall include a schedule 
for completing these actions.
    (2) The project-specific strategy shall:
    (i) Identify each project that has a percentage of occupancy less 
than 97 percent.
    (ii) State the project-specific actions the IHA is taking or 
intends to take to eliminate vacancies, such as:
    (A) Modernization;
    (B) Demolition;
    (C) Disposition;
    (D) Change in occupancy policy; or
    (E) Physical or management improvements; and
    (iii) For each project identified, include a schedule for 
completing these actions and returning the units to occupancy.
    (3) The COP shall also include yearly IHA-wide occupancy goals and 
yearly occupancy goals for each project with an occupancy rate below 97 
percent stated for each year until there is a projected IHA-wide 
occupancy rate of at least 97 percent or an estimate that the IHA will 
have five or fewer vacant units, excluding units that are vacant, on-
schedule modernization units. These goals should reflect the average 
occupancy percentage for each year. The yearly occupancy goals (both 
IHA-wide and project specific) for the first year of a COP that is 
submitted with an IHA's budget for its first requested budget year 
beginning on or after July 1, 1986, shall take into account actions 
taken by the IHA from August 2, 1985, to reduce vacancies.
    (c) Time for submitting a Comprehensive Occupancy Plan. An IHA that 
submits a COP to HUD for approval in accordance with paragraph (a) of 
this section shall submit the COP with its budget.
    (d) Maximum term of a Comprehensive Occupancy Plan. (1) Except as 
provided in paragraph (d)(2) of this section, a COP:
    (i) Submitted for an IHA's first requested budget year beginning on 
or after July 1, 1986, shall be for a period approved by HUD as 
reasonable, which shall not exceed five years; or
    (ii) Submitted for a requested budget year beginning on or after 
July 1, 1987, shall be for a period of one or two years, as approved by 
HUD.
    (2) A COP that exceeds the maximum period provided in paragraphs 
(d)(1)(i) or (ii) of this section may be approved only if the Assistant 
Secretary for Public and Indian Housing has given written authorization 
for such longer period before the approval of the COP.
    (e) Local governing body review. The IHA shall have the COP 
reviewed by the local governing body for comment and shall submit any 
comments from the local governing body to HUD with the COP.
    (f) HUD review of Comprehensive Occupancy Plan. If HUD fails to 
approve, disapprove, or otherwise substantively comment on a COP within 
45 days of receipt of the plan, the IHA-wide yearly occupancy goal for 
the first year of the COP shall be considered approved for the purpose 
of determining the IHA's projected occupancy percentage under paragraph 
(g) of this section.
    (g) Projected Occupancy Percentage (Comprehensive Occupancy Plan). 
An IHA that has a HUD-approved COP shall use as its projected occupancy 
percentage for computing its projected operating income level under 
Sec. 950.725 the greater of its actual occupancy percentage, as 
determined under Sec. 950.760, or its approved, yearly IHA-wide 
occupancy goal, adjusted as necessary to discount units that are vacant 
for reasons beyond the IHA's control, as provided in paragraph (h) of 
this section.
    (h) Units vacant for reasons beyond an IHA's control. A vacant unit 
is considered vacant for reasons beyond an IHA's control only if the 
unit is located in a project that meets one of the following 
conditions:
    (1) The IHA has applied for modernization, HUD cannot fund the 
project because of lack of sufficient funding, and it is expected that 
the units will be occupied when the units are modernized.
    (2) The vacant units are vacant, on-schedule modernization units.
    (3) The units are vacant because of natural disasters, or as a 
result of court-ordered, or HUD-approved, constraints relating to title 
VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d).


Sec. 950.772  Financial management systems, monitoring, and reporting.

    The financial management systems, monitoring, and reporting on 
program performance and financial reporting will be in compliance with 
the requirements of 24 CFR 85.20, 85.40, and 85.41, except to the 
extent that HUD requirements provide for additional specialized 
procedures necessary to permit the Secretary to make the determinations 
regarding the payment of operating subsidy specified in section 9(a)(1) 
of the United States Housing Act of 1937 (42 U.S.C 1437g(a)(1)).


Sec. 950.774  Operating subsidy eligibility for projects owned by IHAs 
in Alaska.

    The provisions of this subpart are applicable to the development, 
modernization, and operation of the rental housing owned by the IHAs in 
the State of Alaska, excluding the formula calculation for the PFS.
[[Page 18268]]

Subpart K--Energy Audits, Energy Conservation Measures and Utility 
Allowances


Sec. 950.801  Purpose and applicability.

    (a) Purpose. The purpose of this subpart K is to implement HUD 
policies in support of national energy conservation goals by reducing 
energy consumption through requiring that IHAs conduct energy audits 
and undertake certain cost-effective energy conservation measures. This 
subpart K also provides for the establishment of utility allowances for 
residents based on reasonable consumption of utilities by an energy-
conscious household.
    (b) Applicability. The provisions of this subpart K apply to all 
IHAs with IHA-owned housing, including Mutual Help and Turnkey III.

Energy Audits and Energy Conservation Measures


Sec. 950.805  Requirements for energy audits.

    All IHAs shall complete an energy audit for each IHA-owned project 
under management. Standards for energy audits shall be equivalent to 
State or tribal standards for energy audits. Energy audits shall 
analyze all of the energy conservation measures, and the payback period 
for these measures, that are pertinent to the type of buildings and 
equipment operated by the IHA.


Sec. 950.810  Order of funding.

    Within the funds available to an IHA, energy conservation measures 
should be accomplished with the shortest pay-back periods funded first. 
However, HUD Area ONAPs should permit IHAs to make adjustments to this 
funding order because of insufficient funds to accomplish high-cost 
energy conservation measures (ECM), or a situation in which an ECM with 
a longer pay-back period can be more efficiently installed in 
conjunction with other planned modernization. Area ONAPs may not 
authorize installation of individual utility meters that measure the 
energy or fuel used for space heating in dwelling units that need 
substantial weatherization, when installation of meters would result in 
economic hardship for residents. In these cases, the ECMs related to 
weatherization shall be accomplished before the installation of 
individual utility meters.


Sec. 950.812  Funding.

    (a) The cost of accomplishing cost-effective energy conservation 
measures, including the cost of performing energy audits, shall be 
funded from operating funds of the IHA to the extent feasible. When 
sufficient operating funds are not available for this purpose, such 
costs are eligible for inclusion in a modernization program, for 
funding from any available development funds in the case of projects 
still in development, or for other available funds that HUD may 
designate to be used for energy conservation.
    (b) If an IHA finances energy conservation measures from sources 
other than modernization or operating reserves, such as on the basis of 
a promise to repay, HUD may agree to provide adjustments in its 
calculation of the IHA's operating subsidy eligibility under the PFS 
for the project and utility involved if the financing arrangement is 
cost-beneficial to HUD. (See Sec. 950.730(e)).


Sec. 950.815  Energy conservation equipment and practices.

    In purchasing original or, when needed, replacement equipment, IHAs 
shall acquire only equipment that meets or exceeds the minimum 
efficiency requirements established by the U.S. Department of Energy. 
In the operation of their facilities, IHAs shall follow operating 
practices directed to maximum energy conservation.


Sec. 950.822  Compliance schedule.

    All energy conservation measures determined by energy audits to be 
cost effective shall be accomplished as funds are available.


Sec. 950.825  Energy performance contracts.

    Method of procurement. Energy performance contracting shall be 
conducted using one of the following methods of procurement:
    (a) Competitive proposals (see Sec. 950.165(c)). In identifying the 
evaluation factors and their relative importance, as required by 
Sec. 950.165(c)(1), the solicitation shall state that technical factors 
are significantly more important than price (of the energy audit); or
    (b) If the services are available only from a single source, 
noncompetitive proposals (see Sec. 950.165(d)).

Individual Metering of Utilities


Sec. 950.840  Individually metered utilities.

    (a) All utility service shall be individually metered to residents, 
either through provision of retail service to the residents by the 
utility supplier or through the use of checkmeters, unless:
    (1) Individual metering is impractical, such as in the case of a 
central heating system in an apartment building;
    (2) Change from a mastermetering system to individual meters would 
not be financially justified based upon a benefit/cost analysis; or
    (3) Checkmetering is not permissible under State or local law, or 
under the policies of the particular utility supplier or public service 
commission.
    (b) If checkmetering is not permissible, retail service shall be 
considered. Where checkmetering is permissible, the type of individual 
metering offering the most savings to the IHA shall be selected.


Sec. 950.842  Benefit/cost analysis.

    (a) A benefit/cost analysis shall be made to determine whether a 
change from a mastermetering system to individual meters will be cost 
effective, except as otherwise provided in Sec. 950.846.
    (b) Proposed installation of checkmeters shall be justified on the 
basis that the cost of debt service (interest and amortization) of the 
estimated installation costs plus the operating costs of the 
checkmeters will be more than offset by reduction in future utilities 
expenditures to the IHA under the mastermeter system.
    (c) Proposed conversion to retail service shall be justified on the 
basis of net savings to the IHA. This determination involves making a 
comparison between the reduction in utility expense obtained through 
eliminating the expense to the IHA for IHA-supplied utilities and the 
resultant allowance for resident-supplied utilities, based on the cost 
of utility service to the residents after conversion.


Sec. 950.844  Funding.

    The cost to change mastermeter systems to individual metering of 
resident consumption, including the costs of benefit/cost analysis and 
complete installation of checkmeters, shall be funded from operating 
funds of the IHA to the extent feasible. When sufficient operating 
funds are not available for this purpose, such costs are eligible for 
inclusion in a modernization project or for funding from any available 
development funds.


Sec. 950.845  Order of conversion.

    Conversions to individually metered utility service shall be 
accomplished in the following order when an IHA has projects of two or 
more of the designated categories, unless otherwise approved by the HUD 
Area ONAP:
    (a) In projects for which retail service is provided by the utility 
supplier and the IHA is paying all the individual utility bills, no 
benefit/cost analysis is necessary, and residents shall be billed 
directly after the IHA adopts revised payment schedules providing 
appropriate allowances for resident-supplied utilities.
    (b) In projects for which checkmeters have been installed but are 
not being [[Page 18269]] utilized as the basis for determining utility 
charges to the residents, no benefit/cost analysis is necessary. The 
checkmeters shall be used as the basis for utility charges and 
residents shall be surcharged for excess utility use.
    (c) Projects for which meter loops have been installed for 
utilization of checkmeters shall be analyzed both for the installation 
of checkmeters and for conversion to retail service.
    (d) Low- or medium-rise family units with a mastermeter system 
should be analyzed for both checkmetering and conversion to retail 
service, because of their large potential for energy savings.
    (e) Low- or medium-rise housing for elderly should next be analyzed 
for both checkmetering and conversion to retail service, since the 
potential for energy saving is less than for family units.
    (f) Electric service under mastermeters for high-rise buildings, 
including projects for the elderly, should be analyzed for both use of 
retail service and of checkmeters.


Sec. 950.846  Actions affecting residents.

    (a) Before making any conversion to retail service, the IHA shall 
adopt revised payment schedules, providing appropriate allowances for 
the resident-supplied utilities resulting from the conversion.
    (b) Before implementing any modifications to utility services 
arrangements with the residents or charges with respect thereto, the 
requisite changes shall be made in resident dwelling leases in 
accordance with subpart D of this part.
    (c) To the extent practicable, IHAs should work closely with 
resident organizations in making plans for conversion of utility 
service to individual metering, explaining the national policy 
objectives of energy conservation, the changes in charges and rent 
structure that will result, and the goals of achieving an equitable 
structure that will be advantageous to residents who conserve energy.
    (d) A transition period of at least six months shall be provided in 
the case of initiation of checkmeters, during which residents will be 
advised of the charges but during which no surcharge will be made based 
on the readings. This trial period will afford residents ample notice 
of the effects the checkmetering system will have on their individual 
utility charges and also afford a test period for the adequacy of the 
utility allowances established.
    (e) During and after the transition period, IHAs shall advise and 
assist residents with high utility consumption on methods for reducing 
their usage. This advice and assistance may include counseling, 
installation of new energy conserving equipment or appliances, and 
corrective maintenance.


Sec. 950.849  Waivers for similar projects.

    IHAs with more than one project of similar design and utilities 
service may prepare a benefit/cost analysis for a representative 
project. A finding that a change in metering is not cost effective for 
the representative project is sufficient reason for the HUD Area ONAP 
to waive the requirements of this subpart for benefit/cost analysis on 
the remaining similar projects.


Sec. 950.850  Reevaluations of mastermeter systems.

    Because of changes in the cost of utility services and the periodic 
changes in utility regulations, IHAs with mastermeter systems are 
required to reevaluate mastermeter systems without checkmeters by 
making benefit/cost analyses at least every 36 months. HUD Area ONAPs 
may grant waivers of this requirement upon making a finding as provided 
in Sec. 950.849.

Resident Utility Allowances


Sec. 950.860  Applicability.

    (a) Sections 950.860 through 950.876 apply to all Indian housing 
dwelling units, including those operated under the Mutual Help 
Homeownership Opportunity Program.
    (b) In rental units for which utilities are furnished by the IHA 
but there are no checkmeters to measure the actual utilities 
consumption of the individual units, residents shall be subject to 
charges for consumption of resident-owned major appliances, or for 
optional functions of IHA-furnished equipment, in accordance with 
Sec. 950.865(e), but no utility allowance will be established.


Sec. 950.865  Establishment of utility allowances by IHAs.

    (a) IHAs shall establish allowances for IHA-furnished utilities for 
all checkmetered utilities and allowances for resident-purchased 
utilities for all utilities purchased directly by residents from the 
utilities suppliers.
    (b) The IHA shall maintain a record that documents the basis on 
which allowances and scheduled surcharges, and revisions thereof, are 
established and revised. Such record shall be available for inspection 
by residents.
    (c) The IHA shall give notice to all residents of proposed 
allowances, scheduled surcharges, and revisions thereof. Such notice 
shall be given, in the manner provided in the lease or homebuyer 
agreement, not less than 60 days before the proposed effective date of 
the allowances or scheduled surcharges or revisions; shall describe 
with reasonable particularity the basis for determination of the 
allowances, scheduled surcharges, or revisions, including a statement 
of the specific items of equipment and function whose utility 
consumption requirements were included in determining the amounts of 
the allowances or scheduled surcharges; shall notify residents of the 
place where the IHA's record maintained in accordance with paragraph 
(b) of this section is available for inspection; and shall provide all 
residents an opportunity to submit written comments during a period 
expiring not less than 30 days before the proposed effective date of 
the allowances or scheduled surcharges or revisions. Such written 
comments shall be retained by the IHA and shall be available for 
inspection by residents.
    (d) Schedules of allowances and scheduled surcharges shall not be 
subject to approval by HUD before becoming effective, but will be 
reviewed in the course of audits or reviews of IHA operations.
    (e) The IHA's determinations of allowances, scheduled surcharges, 
and revisions thereof shall be final and valid unless found to be 
arbitrary, capricious, an abuse of discretion, or otherwise not in 
accordance with the law.


Sec. 950.867  Categories for establishment of allowances.

    Separate allowances shall be established for each utility and for 
each category of dwelling units determined by the IHA to be reasonably 
comparable as to factors affecting utility usage. The IHA will 
establish allowances for different size units, in terms of numbers of 
bedrooms. Other categories may be established at the discretion of the 
IHA.


Sec. 950.869  Period for which allowances are established.

    (a) IHA-furnished utilities. Allowances will normally be 
established on a quarterly basis; however, residents may be surcharged 
on a monthly basis. The allowances established may provide for seasonal 
variations.
    (b) Resident-purchased utilities. Monthly allowances shall be 
established at a uniform monthly amount based on an average monthly 
utility requirement for a year; however, if the utility supplier does 
not offer residents a uniform payment plan, the allowances established 
may provide for seasonal variations.


Sec. 950.870  Standards for allowances for utilities.

    (a) The objective of an IHA in designing methods of establishing 
[[Page 18270]] utility allowances for each dwelling unit category and 
unit size shall be to approximate a reasonable consumption of utilities 
by an energy-conservative household of modest circumstances consistent 
with the requirements of a safe, sanitary, and healthful living 
environment.
    (b) Allowances for both IHA-furnished and resident-purchased 
utilities shall be designed to include such reasonable consumption for 
major equipment or for utility functions furnished by the IHA for all 
residents (e.g., heating furnace, hot water heater), for essential 
equipment whether or not furnished by the IHA (e.g., range and 
refrigerator), and for minor items of equipment (such as toasters and 
radios) furnished by residents.
    (c) The complexity and elaborateness of the methods chosen by the 
IHA, in its discretion, to achieve the foregoing objective will depend 
upon the data available to the IHA and the extent of the administrative 
resources reasonably available to the IHA to be devoted to the 
collection of such data, the formulation of methods of calculation, and 
actual calculation and monitoring of the allowances.
    (d) In establishing allowances, the IHA shall take into account 
relevant factors affecting consumption requirements, including:
    (1) The equipment and functions intended to be covered by the 
allowance for which the utility will be used. For instance, natural gas 
may be used for cooking, heating domestic water, or space heating, or 
any combination of the three.
    (2) The climatic location of the housing projects.
    (3) The size of the dwelling units and the number of occupants per 
dwelling unit.
    (4) Type of construction and design of the housing project.
    (5) The energy efficiency of IHA-supplied appliances and equipment.
    (6) The utility consumption requirements of appliances and 
equipment whose reasonable consumption is intended to be covered by the 
total resident payment.
    (7) The physical condition, including insulation and 
weatherization, of the housing project.
    (8) Temperature levels intended to be maintained in the unit during 
the day and at night, and in cold and warm weather.
    (9) Temperature of domestic hot water.


Sec. 950.872  Surcharges for excess consumption of IHA-furnished 
utilities.

    (a) For dwelling units subject to allowances for IHA-furnished 
utilities where checkmeters have been installed, the IHA shall 
establish surcharges for utility consumption in excess of the 
allowances. Surcharges may be computed on a straight per unit of 
purchase basis (e.g., cents per kilowatt hour of electricity) or for 
stated blocks of excess consumption, and shall be based on the IHA's 
average utility rate. The basis for calculating such surcharges shall 
be described in the IHA's schedule of allowances. Changes in the dollar 
amounts of surcharges based directly on changes in the IHA's average 
utility rate shall not be subject to the advance notice requirements of 
this section.
    (b) For dwelling units served by IHA-furnished utilities where 
checkmeters have not been installed, the IHA shall establish schedules 
of surcharges indicating additional dollar amounts residents will be 
required to pay by reason of estimated utility consumption attributable 
to resident-owned major appliances or to optional functions of IHA-
furnished equipment. Such surcharge schedules shall state the resident-
owned equipment (or functions of IHA-furnished equipment) for which 
surcharges shall be made and the amounts of such charges, which shall 
be based on the cost to the IHA of the utility consumption estimated to 
be attributable to reasonable usage of such equipment.


Sec. 950.874  Review and revision of allowances.

    (a) Annual review. The IHA shall review at least annually the basis 
on which utility allowances have been established and, if reasonably 
required in order to continue adherence to the standards stated in 
Sec. 950.870, shall establish revised allowances. The review shall 
include all changes in circumstances (including completion of 
modernization and/or other energy conservation measures implemented by 
the IHA) indicating probability of a significant change in reasonable 
consumption requirements and changes in utility rates.
    (b) Revision as a result of rate changes. The IHA may revise its 
allowances for resident-purchased utilities between annual reviews if 
there is a rate change (including fuel adjustments) and shall be 
required to do so if such change, by itself or together with prior rate 
changes not adjusted for, results in a change of 10 percent or more 
from the rates on which such allowances were based. Adjustments to 
resident payments as a result of such changes shall be retroactive to 
the first day of the month following the month in which the last rate 
change taken into account in such revision became effective.


Sec. 950.876  Individual relief.

    Requests for relief from surcharges for excess consumption of IHA-
purchased utilities, or from payment of utility supplier billings in 
excess of the allowances for resident-purchased utilities, may be 
granted by the IHA on reasonable grounds, such as special needs of 
elderly, il,l or handicapped residents, or special factors affecting 
utility usage not within the control of the resident, as the IHA shall 
deem appropriate. The IHA's criteria for granting such relief, and 
procedures for requesting such relief, shall be adopted at the time the 
IHA adopts the methods and procedures for determining utility 
allowances. Notice of the availability of such procedures (including 
identification of the IHA representative with whom initial contact may 
be made by residents), and the IHA's criteria for granting such relief, 
shall be included in each notice to residents given in accordance with 
Sec. 950.865(c) and in the information given to new residents upon 
admission.

Subpart L--Operation of Projects After Expiration of Initial ACC 
Term


Sec. 950.901  Purpose and applicability.

    (a) Purpose. This subpart L specifies methods for extending the 
effective period of provisions of the ACC relating to project operation 
beyond the original ACC term. Such an extension provides a contractual 
basis for continued eligibility for operating subsidy.
    (b) Applicability. This subpart L applies to any Indian housing 
project which is owned by an IHA and is subject to an ACC under section 
5 of the United States Housing Act of 1937, including rental, Turnkey 
III, or Mutual Help housing. However, it does not apply to the Section 
8 and Section 23 Housing Assistance Payments Programs and the Section 
10(c) and Section 23 Leased Housing Programs.


Sec. 950.903  Continuing eligibility for operating subsidy; ACC 
extension.

    (a) Operating subsidy. After the initial term of the ACC, HUD will 
pay operating subsidy with respect to a project only in accordance with 
an ACC amendment providing for extension of the term of the ACC 
provisions related to project operation for at least ten years after 
the last payment of HUD assistance. The ACC amendment shall be in the 
form prescribed by HUD, and shall specify the particular provisions of 
the ACC that relate to continued project operation and, therefore, 
remain in effect for the extended ACC term. These 
[[Page 18271]] provisions shall include a requirement that the IHA 
execute and file, for public record, an appropriate document evidencing 
the IHA's covenant not to convey, encumber or make any other 
disposition of the project without HUD approval for a period of ten 
years after the receipt of the last payment of HUD assistance.
    (b) Consolidated ACC. Where a single ACC covers more than one 
project (consolidated ACC), each annual operating subsidy payable under 
that ACC is a lump-sum amount which is not divided into discrete 
amounts for the individual projects subject to the consolidated ACC 
(see subpart J of this part). Accordingly, if an IHA, before submitting 
a request for operating subsidy, determines that any project(s) under 
the consolidated ACC will not require operating subsidy and should not 
be subject to the provisions of paragraph (a) of this section, the IHA 
shall accompany its request with a resolution adopted by the Board of 
Commissioners certifying that no operating subsidy shall be used with 
respect to such project(s) thereafter and that all financial records 
and accounts shall be kept separately for such project(s). In such 
cases, the removal of the project(s) from the request for operating 
subsidy shall be reflected by the inclusion of that number of unit 
months available for the project(s) when making the calculations, under 
subpart J of this part, for determination of total amount of operating 
subsidy payable under the consolidated ACC. In any event no operating 
subsidy payable under a consolidated ACC or otherwise shall be used to 
pay, directly or indirectly, any costs attributable to a project that 
is ineligible or otherwise excluded from operating subsidy under 
paragraph (a) of this section. Even if no operating subsidy is received 
with respect to a project, the IHA remains obligated to maintain and 
operate the project in accordance with the provisions of the ACC 
related to project operation so long as those ACC provisions remain in 
effect.


Sec. 950.905  ACC extension in absence of current operating subsidy.

    Where no operating subsidy is being paid under an ACC, the IHA 
shall, at least one year before the anticipated ACC expiration date for 
the project, notify the Area ONAP as to whether or not the IHA desires 
to maintain a basis for receiving operating subsidy with respect to the 
project after the anticipated ACC expiration date. This notification 
shall be submitted to the appropriate Area ONAP in the form of a 
resolution by the IHA's Board of Commissioners. If the IHA does not 
desire to maintain a basis for operating subsidy payments with respect 
to the project after the anticipated ACC expiration date, the 
resolution shall certify that no operating subsidy shall be utilized 
with respect to the project after the effective date of this rule and 
that all financial records and accounts for such a project shall be 
kept separately. If the IHA does desire to maintain a basis for such 
operating subsidy payments, the resolution shall include the IHA's 
request for extension of the term of the ACC provisions related to 
project operation, for a period of not less than one nor more than 10 
years. Upon the Area ONAP's receipt of the request, HUD and the IHA 
shall enter into an ACC amendment effecting the extension for the 
period requested by the IHA, unless HUD finds that continued operation 
of the project cannot be justified under the standards set forth in 
subpart M of this part.


Sec. 950.907  HUD approval of disposition or demolition.

    During the post-assistance service period of continued operation as 
low-income housing, HUD may authorize an IHA to dispose of or demolish 
housing units at any time, in accordance with subpart M of this part.

Subpart M--Disposition or Demolition of Projects


Sec. 950.921  Purpose and applicability.

    (a) Purpose. This subpart M sets forth requirements for HUD 
approval of an IHA's application to dispose of or demolish (in whole or 
in part) IHA-owned projects assisted under the Act. The rules and 
procedures contained in 24 CFR part 85 are inapplicable.
    (b) Applicability. (1) Type of projects. This subpart M applies to 
any Indian housing project that is owned by an IHA and is subject to an 
ACC under section 5 of the United States Housing Act of 1937 (42 U.S.C. 
1437c), including rental, Turnkey III, or Mutual Help housing. This 
subpart M does not apply to:
    (i) IHA-owned Section 8 housing or housing leased under section 
10(c) or section 23 of the Act (42 U.S.C. 1437h(c) or 1437u);
    (ii) Demolition or disposition before the end of the initial 
operating period (EIOP), as determined under the ACC, of property 
acquired incident to the development of an Indian housing project 
(however, this exception does not apply to units occupied or available 
for occupancy by Indian housing tenants before EIOP);
    (iii) Conveyance of Indian housing for the purpose of providing 
homeownership opportunities for low-income families under section 21 of 
the Act, the Turnkey III or Mutual Help Homeownership Opportunity 
programs, or any other homeownership programs established under 
sections 5(h) and 6(c)(4)(D) of the Act (42 U.S.C. 1437c(h), 
1437d(c)(4)(3)) or titles II and III of the Act (42 U.S.C. 1437aa, 
1437aaa).
    (iv) Leasing of dwelling or nondwelling space incident to the 
normal operation of the project for Indian housing purposes, as 
permitted by the ACC;
    (v) Easements, rights-of-way, and transfers of utility systems 
incident to the normal operation of the project for Indian housing 
purposes, as permitted by the ACC;
    (vi) Reconfiguration of the interior space of buildings (e.g., 
moving or removing interior walls to change the design, sizes, or 
number of units) without demolition; and
    (vii) A whole or partial taking by a public or quasi-public entity 
through the exercise of its power of eminent domain.
    (2) [Reserved].
    (c) Type of actions. Any action by an IHA to dispose of or demolish 
an Indian housing project or a portion of an Indian housing project is 
subject to the requirements of this subpart M. Until such time as HUD 
approval may be obtained, the IHA may not take any action to dispose of 
or demolish an Indian housing project or portion of an Indian housing 
project, and the IHA shall continue to meet its ACC obligations to 
maintain and operate the property as housing for low-income families. 
This does not mean that HUD approval under this subpart M is required 
for planning activities, analysis, or consultations, such as project 
viability studies, comprehensive modernization planning, or 
comprehensive occupancy planning.


Sec. 950.923  General requirements for HUD approval of disposition or 
demolition.

    (a) For purposes of this subpart M, the term ``tenant'' will also 
include ``homebuyer'' when the development involved is a homeownership 
project; and the term ``unit of general government'' will include the 
tribal government, when applicable.
    (b) HUD will not approve an application for disposition or 
demolition unless:
    (1) The application has been developed in consultation with tenants 
of the project involved, any tenant organizations for the project, and 
any IHA-wide tenant organizations that will be affected by the 
disposition or demolition; [[Page 18272]] 
    (2) The IHA has complied with the requirement to offer the project 
or portion of the project proposed for demolition or disposition to the 
resident organizations as required under Sec. 950.925;
    (3) The application contains a certification by the chief executive 
officer, or designee, that the unit of general government will comply 
with displacement, relocation, and real property acquisition policies 
described in Sec. 950.117;
    (4) Demolition or disposition (including any related replacement 
housing plan) will meet the requirements of the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321), the National Historic Preservation 
Act of 1966 (16 U.S.C. 469), and related laws, as stated in HUD's 
regulations at 24 CFR part 50. When the site of the replacement housing 
is unknown at the time of submission of the application for demolition 
or disposition, the application shall contain a certification that the 
applicant agrees to assist HUD to comply with 24 CFR part 50, and that 
the applicant shall:
    (i) Supply HUD with all available, relevant information necessary 
for HUD to perform for each property any environmental review required 
by 24 CFR part 50;
    (ii) Carry out mitigating measures required by HUD or select 
alternate eligible property; and
    (iii) Not acquire, rehabilitate, convert, lease, repair, or 
construct property, or commit HUD funds or other funds to such program 
activities with respect to any eligible property, until HUD approval is 
received.
    (5) The IHA has developed a replacement housing plan, in accordance 
with Sec. 950.935, and has obtained a commitment for the funds 
necessary to carry out the plan over the approved schedule of the plan. 
To the extent such funding is not provided from other sources (e.g., 
State, tribal, or local programs or proceeds of disposition), HUD 
approval of the application for demolition or disposition is 
conditioned on HUD's agreement to commit the necessary funds (subject 
to availability of future appropriations).


Sec. 950.925  Resident organization opportunity to purchase.

    (a) Applicability. (1) This section applies to applications for 
demolition or disposition of a development which involve dwelling 
units, nondwelling spaces (e.g., administration and community 
buildings, maintenance facilities), and excess land.
    (2) The requirements of this section do not apply to the following 
cases which it has been determined do not present appropriate 
opportunities for resident purchase:
    (i) The IHA has determined that the property proposed for 
demolition is an imminent threat to the health and safety of residents;
    (ii) The tribal or local government has condemned the property 
proposed for demolition;
    (iii) A tribal or local government agency has determined and 
notified the IHA that units shall be demolished to allow access to fire 
and emergency equipment;
    (iv) The IHA has determined that the demolition of selected 
portions of the development in order to reduce density is essential to 
ensure the long-term viability of the development or the IHA (but in no 
case should this be used cumulatively to avoid Section 412 
requirements); or
    (v) A public body has requested to acquire vacant land that is less 
than two acres in order to build or expand its services (e.g., a tribal 
or local government wishes to use the land to build or establish a 
police substation).
    (3) In the situations listed in paragraph (a)(2) of this section, 
the IHA may proceed to submit its request to demolish or dispose of the 
property, or the portion of the property, to HUD, in accordance with 
section 18 of the United States Housing Act of 1937 (42 U.S.C. 1437p) 
and this subpart without affording an opportunity for purchase by a 
resident organization. However, resident consultation would be required 
in accordance with Sec. 950.923(b)(1). The IHA shall submit written 
documentation, on official stationery, with date and signatures to 
justify paragraphs (a)(2)(i) through (v) of this section. Examples of 
such documentation include:
    (i) A certification from a tribal or local agency, such as the fire 
or health department, that a condition exists in the development that 
is an imminent threat to residents; or
    (ii) A copy of the condemnation order from the local health 
department. If, however, at some future date, the IHA proposes to sell 
the remaining property described in paragraphs (a)(2)(i) through (iii) 
of this section, the IHA will be required to comply with this section.
    (b) Opportunity for residents to organize. Where the affected 
development does not have an existing resident organization, resident 
management corporation or resident cooperative at the time of the IHA 
proposal to demolish or dispose of the development or a portion of the 
development, the IHA shall make a reasonable effort to inform residents 
of the development of the opportunity to organize and purchase the 
property proposed for demolition or disposition. Examples of 
``reasonable effort'' at a minimum include at least one of the 
following activities: convening a meeting, sending letters to all 
residents, publishing an announcement in the resident newsletter, where 
available, or hiring a consultant to provide technical assistance to 
the residents. HUD will not approve any application that cannot 
demonstrate that the IHA has allowed at least 45 days for the residents 
of the affected development to organize a resident organization. The 
IHA should initiate its efforts to inform the residents of their right 
to organize as an integral part of the resident consultation 
requirement under Sec. 950.923(b)(1).
    (c) Established organizations. Where there are duly formed resident 
management corporations, resident organizations or resident 
cooperatives at the affected development, the IHA should follow the 
procedures beginning in paragraph (d) of this section. Where the 
affected development is fully or partially occupied, the residents 
shall be given the opportunity to form under the procedures in 
paragraph (b) of this section.
    (d) Offer of sale to resident organizations. (1) The IHA shall make 
the formal offer for sale which shall include the information listed in 
this section. All contacted organizations shall have 30 days to express 
an interest in the offer. The IHA shall offer to sell the property 
proposed for demolition or disposition to the resident management 
corporation, the resident organization or resident cooperative of the 
affected development under at least as favorable terms and conditions 
as the IHA would offer it for sale to another purchaser. The offer 
shall include:
    (i) An identification of the development, or portion of the 
development, in the proposed demolition or disposition, including the 
development number and location, the number of units and bedroom 
configuration, the amount of space and use for non-dwelling space, the 
current physical condition (e.g., fire damaged, friable asbestos, lead 
based paint test results), and occupancy status (e.g., percent 
occupancy);
    (ii) In the case of disposition, a copy of the appraisal of the 
property and any terms of sale;
    (iii) An IHA disclosure and description of plans proposed for reuse 
of land, if any, after the proposed demolition or disposition; 
[[Page 18273]] 
    (iv) An identification of available resources (including its own 
and HUD's) to provide technical assistance to the resident management 
corporation, resident organization or resident cooperative of the 
affected development to enable the organization to better understand 
its opportunity to purchase the development, the development's value 
and potential use;
    (v) Any and all terms of sale that the IHA requires for the Section 
18 action; [If the resident management corporation, resident 
organization or resident cooperative of the affected development 
submits a proposal that is other than the terms of sale (e.g., purchase 
at less than fair market value with demonstrated commensurate public 
benefit or for the purposes of homeownership), the IHA may consider 
accepting the offer.]
    (vi) A date by which the resident management corporation, resident 
organization or resident cooperative of the affected development shall 
respond to the IHA's offer to sell the property proposed for demolition 
or disposition, which shall be no less than 30 days from the date of 
the official offering of the IHA which will be made sometime after the 
meeting. The response from the resident management corporation, 
resident organization or resident cooperative of the affected 
development shall be in the form of a letter expressing its interest in 
accepting the IHA's written offer.
    (vii) A statement that the resident management corporation, 
resident organization and resident cooperative of the affected 
development will be given up to 60 days to develop and submit a 
proposal to the IHA to purchase the property and to obtain a firm 
financial commitment. It shall explain that the IHA shall approve the 
proposal from the resident management corporation, resident 
organization or resident cooperative of the affected development, if it 
meets the terms of sale. However, the statement shall indicate that the 
IHA can consider accepting an offer from the resident management 
corporation, resident organization or resident cooperative of the 
affected development that is other than the terms of sale; e.g., 
purchase at less than fair market value with demonstrated commensurate 
public benefit or for the purposes of homeownership. The statement 
shall explain that if the IHA receives more than one proposal from a 
resident management corporation, resident organization or resident 
cooperative at the affected development, the IHA shall select the 
proposal that meets the terms of sale. In the event that two proposals 
from the affected development meet the terms of sale, the IHA shall 
choose the best proposal.
    (2) After the 30 day time frame for the resident management 
corporation, resident organization or resident cooperative of the 
affected development to respond to the notification letter has expired, 
the IHA is to prepare letters to those organizations that responded 
affirmatively inviting them to submit a formal proposal to purchase the 
property. The organization has up to 60 days from the date of its 
affirmative response to prepare and submit a proposal to the IHA that 
provides all the information requested in paragraph (d)(1) of this 
section and meets the terms of sale.
    (e) IHA review of proposals. The IHA has up to 60 days from the 
date of receipt of the proposals to review them and determine whether 
they meet the terms of sale set forth in its offer. If the resident 
management corporation, resident organization or resident cooperative 
of the affected development submits a proposal that is other than the 
terms of sale (e.g., purchase at less than the fair market value with 
demonstrated commensurate public benefit or for the purposes of 
homeownership), the IHA may consider accepting the offer. If the terms 
of sale are met, within 14 days of the IHA's final decision, the IHA 
shall notify the resident management corporation, resident organization 
or resident cooperative of the affected development of that fact and 
that the proposal has been accepted or rejected.
    (f) Appeals. The resident management corporation, resident 
organization or resident cooperative of the affected development has 
the right to appeal the IHA's decision to the HUD Area ONAP. A written 
appeal shall be made within 30 days of the decision by the IHA. The 
appeal should include copies of the proposal and any related 
correspondence. The HUD Area ONAP will render a final decision within 
30 days. A letter communicating the decision is to be prepared and sent 
to the IHA and the resident management corporation, resident 
organization or resident cooperative of the affected development.
    (g) Contents of proposal. (1) The proposal from the resident 
management corporation, resident organization or resident cooperative 
of the affected development shall at a minimum include the following:
    (i) The length of time the organization has been in existence;
    (ii) A description of current or past activities which demonstrate 
the organization's organizational and management capability or the 
planned acquisition of such capability through a partner or other 
outside entities;
    (iii) A statement of financial capability;
    (iv) A description of involvement of any non-resident organization 
(non-profit, for-profit, governmental or other entities), if any, the 
proposed division of responsibilities between the two, and the non-
resident organization's financial capabilities;
    (v) A plan for financing the purchase of the property and a firm 
commitment for funding resources necessary to purchase the property and 
pay for any necessary repairs;
    (vi) A plan for the use of the property;
    (vii) The proposed purchase price in relation to the appraised 
value;
    (viii) Justification for purchase at less than the fair market 
value in accordance with Sec. 950.931(h), if appropriate;
    (ix) Estimated time schedule for completing the transaction;
    (x) The response to the IHA's terms of sale;
    (xi) A resolution from the resident organization approving the 
proposal; and
    (xii) A proposed date of settlement, generally not to exceed six 
months from the date of IHA approval of the proposal, or such period as 
the IHA may determine to be reasonable.
    (2) If the proposal is to purchase the property for homeownership 
under section 5(h) or HOPE 1, then the requirements of section 18 of 
the United States Housing Act of 1937 (42 U.S.C. 1437p) and this 
subpart do not apply, and the applicable requirements shall be those 
under the HOPE 1 guidelines, as set forth at 24 CFR Subtitle A, App. A, 
or the section 5(h) regulation, as set forth in subpart P of this part. 
In order for the IHA to consider a proposal to purchase under section 
412, using homeownership opportunities under section 5(h) or HOPE 1, 
the resident management corporation, organization or resident 
cooperative of the affected development shall meet the provisions of 
this subsection, including items in paragraph (g)(1) of this section.
    (3) If the proposal is to purchase the property for other than the 
aforementioned homeownership programs or for uses other than 
homeownership, then the proposal shall meet all the disposition 
requirements of section 18 of the United States Housing Act of 1937 (42 
U.S.C. 1437p) and this subpart.
    (h) IHA Obligations. (1) Prepare and disperse the formal offer of 
sale to the resident management corporation, resident organization and 
resident cooperative of the affected development. [[Page 18274]] 
    (2) Evaluate proposals received and make the selection based on the 
considerations set forth in paragraph (b) of this section. Issue 
letters of acceptance and rejection.
    (3) Prepare certifications, where appropriate, as discussed in 
paragraph (j)(3) of this section. The IHA shall comply with its 
obligations under Sec. 950.923(b)(1) regarding tenant consultation and 
provide evidence to HUD that it has met those obligations. The IHA 
shall not act in an arbitrary manner and shall give full and fair 
consideration to any qualified resident management corporation, 
resident organization or resident cooperative of the affected 
development and accept the proposal if it meets the terms of sale.
    (i) IHA application submission requirements for proposed demolition 
or disposition. (1) If the proposal from the resident organization is 
rejected by the IHA, and either there is no appeal by the organization 
or the appeal has been denied, the IHA shall submit its demolition or 
disposition application to HUD in accordance with section 18 of the 
United States Housing Act of 1937 (42 U.S.C. 1437p) and this subpart. 
The demolition or disposition application shall include complete 
documentation that the requirements of this section have been met. IHAs 
shall submit written documentation that the resident management 
corporation, resident organization and resident cooperative of the 
affected development have been apprised of their opportunity to 
purchase under this section. This documentation shall include a copy of 
the signed and dated IHA notification letter(s) to each organization 
informing them of the IHA's intention to submit an application for 
demolition or disposition and the responses from each organization.
    (2) If the IHA accepts the proposal of the resident organization, 
the IHA shall submit a disposition application in accordance with 
section 18 of the United States Housing Act of 1937 (42 U.S.C. 1437p) 
and this subpart, with appropriate justification for a negotiated sale 
and for sale at less than fair market value, if applicable.
    (3) HUD will not process an application for demolition or 
disposition unless the IHA provides HUD with one of the following:
    (i) Where no resident management corporation, resident organization 
or resident cooperative exists in the affected development and the 
residents of the affected development have not formed a new 
organization, a certification from either the executive director or the 
board of commissioners stating that no such organization(s) exists and 
documentation that a reasonable effort to inform residents of their 
opportunity to organize has been made; or
    (ii) Where a resident management corporation, resident organization 
or resident cooperative exists in the affected development one of the 
following, either paragraph (i)(3)(ii)(A) or (B) of this section:
    (A) A board resolution or its equivalent from each resident 
management corporation, resident organization or resident cooperative 
stating that such organization has received the IHA letter, and that it 
understands the offer and waives its opportunity to purchase the 
project, or portion of the project, covered by the demolition or 
disposition application. The response should clearly state that the 
resolution was adopted by the entire organization at a formal meeting; 
or
    (B) A certification from the executive director or board of 
commissioners of the IHA that the thirty (30) day timeframe has expired 
and no response was received to its offer.


Sec. 950.927  Specific criteria for HUD approval of disposition 
requests.

    In addition to other applicable requirements of this subpart, HUD 
will not approve a request for disposition unless HUD determines that 
retention is not in the best interests of the tenants and the IHA, 
because at least one of the following criteria is met:
    (a) Developmental changes in the area surrounding the project 
adversely affect the health or safety of the tenants or the feasible 
operation of the project by the IHA.
    (b) Disposition will allow the acquisition, development, or 
rehabilitation of other properties that will be more efficiently or 
effectively operated as low-income housing projects, and that will 
preserve the total amount of low-income housing stock available to the 
community.
    (c) There are other factors justifying disposition that HUD 
determines are consistent with the best interests of the tenants and 
the IHA that are not inconsistent with other provisions of the Act.
    (d) In the case of disposition of property other than dwelling 
units:
    (1) The property is determined by HUD to be excess to the needs of 
the project (after the end of the initial operating period); or
    (2) The disposition of the property is incidental to, or does not 
interfere with, continued operation of the remaining portion of the 
project.


Sec. 950.928  Specific criteria for HUD approval of demolition 
requests.

    In addition to other applicable requirements of this subpart, HUD 
will not approve an application for demolition unless HUD determines 
that at least one of the following criteria is met:
    (a) In the case of demolition of all or a portion of a project, the 
project, or a portion of the project, is obsolete as to physical 
condition, location, or other factors, making it unusable for housing 
purposes; and
    (b) No reasonable program of modifications, in keeping with the 
provisions of subpart I of this part, is feasible to return the project 
or portion of the project to useful life.


Sec. 950.931  IHA application for HUD approval.

    Written approval by HUD shall be required before the IHA may 
undertake any transaction involving demolition or disposition. To 
request approval, the IHA shall submit an application to the HUD Area 
ONAP that includes the following:
    (a) A description of the property involved;
    (b) A description of, as well as a timetable for, the specific 
action proposed (including, in the case of disposition, the specific 
method proposed);
    (c) A statement justifying the proposed disposition or demolition 
under one or more of the applicable criteria of Secs. 950.927 or 
950.928;
    (d) If applicable, a plan that meets the requirements of 
Sec. 950.117 for the relocation of tenants who would be displaced by 
the proposed demolition or disposition;
    (e) A description of the IHA's consultations with tenants and any 
tenant organizations (as required under Sec. 950.923(b)(1)), with 
copies of any written comments which may have been submitted to the IHA 
and the IHA's evaluation of the comments;
    (f) A replacement housing plan, as required under Sec. 950.935, and 
a resolution by the governing body of the unit of tribal or general 
local government in which the project is located, indicating approval 
of the replacement plan;
    (g) Evidence that the IHA has complied with the requirement to 
offer the project or portion of the project proposed for demolition or 
disposition to the resident organizations, as required under 
Sec. 950.925;
    (h) The estimated balance of project debt, if any, under the ACC 
for development and modernization;
    (i) In the case of disposition, an estimate of the fair market 
value of the [[Page 18275]] property, established on the basis of one 
independent appraisal, unless, as determined by HUD:
    (1) More than one appraisal is warranted; or
    (2) Another method of valuation is clearly sufficient and the 
expense of an independent appraisal is unjustified because of the 
limited nature of the property interest involved or other available 
data;
    (j) In the case of disposition, estimates of the gross and net 
proceeds to be realized, with an itemization of estimated costs to be 
paid out of gross proceeds and the proposed use of any net proceeds in 
accordance with Sec. 950.933;
    (k) A copy of a resolution by the IHA's Board of Commissioners 
approving the application;
    (l) If determined to be necessary by HUD, an opinion by the IHA's 
legal counsel that the proposed action is consistent with applicable 
requirements of Federal, State, tribal, and local laws; and
    (m) Any additional information necessary to support the application 
and assist HUD in making determinations under this subpart M.


Sec. 950.933  Use of proceeds.

    (a) Disposition. (1) If HUD approves the disposition of real 
property of a project, in whole or in part, the IHA shall dispose of it 
promptly by public solicitation of bids for not less than fair market 
value, unless HUD authorizes negotiated sale for reasons found to be in 
the best interests of the IHA or the Federal Government, or for sale 
for less than fair market value (where permitted by State, tribal, or 
local law), based on commensurate public benefits to the community, the 
IHA, or the Federal Government justifying such an exception.
    (2) Net proceeds (after payment of HUD-approved costs of 
disposition and relocation under paragraph (a) of this section) shall 
be used, subject to HUD approval, as follows: first for the retirement 
of outstanding obligations, if any, issued to finance development or 
modernization of the project, which in the case of scattered site 
housing of an IHA, shall be in an amount that bears the same ratio to 
the total of such costs and obligations as the number of units disposed 
of bears to the total number of units of the project at the time of 
disposition; and thereafter for the provision of housing assistance for 
low-income families, through such measures as modernization of low-
income housing or the acquisition, development, or rehabilitation of 
other properties to operate as low-income housing.
    (b) Demolition. If HUD has approved demolition of a project, or a 
portion of a project, and the proposed action is part of a 
modernization program under subpart I of this part, the costs of 
demolition and of relocation of displaced tenants may be included in 
the modernization budget.


Sec. 950.935  Replacement housing plan.

    (a) HUD may not approve an application or furnish assistance under 
this subpart unless the IHA submitting the application for disposition 
or demolition also submits a plan for the provision of an additional 
decent, safe, sanitary, and affordable dwelling unit (at rents no 
higher than permitted under the Act) for each dwelling unit to be 
disposed of or demolished under the application. The plan shall include 
any one or a combination of the following:
    (1) The acquisition or development of additional low-income housing 
dwelling units;
    (2) The use of project-based assistance under section 8 (as 
provided for in 24 CFR part 882, subpart G);
    (3) The use of project-based assistance under other Federal 
programs;
    (4) The acquisition or development of dwelling units assisted under 
a State or local tribal government program that provides for project-
based assistance comparable in terms of eligibility, contribution to 
rent, and length of assistance contract to assistance under section 
8(b)(1) of the Act; or
    (5) The use of tenant-based assistance under section 8 of the Act 
(excluding vouchers under section 8(o) of the Act (42 U.S.C. 1437f(o)), 
under the conditions described in paragraph (b) of this section.
    (b) Tenant-based assistance under section 8 may be approved under 
the replacement plan only if:
    (1) There is a finding by HUD that replacement with project-based 
assistance is not feasible; that the supply of private rental housing 
actually available to those who would receive project-based assistance 
under the plan is sufficient for the total number of certificates and 
vouchers available in the community after implementation of the plan; 
and that this available housing supply is likely to remain available 
for the full term of the assistance; and
    (2) HUD's findings under paragraph (b)(1) of this section are based 
on objective information, which shall include rates of participation by 
landlords in the Section 8 program; size, condition, and rent levels of 
available rental housing as compared to Section 8 standards; the supply 
of vacant existing housing meeting the Section 8 housing quality 
standards with rents at or below the fair market rent or the likelihood 
of adjusting the fair market rent; the number of eligible families 
waiting for housing assistance under the Act; the extent of 
discrimination practiced against the types of individuals or families 
to be served by the assistance; and such additional data as HUD may 
determine to be relevant in particular circumstances.
    (c) The plan shall be approved by the unit of general local 
government (including tribal government) in which the project is 
located.
    (d) The plan shall include a schedule for carrying out all its 
terms within a period consistent with the size of the proposed 
disposition or demolition, except that the schedule for completing the 
plan shall in no event exceed six years from the date specified to 
begin plan implementation.
    (e) The plan shall include a method that ensures that at least the 
same total number of individuals and families will be provided housing, 
allowing for replacement with units of different sizes to accommodate 
changes in local priority needs.
    (f) The plan shall include an assessment of the suitability of the 
location of proposed replacement housing based upon application of the 
site selection criteria established in Sec. 950.235.
    (g) The plan shall contain assurances that any replacement units 
acquired, newly constructed, or rehabilitated will meet the applicable 
accessibility requirements set forth in 24 CFR 8.25.

Subpart N--[Reserved]

Subpart O--Resident Participation and Opportunities General 
Provisions


Sec. 950.960  Purpose.

    The purpose of this subpart O 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. 950.961  Applicability and scope.

    (a) This subpart O 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 United States Housing Act of 1937.
    (b) This subpart O contains HUD's policies, procedures, and 
requirements for the participation of Indian housing residents in 
Indian housing management. [[Page 18276]] 
    (c) This subpart O is designed to encourage increased resident 
participation in Indian housing.
    (d) This subpart O 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 O 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. 950.962  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. 950.969.
    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 shall have each of the 
following characteristics:
    (1) It shall 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 shall have an elected Board of Directors.
    (4) Its by-laws shall 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 shall be approved by the resident organization. If there is 
no organization, a majority of the households of the project or 
projects shall 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 shall 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 shall fairly represent residents 
from each development that it represents.
    (3) It shall adopt written procedures providing for the election of 
specific officers on a regular basis.
    (4) It shall 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. 950.963  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. 950.964  Resident participation requirements.

    (a) IHA responsibilities. (1) An IHA shall 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 shall 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 shall 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 can not serve 
as contractors or employees if they are in policy making or supervisory 
positions at the IHA.


Sec. 950.965  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 [[Page 18277]] 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 ONAP 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. 950.102 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 
shall 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. 950.966  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. 950.967  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, 
shall 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;
    (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; and
    (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. Other HUD programs such 
as the Youth Sports Program and the Public Housing Drug Elimination 
Programs also provide funding in these areas.
    (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 shall be made to acquire donated or discounted hardware;
    (3) Training in accessing other funding sources; and
    (4) Hiring trainers or other experts. RO/RMCs shall 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. 950.968  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 O.


Sec. 950.969  Resident management requirements.

    The following requirements apply when an IHA and its residents are 
[[Page 18278]] interested in providing for resident performance of 
management functions in one or more projects under this subpart O.
    (a) Resident management corporation. Residents interested in 
contracting with an IHA shall establish a RMC that meets the 
requirements for such a corporation, as specified in this subpart O.
    (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 shall 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 shall 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 shall 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 shall 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. 950.970  Management specialist.

    The RO shall 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. 950.971  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 O. These expenditures will include the project's share of any 
expenses which are overhead or centralized IHA expenditures. The 
expenses shall represent a normal year's expenditures for the project, 
and shall exclude all expenditures that are not normal fiscal year 
expenditures as to amount or as to the purpose for which expended. 
Documentation of this expense level shall 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 O, 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 subaccount.
    (ii) The use of the reserve will be subject to all administrative 
procedures generally applicable to the Indian housing program. Any 
expenditure of [[Page 18279]] 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 O:
    (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 O.
    (d) Retention of excess revenues. Any income generated by a 
resident management corporation that exceeds the income estimated for 
the income category involved shall 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. 950.972  TOP Audit and administrative requirements.

    (a) Annual audit of financial statements. The financial statements 
of a RMC managing a project under this subpart shall 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 shall 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 shall comply with the requirements of OMB Circulars A-110 
and A-122, as applicable.

Family Investment Centers (FIC) Program


Sec. 950.980  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 shall 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. 950.982  Eligibility.

    An IHA may apply to establish one or more FICs for more than one 
Indian housing development. An IHA shall 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. 950.983  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 [[Page 18280]] 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. 950.984  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. 950.985  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. 950.986  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. 950.987  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. 950.988  Administrative requirements.

    Each IHA receiving a grant shall submit to the Area ONAP annual 
progress report describing and evaluating the use of grant amounts 
received under this program.

Subpart P--Section 5(h) Homeownership Program


Sec. 950.1001  Purpose.

    This part codifies the provisions of the Section 5(h) Homeownership 
Program for Indian housing, as authorized by sections 5(h) and 
6(c)(4)(D) of the United States Housing Act of 1937 (the Act) and 
administered by the Department of Housing and Urban Development (HUD).


Sec. 950.1002  Applicability.

    (a) General applicability. This subpart P applies to low-income 
housing owned by Indian Housing Authorities (IHAs), subject to Annual 
Contributions Contracts (ACCs) under the Act. The terms ``housing'' or 
``low-income housing,'' as used in this subpart P, refer to the types 
of properties described in the preceding sentence, except as indicated 
by the particular context. In reference to housing properties, 
``development'' means the same as ``project'' (as defined in the Act). 
Except where otherwise indicated by the context, ``resident'' means the 
same as ``tenant,'' as the latter term is used in the Act, including 
Mutual Help and Turnkey III homebuyers, as well as rental tenants of 
low-income housing and Section 8 residents, and references to sale, 
purchase, conveyance, and ownership include the types of interests and 
transactions that are incident to cooperative ownership.
    (b) Nonretroactivity. In the case of a Section 5(h) homeownership 
plan that was approved by HUD before October 21, 1991, no modifications 
or additional requirements will be imposed, except for reasonable 
administrative procedures prescribed by HUD. Similarly, in the case of 
a plan that was approved after October 20, 1991, but before December 
12, 1994, no modifications or additional requirements will be imposed, 
except for such reasonable administrative procedures.


Sec. 950.1003  General authority for sale.

    An IHA may sell all or a portion of a development to eligible 
residents, as defined under Sec. 950.1008, for purposes of 
homeownership, according to a homeownership plan approved by HUD under 
this subpart P. Upon sale in accordance with the HUD-approved 
homeownership plan, HUD will execute a release of the title 
restrictions prescribed by the ACC. Because the property will no longer 
be subject to the ACC after sale, it will cease to be eligible for 
further HUD funding for operating subsidies or modernization under the 
Act upon conveyance of title by the IHA. (That does not preclude any 
other types of post-sale subsidies that may be available, under other 
Federal, tribal, State, or local programs, such as the possibility of 
available assistance under Section 8 of the Act, in connection with a 
plan for cooperative homeownership, if authorized by the Section 8 
regulations.)


Sec. 950.1004  Fundamental criteria for HUD approval.

    HUD will approve an IHA's homeownership plan if it meets all three 
of the following criteria:
    (a) Workability. The plan shall be practically workable, with sound 
potential for long-term success. Financial viability, including the 
capability of purchasers to meet the financial obligations of 
homeownership, is a critical requirement.
    (b) Legality. The plan shall be consistent with law, including the 
requirements of this part and any other applicable Federal, tribal, 
State, and local statutes and regulations, and existing contracts. 
Subject to the other two criteria stated in this section, any provision 
that is not contrary to those legal requirements may be included in the 
plan, at the discretion of the IHA, whether or not expressly authorized 
in this subpart P.
    (c) Documentation. The plan shall be clear and complete enough to 
serve as a working document for implementation, as well as a basis for 
HUD review.


Sec. 950.1005  Resident consultation and involvement.

    (a) Resident input. In developing a proposed homeownership plan, 
and in carrying out the plan after HUD approval, the IHA shall consult 
with residents of the development involved, and with any resident 
organization that represents them, as necessary and appropriate to 
provide them with information and a reasonable opportunity to make 
their views and recommendations known to the IHA. If [[Page 18281]] the 
plan contemplates sale of units in an entirely vacant development, the 
IHA shall consult with the IHA-wide resident organization, if any. 
While the Act gives the IHA sole legal authority for final decisions, 
as to whether or not to submit a proposed homeownership plan and the 
content of such a proposal, the IHA shall give residents and their 
resident organizations full opportunity for input in the homeownership 
planning process, and full consideration of their concerns and 
opinions.
    (b) Resident initiatives. Where individual residents, a resident 
management corporation (RMC), or another form of resident organization 
may wish to initiate discussion of a possible homeownership plan, the 
IHA shall negotiate with them in good faith. Joint development and 
submission of the plan by the IHA and RMC, or other resident 
organization, is encouraged. In addition, participation of an RMC or 
other resident organization in the implementation of the plan is 
encouraged. (Approved by the Office of Management and Budget under 
control number 2577-0201).


Sec. 950.1006  Property that may be sold.

    (a) Types of property. Subject to the workability criterion of 
Sec. 950.1004(a) (including, for example, consideration of common 
elements and other characteristics of the property), a homeownership 
plan may provide for sale of one or more dwellings, along with 
interests in any common elements, comprising all or a portion of one or 
more housing developments. A plan may provide for conversion of 
existing housing to homeownership or for homeownership sale of newly-
developed housing. (However, for low-income housing units developed as 
replacement housing for units demolished or disposed of pursuant to 
subpart M of this part, that subpart requires that the initial 
occupants be selected solely on the basis of the requirements governing 
rental occupancy (or Mutual Help occupancy, if applicable), without 
reference to any additional homeownership eligibility or selection 
requirements under this subpart P.) Mutual Help or Turnkey III 
homeownership units may be converted to Section 5(h) homeownership, 
upon voluntary termination by any existing Mutual Help or Turnkey III 
homebuyers of their contractual rights and amendment of the ACC, in a 
form prescribed by HUD.
    (b) Physical condition of property. The property shall meet local 
code requirements (or, if no local code exists, the housing quality 
standards established by HUD for the Section 8 Housing Assistance 
Payments Program for Existing Housing, under 24 CFR part 882) and the 
requirements for elimination of lead-based paint hazards in HUD-
associated housing, under subpart C of 24 CFR part 35. When a 
prospective purchaser with disabilities requests accessible features, 
the features shall be added in accordance with 24 CFR parts 8 and 9. 
Further, the property shall be in good repair, with the major 
components having a remaining useful life that is sufficient to justify 
a reasonable expectation that homeownership will be affordable by the 
purchasers. This standard shall be met as a condition for conveyance of 
a dwelling to an individual purchaser, unless the terms of sale include 
measures to assure that the work will be completed within a reasonable 
time after conveyance, not to exceed two years (e.g., as a part of a 
mortgage financing package that provides the purchaser with a home 
improvement loan or pursuant to a sound sweat equity arrangement).


Sec. 950.1007  Methods of sale and ownership.

    (a) Permissible methods. Any appropriate method of sale and 
ownership may be used, such as fee simple conveyance of single-family 
dwellings or conversion of multifamily buildings to resident-owned 
cooperatives or condominiums.
    (b) Direct or indirect sale. An IHA may sell dwellings to residents 
directly or (with respect to multifamily buildings or a group of 
single-family dwellings) through another entity established and 
governed by, and solely composed of, residents of the IHA's low-income 
housing, provided that:
    (1) The other entity has the necessary legal capacity and practical 
capability to carry out its responsibilities under the plan.
    (2) The respective rights and obligations of the IHA and the other 
entity will be specified by a written agreement that includes:
    (i) Assurances that the other entity will comply with all 
provisions of the HUD-approved homeownership plan;
    (ii) Assurances that the IHA's conveyance of the property to the 
other entity will be subject to a title restriction providing that the 
property may be resold or otherwise transferred only by conveyance of 
individual dwellings to eligible residents, in accordance with the HUD-
approved homeownership plan, or by reconveyance to the IHA, and that 
the property will not be encumbered by the other entity without the 
written consent of the IHA;
    (iii) Protection against fraud or misuse of funds or other property 
on the part of the other entity, its employees and agents;
    (iv) Assurances that the resale proceeds will be used only for the 
purposes specified by the HUD-approved homeownership plan;
    (v) Limitation of the other entity's administrative and overhead 
costs, and of any compensation or profit that may be realized by the 
entity, to amounts that are reasonable in relation to its 
responsibilities and risks;
    (vi) Accountability to the IHA and residents for the recordkeeping, 
reporting and audit requirements of Sec. 950.1017;
    (vii) Assurances that the other entity will administer its 
responsibilities under the plan in accordance with applicable civil 
rights statutes and implementing regulations, as described in 
Sec. 950.115; and
    (viii) Adequate legal remedies for the IHA and residents, in the 
event of the other entity's failure to perform in accordance with the 
agreement.


Sec. 950.1008  Purchaser eligibility and selection.

    Standards and procedures for eligibility and selection of the 
initial purchasers of individual dwellings shall be consistent with the 
following provisions:
    (a) Applications. Persons who are interested in purchase shall 
submit applications for that specific purpose, and those applications 
shall be handled separately from applications for other IHA programs. 
For vacant units, applications shall be dated as received by the IHA 
and, subject to eligibility and preference factors, selection shall be 
made in the order of receipt. Application for homeownership shall not 
affect an applicant's place on any other IHA waiting list.
    (b) Eligibility threshold. Subject to any additional eligibility 
and preference standards that are required or permitted under this 
section, a homeownership plan may provide for the eligibility of 
residents of low-income housing owned or leased by the seller IHA 
(including Mutual Help and Turnkey III homebuyers, who may elect to 
terminate their existing homebuyer agreements in favor of purchase 
under the Section 5(h) homeownership plan) and residents of other 
housing who are receiving housing assistance under Section 8 of the 
Act, under an ACC administered by the seller IHA; provided that the 
resident has been in lawful occupancy for a minimum period specified in 
the plan (not less than 30 days prior to conveyance of title to the 
dwelling to be [[Page 18282]] purchased). For residents of other 
housing who are receiving housing assistance under Section 8, the 
minimum occupancy requirement may be satisfied in the unit for which 
the family is receiving Section 8 assistance or the Indian housing 
unit. If the family is to meet part or all of the minimum occupancy 
requirement in the Indian housing unit, the Section 8 assistance shall 
be terminated before the family moves into the Indian housing unit. 
Indian housing units are ineligible for Section 8 certificate and 
voucher assistance as long as they remain under the ACC as Indian 
housing.
    (c) Applicants who do not meet minimum residency requirement for 
eligibility. (1) A homeownership plan, at IHA discretion, may also 
permit eligibility for applicants who do not meet the minimum residency 
requirement of paragraph (b) of this section (30 days or more, as 
prescribed by the homeownership plan) at the time of application, 
provided that their selection is conditioned upon completion of the 
minimum residency requirement prior to conveyance of title. A plan may 
thus allow satisfaction of the threshold requirements for eligibility 
by:
    (i) Existing low-income housing or Section 8 residents with less 
than the minimum period of residency;
    (ii) Families who are already on the IHA's waiting lists; and
    (iii) Other low-income families who are neither low-income housing 
nor Section 8 residents at the time of application or selection.
    (2) Applicants who are not already low-income housing residents, 
however, shall also satisfy the requirements for admission to such 
housing.
    (d) Compliance with lease obligations. Eligibility shall be 
limited, however, to residents who have been current in all of their 
lease obligations (in the case of Mutual Help or Turnkey III 
homebuyers, obligations under their homebuyer agreements) over a period 
of not less than six months prior to conveyance of title (or, if so 
provided by the homeownership plan, such lesser period as has elapsed 
since the beginning of low-income housing or Section 8 tenure), 
including, but not limited to, payment of rents (or homebuyer's monthly 
payments) and other charges and reporting of all income that is 
pertinent to determination of rents (or homebuyer's monthly payments). 
At the IHA's discretion, the homeownership plan may allow a resident to 
remedy under-reporting of income, provided that proper reporting of 
income would not have resulted in ineligibility for admission to low-
income housing or for Section 8 assistance, by payment of the resulting 
underpayment for rent (or homebuyer's monthly payments) prior to 
conveyance of title to the homeownership dwelling, either in a lump sum 
or in installments over a reasonable period. Alternatively, the plan 
may permit payment within a reasonable period after conveyance of 
title, under an agreement secured by a mortgage on the property.
    (e) Affordability standard. Eligibility shall be further limited to 
residents who are capable of assuming the financial obligations of 
homeownership, under minimum income standards for affordability, taking 
into account the unavailability of operating subsidies and 
modernization funds after conveyance of the property by the IHA. A 
homeownership plan may, however, take account of any available subsidy 
from other sources (e.g., in connection with a plan for cooperative 
ownership, assistance under Section 8 of the Act, if available and 
authorized by the Section 8 regulations). Under this affordability 
standard, an applicant shall meet the following requirements:
    (1) On an average monthly estimate, the amount of the applicant's 
payments for mortgage principal and interest, plus insurance, real 
estate taxes, utilities, maintenance, and other regularly-recurring 
homeownership costs (such as condominium, cooperative, or other 
homeownership association fees) will not exceed the sum of 35 percent 
of the applicant's adjusted income, as defined in this part.
    (2) The applicant can pay any amounts required for closing, such as 
a downpayment (if any) and closing costs chargeable to the purchaser, 
in accordance with the homeownership plan.
    (f) Option to restrict eligibility. A homeownership plan may, at 
the IHA's discretion, restrict eligibility to one or more residency-
based categories (e.g., for occupied units, eligibility may be 
restricted to the existing residents of the units to be sold; for 
vacant units, eligibility may be restricted to low-income housing 
residents only, or to low-income housing residents plus any one or more 
of the other residency-based categories that may be established under 
paragraphs (b) and (c) of this section), as may be reasonable in view 
of the number of units to be offered for sale and the estimated number 
of eligible applicants in various categories provided that the 
residency-based preferences mandated by paragraph (g) of this section 
are observed.
    (g) Residency-based preferences. For occupied units, a preference 
shall be given to the existing residents of each of the dwellings to be 
sold. For vacant units (including units which are voluntarily vacated), 
a preference shall be given to residents of other low-income housing 
units owned or leased by the seller IHA (over any other residency-based 
categories that may be established by a homeownership plan for Section 
8 residents or for nonresident applicants).
    (h) Other eligibility or preference standards. If consistent with 
the other provisions of this section, a homeownership plan may include 
any other standards for eligibility or preference, or both, at the 
discretion of the IHA, that are not contrary to law. (Approved by the 
Office of Management and Budget under control number 2577-0201).


Sec. 950.1009  Counseling, training, and technical assistance.

    Appropriate counseling shall be provided to prospective and actual 
purchasers, as necessary for each stage of implementation of the 
homeownership plan. Particular attention shall be given to the terms of 
purchase and financing, along with the other financial and maintenance 
responsibilities of homeownership. In addition, where applicable, 
appropriate training and technical assistance shall be provided to any 
entity (such as an RMC, other resident organization, or a cooperative 
or condominium entity) that has responsibilities for carrying out the 
plan.


Sec. 950.1010  Nonpurchasing residents.

    (a) Nonpurchasing resident's options. If an existing resident of a 
dwelling authorized for sale under a homeownership plan is ineligible 
for purchase, or declines to purchase, the resident shall be given the 
choice of either relocation to other suitable and affordable housing or 
continued occupancy of the present dwelling on a rental basis, at a 
rent no higher than that permitted by the Act. Displacement (permanent, 
involuntary move), in order to make a dwelling available for sale, is 
prohibited. In addition to applicable program sanctions, a violation of 
the displacement prohibition may trigger a requirement to provide 
relocation assistance in accordance with the Uniform Relocation and 
Real Property Acquisition Act of 1970 and implementing regulations at 
49 CFR part 24. Where continued rental occupancy by a nonpurchasing 
resident is contemplated after conveyance of the property, the 
homeownership plan shall include provision for any rental subsidy 
required (e.g., Section 8 assistance, if available and authorized by 
the Section [[Page 18283]] 8 regulations). As soon as feasible after 
they can be identified, all nonpurchasing residents shall be given 
written notice of their options under this section.
    (b) Relocation assistance. A nonpurchasing resident who chooses to 
relocate pursuant to this section shall be offered the following 
relocation assistance:
    (1) Advisory services to assure full choices and real opportunities 
to obtain relocation within a full range of neighborhoods where 
suitable housing may be found, including timely information, 
counseling, and explanation of the resident's rights under applicable 
civil rights statutes and implementing regulations, as specified in 
Sec. 950.115, and referrals to suitable, safe, sanitary, and affordable 
housing (at a rent no higher than permitted by the Act), which is of 
the resident's choice, on a nondiscriminatory basis, in accordance with 
applicable civil rights statutes and implementing regulations, as 
specified in Sec. 950.115. This requirement will be met if the 
applicant is offered the opportunity to relocate to another suitable 
unit in other low-income housing, under any of the housing assistance 
programs under Section 8 of the Act, or any other Federal, tribal, 
State, or local program that is comparable, as to standards of housing 
quality, admission, and rent, to the programs under the Act, and 
provides a term of assistance of at least five years; and
    (2) Payment for actual, reasonable moving and related expenses.
    (c) Temporary relocation. A nonpurchasing resident who must 
relocate temporarily to permit work to be carried out shall be provided 
suitable, decent, safe, and sanitary housing for the temporary period 
and reimbursed for all reasonable out-of-pocket expenses incurred in 
connection with the temporary relocation, including the cost of moving 
to and from the temporarily occupied housing and any increase in 
monthly rent and utility costs.


Sec. 950.1011  Nonroutine maintenance reserve.

    (a) When reserve is required. A nonroutine maintenance reserve 
shall be established for all multifamily properties sold under a 
homeownership plan. For single-family dwellings, such a reserve shall 
not be required if the availability of the funds needed for nonroutine 
maintenance is adequately addressed under the affordability standard 
prescribed by the plan.
    (b) Purpose of reserve. The purpose of this reserve shall be to 
provide a source of reserve funds for nonroutine maintenance (including 
replacement), as necessary to ensure the long-term success of the plan, 
including protection of the interests of the homeowners and the IHA. 
The amounts to be set aside, and other terms of this reserve, shall be 
as necessary and appropriate for the particular homeownership plan, 
taking into account such factors as prospective needs for nonroutine 
maintenance, the homeowners' financial resources, and any special 
factors that may aggravate or mitigate the need for such a reserve.


Sec. 950.1012  Purchase prices and financing.

    (a) Below-market terms. To ensure affordability by eligible 
purchasers, by the standard adopted under Sec. 906.8(e) of this 
chapter, a homeownership plan may provide for below-market purchase 
prices or below-market financing, or a combination of the two. 
Discounted purchase prices may be determined on a unit-by-unit basis, 
based on the particular purchaser's ability to pay, or may be 
determined by any other fair and reasonable method (e.g., uniform 
prices for a group of comparable dwellings, within a range of 
affordability by a group of potential purchasers).
    (b) Types of financing. Any type of private or public financing may 
be used (e.g., conventional, Federal Housing Administration (FHA), 
Department of Veterans Affairs (VA), Farmers' Home Administration 
(FmHA), or a tribal, State, or local program). An IHA may finance or 
assist in financing purchase by any methods it may choose, such as 
purchase-money mortgages, guarantees of mortgage loans from other 
lenders, shared equity, or lease-purchase arrangements.


Sec. 950.1013  Protection against fraud and abuse.

    A homeownership plan shall include appropriate protections against 
any risks of fraud or abuse that are presented by the particular plan, 
such as collusive purchase for the benefit of nonresidents, extended 
use of the dwelling by the purchaser as rental property, or collusive 
sale that would circumvent the resale profit limitation of 
Sec. 950.1014.


Sec. 950.1014  Limitation on resale profit.

    (a) General. If a dwelling is sold to the initial purchaser for 
less than fair market value, the homeownership plan shall provide for 
appropriate measures to preclude realization by the initial purchaser 
of windfall profit on resale. ``Windfall profit'' means all or a 
portion of the resale proceeds attributable to the purchase price 
discount (the fair market value at date of purchase from the IHA less 
the below-market purchase price), as determined by one of the methods 
described in paragraphs (b) through (d) of this section. Subject to 
that requirement, however, purchasers should be permitted to retain any 
resale profit attributable to appreciation in value after purchase (or 
a portion of such profit under a limited or shared equity arrangement), 
along with any portion of the resale profit that is fairly attributable 
to improvements made by them after purchase.
    (b) Promissory note method. Where there is potential for a windfall 
profit because the dwelling unit is sold to the initial purchaser for 
less than fair market value, without a commensurate limited or shared 
equity restriction, the initial purchaser shall execute a promissory 
note, payable to the IHA, along with a mortgage securing the obligation 
of the note, on the following terms and conditions:
    (1) The principal amount of indebtedness shall be the lesser of:
    (i) The purchase price discount, as determined by the definition in 
paragraph (a) of this section and stated in the note as a dollar 
amount; or
    (ii) The net resale profit, in an amount to be determined upon 
resale by a formula stated in the note. That formula shall define net 
resale profit as the amount by which the gross resale price exceeds the 
sum of:
    (A) The discounted purchase price;
    (B) Reasonable sale costs charged to the initial purchaser upon 
resale; and
    (C) Any increase in the value of the property that is attributable 
to improvements paid for or performed by the initial purchaser during 
tenure as a homeowner.
    (2) At the option of the IHA, the note may provide for automatic 
reduction of the principal amount over a specified period of ownership 
while the property is used as the purchaser's family residence, 
resulting in total forgiveness of the indebtedness over a period of not 
less than five years from the date of conveyance, in annual increments 
of not more than 20 percent. This does not require an IHA's plan to 
provide for any such reduction at all, or preclude it from specifying 
terms that are less generous to the purchaser than those stated in the 
foregoing sentence.
    (3) To preclude collusive resale that would circumvent the intent 
of this section, the IHA shall (by an appropriate form of title 
restriction) condition the initial purchaser's right to resell upon 
approval by the IHA, to be based solely on the IHA's determination that 
the resale price represents fair market value or a lesser amount that 
will result in [[Page 18284]] payment to the IHA, under the note, of 
the full amount of the purchase price discount (subject to any accrued 
reduction, if provided for by the homeownership plan pursuant to 
paragraph (b)(2) of this section). If so determined, the IHA shall be 
obligated to approve the resale.
    (4) The IHA may, in its sole discretion, agree to subordination of 
the mortgage that secures the promissory note, in favor of an 
additional lien granted by the purchaser as security for a loan for 
home improvements or other purposes approved by the IHA.
    (c) Limited equity method. As a second option, the requirement of 
this section may be satisfied by an appropriate form of limited equity 
arrangement, restricting the amount of net resale profit that may be 
realized by the seller (the initial purchaser and successive purchasers 
over a period prescribed by the homeownership plan) to the sum of:
    (1) The seller's paid-in equity;
    (2) The portion of the resale proceeds attributable to any 
improvements paid for or performed by the seller during homeownership 
tenure; and
    (3) An allowance for a portion of the property's appreciation in 
value during homeownership tenure, calculated by a fair and reasonable 
method specified in the homeownership plan (e.g., according to a price 
index factor or other measure).
    (d) Third option. The requirements of this section may be satisfied 
by any other fair and reasonable arrangement that will accomplish the 
essential purposes stated in paragraph (a) of this section.
    (e) Appraisal. Determinations of fair market value under this 
section shall be made on the basis of appraisal within a reasonable 
time prior to sale, by an independent appraiser to be selected by the 
IHA.


Sec. 950.1015  Use of sale proceeds.

    (a) General authority for use. Sale proceeds may, after provision 
for sale and administrative costs that are necessary and reasonable for 
carrying out the homeownership plan, be retained by the IHA and used 
for housing assistance to low-income families (as such families are 
defined under the Act). The term ``sale proceeds'' includes all 
payments made by purchasers for credit to the purchase price (e.g., 
earnest money, downpayments, payments out of the proceeds of mortgage 
loans, and principal and interest payments under purchase-money 
mortgages), along with any amounts payable upon resale under 
Sec. 950.1014, and interest earned on all such receipts. (Residual 
receipts, as defined in the ACC, shall not be treated as sale 
proceeds.)
    (b) Permissible uses. Sale proceeds may be used for any one or more 
of the following forms of housing assistance for low-income families, 
at the discretion of the IHA and as stated in the HUD-approved 
homeownership plan:
    (1) In connection with the homeownership plan from which the funds 
are derived, for purposes that are justified to ensure the success of 
the plan and to protect the interests of the homeowners, the IHA and 
any other entity with responsibility for carrying out the plan. 
Nonexclusive examples include nonroutine maintenance reserves under 
Sec. 950.1011, a reserve for loans to homeowners to prevent or cure 
default or for other emergency housing needs; a reserve for any 
contingent liabilities of the IHA under the homeownership plan (such as 
IHA guaranty of mortgage loans); and a reserve for IHA repurchase, 
repair, and resale of homes in the event of defaults.
    (2) In connection with another HUD-approved homeownership plan 
under this part, for assistance to purchasers and for reasonable 
planning and implementation costs.
    (3) In connection with a tribal, State, or local homeownership 
program for low-income families, as described in the homeownership 
plan, for assistance to purchasers and for reasonable planning and 
implementation costs. Under such programs, sales proceeds may be used 
to construct or acquire additional dwellings for sale to low-income 
families, or to assist such families in purchasing other dwellings from 
public or private owners.
    (4) In connection with the IHA's other low-income housing that 
remains under ACC, for any purposes authorized for the use of operating 
funds under the ACC and applicable provisions of the Act and Federal 
regulations, as included in the HUD-approved operating budgets. 
Examples include maintenance and modernization, augmentation of 
operating reserves, protective services, and resident services. Such 
use shall not result in the reduction of the operating subsidy 
otherwise payable to the IHA for its other low-income housing.
    (5) In connection with any other type of Federal, tribal, State, or 
local housing program for low-income families, as described in the 
homeownership plan.


Sec. 950.1016  Replacement housing.

    (a) Replacement requirement. As a condition for transfer of 
ownership under a HUD-approved homeownership plan, the IHA shall obtain 
a funding commitment, from HUD or another source, for the replacement 
of each of the dwellings to be sold under the plan. Replacement housing 
may be provided by one or any combination of the following methods:
    (1) Development by the IHA of additional low-income housing under 
this part (by new construction or acquisition).
    (2) Rehabilitation of vacant low-income housing owned by the IHA.
    (3) Use of five-year, tenant-based certificate or voucher 
assistance under Section 8 of the Act.
    (4) If the homeownership plan is submitted by the IHA for sale to 
residents through an RMC, resident organization, or cooperative 
association that is otherwise eligible to participate under this 
subpart, acquisition of non-publicly-owned housing units, that the RMC, 
resident organization, or cooperative association will operate as 
rental housing, comparable to IHA-owned low-income housing as to term 
of assistance, housing standards, eligibility, and contribution to 
rent.
    (5) Any other Federal, tribal, State, or local housing program that 
is comparable, as to housing standards, eligibility, and contribution 
to rent, to the programs referred to in paragraphs (a)(1) through 
(a)(3) of this section, and provides a term of assistance of not less 
than five years.
    (b) Funding commitments. Although a HUD funding commitment is 
required if the replacement housing requirement is to be satisfied 
through any of the HUD programs listed in paragraph (a) of this 
section, HUD's approval of a Section 5(h) homeownership plan on the 
expectation that such a funding commitment will be forthcoming shall 
not constitute a binding obligation to make such a commitment. Where 
the requirement is to be satisfied under a tribal, State, or local 
program, or a Federal program not administered by HUD, a funding 
commitment shall be required from the proper authority.
    (c) Use of sale proceeds to fund replacement housing. Sale proceeds 
that are generated under the homeownership plan may be used under some 
of the replacement housing options under paragraph (a) of this section 
(e.g., rehabilitation of vacant public housing units, or an eligible 
local program). Where a homeownership plan provides for sale proceeds 
to be used for replacement housing, HUD approval of the plan and 
execution of the IHA-HUD implementing agreement shall satisfy the 
funding commitment requirement of paragraph (a) of this section, with 
regard to the amount of replacement housing to be funded out of sale 
proceeds. [[Page 18285]] 
    (d) Consistency with current housing needs. Replacement housing may 
differ from the dwellings sold under the homeownership plan, as to unit 
sizes or family or elderly occupancy, if the IHA determines that such 
change is consistent with current local housing needs for low-income 
families.
    (e) Inapplicability to prior plans. This section shall not apply to 
homeownership plans that were submitted to HUD under the Section 5(h) 
Homeownership Program prior to October 1, 1990.


Sec. 950.1017  Records, reports, and audits.

    The IHA shall be responsible for the maintenance of records 
(including sale and financial records) for all activities incident to 
implementation of the homeownership plan. Until all planned sales of 
individual dwellings have been completed, the IHA shall submit to HUD 
annual sales reports, in a form prescribed by HUD. The receipt, 
retention, and expenditure of the sale proceeds shall be covered in the 
regular independent audits of the IHA's housing operations, and any 
supplementary audits that HUD may find necessary for monitoring. Where 
another entity is responsible for sale of individual units, pursuant to 
Sec. 950.1007(b), the IHA shall ensure that the entity's 
responsibilities include proper recordkeeping and accountability to the 
IHA, sufficient to enable the IHA to monitor compliance with the 
approved homeownership plan, to prepare its reports to HUD, and to meet 
its audit responsibilities. All books and records shall be subject to 
inspection and audit by HUD and the General Accounting Office (GAO). 
(Approved by the Office of Management and Budget under control number 
2577-0201).


Sec. 950.1018  Submission and review of homeownership plan.

    Whether to develop and submit a proposed homeownership plan is a 
matter within the discretion of each IHA. An IHA may initiate a 
proposal at any time, according to the following procedures:
    (a) Preliminary consultation with HUD staff. Before submission of a 
proposed plan, the IHA shall consult informally with the appropriate 
HUD Area ONAP to assess feasibility and the particulars to be addressed 
by the plan.
    (b) Submission to HUD. The IHA shall submit the proposed plan, 
together with supporting documentation, in a format prescribed by HUD, 
to the appropriate HUD Area ONAP.
    (c) Conditional approval. Conditional approval may be given, at HUD 
discretion, when HUD determines that to be justified. For example, 
conditional HUD approval might be a necessary precondition for the IHA 
to obtain the funding commitments required to satisfy the requirements 
for final HUD approval of a complete homeownership plan. Where 
conditional approval is granted, HUD will specify the conditions in 
writing. (Approved by the Office of Management and Budget under control 
number 2577-0201)


Sec. 950.1019  HUD approval and IHA-HUD implementing agreement.

    Upon HUD notification to the IHA that the homeownership plan is 
approvable (in final form that satisfies all applicable requirements of 
this part), the IHA and HUD will execute a written implementing 
agreement, in a form prescribed by HUD, to evidence HUD approval and 
authorization for implementation. The plan itself, as approved by HUD, 
shall be incorporated in the implementing agreement. Any of the items 
of supporting documentation may also be incorporated, if agreeable to 
the IHA and HUD. The IHA shall be obligated to carry out the approved 
homeownership plan and other provisions of the implementing agreement 
without modification, except with written approval by HUD.

(Approved by the Office of Management and Budget under control 
number 2577-0201).


Sec. 950.1020  Content of homeownership plan.

    The homeownership plan shall address the following matters, as 
applicable to the particular factual situation:
    (a) Property description. A description of the property, including 
identification of the development and the specific dwellings to be 
sold.
    (b) Repair or rehabilitation. If applicable, a plan for any repair 
or rehabilitation required under Sec. 950.1006, based on the assessment 
of the physical condition of the property that is included in the 
supporting documentation.
    (c) Purchaser eligibility and selection. The standards and 
procedures to be used for homeownership applications and the 
eligibility and selection of purchasers, consistent with the 
requirements of Sec. 950.1008.
    (d) Sale and financing. Terms and conditions of sale and financing 
(see particularly Secs. 950.1011 through 950.1014).
    (e) Future consultation with residents. A plan for consultation 
with residents during the implementation stage (See Sec. 950.1005). If 
appropriate, this may be combined with the plan for counseling.
    (f) Counseling. Counseling, training, and technical assistance to 
be provided in accordance with Sec. 950.1009.
    (g) Sale via other entity. If the plan contemplates sale to 
residents via an entity other than the IHA, a description of that 
entity's responsibilities and information demonstrating that the 
requirements of Sec. 950.1007 have been met or will be met in a timely 
fashion.
    (h) Nonpurchasing residents. If applicable, a plan for 
nonpurchasing residents, in accordance with Sec. 950.1010.
    (i) Sale proceeds. An estimate of the sale proceeds and an 
explanation of how they will be used, in accordance with Sec. 950.1015.
    (j) Replacement housing. A replacement housing plan, in accordance 
with Sec. 950.1016.
    (k) Administration. An administrative plan, including estimated 
staffing requirements.
    (l) Recordkeeping, accounting and reporting. A description of the 
recordkeeping, accounting, and reporting procedures to be used, 
including those required by Sec. 950.1017.
    (m) Budget. A budget estimate, showing the costs of implementing 
the plan, and the sources of the funds that will be used.
    (n) Timetable. An estimated timetable for the major steps required 
to carry out the plan.

(Approved by the Office of Management and Budget under control 
number 2577-0201).


Sec. 950.1021  Supporting documentation.

    The following supporting documentation shall be submitted to HUD 
with the proposed homeownership plan, as appropriate for the particular 
plan:
    (a) Estimate of value. An estimate of the fair market value of the 
property, including the range of fair market values of individual 
dwellings, with information to support the reasonableness of the 
estimate. (The purpose of this information is merely to assist HUD in 
determining whether, taking into consideration the estimated fair 
market value of the property, the plan adequately addresses any risks 
of fraud and abuse, pursuant to Sec. 950.1013, and windfall profit on 
resale, pursuant to Sec. 950.1014. A formal appraisal need not be 
submitted with the proposed homeownership plan.)
    (b) Physical assessment. An assessment of the physical condition of 
the property, based on the standards specified in Sec. 950.1006.
    (c) Workability. A statement demonstrating the practical 
workability of the plan, based on analysis of data on such elements as 
purchase prices, costs [[Page 18286]] of repair or rehabilitation, 
homeownership costs, family incomes, availability of financing, and the 
extent to which there are eligible residents who are expected to be 
interested in purchase. (See Sec. 950.1004(a).)
    (d) IHA commitment and capability. Information to substantiate the 
commitment and capability of the IHA and any other entity with 
substantial responsibilities for implementing the plan.
    (e) Resident planning input. A description of resident consultation 
activities carried out pursuant to Sec. 950.1005 before submission of 
the plan, with a summary of the views and recommendations of residents 
and copies of any written comments that may have been submitted to the 
IHA by individual residents and resident organizations, and any other 
individuals and organizations.
    (f) Nondiscrimination certification. The IHA's certification that 
it will administer the plan on a nondiscriminatory basis, in accordance 
with applicable civil rights laws and implementing regulations, as 
described in Sec. 950.115, and will assure compliance with those 
requirements by any other entity that may assume substantial 
responsibilities for implementing the plan.
    (g) Legal opinion. An opinion by legal counsel to the IHA, stating 
that counsel has reviewed the plan and finds it consistent with all 
applicable requirements of Federal, tribal, State, and local law, 
including regulations as well as statutes. In addition, counsel shall 
identify the major legal requirements that remain to be met in 
implementing the plan, if approved by HUD as submitted, indicating an 
opinion about whether those requirements can be met without special 
problems that may disrupt the timetable or other features contained in 
the plan.
    (h) Board resolution. A resolution by the IHA's Board of 
Commissioners, evidencing its approval of the plan.
    (i) Other information. Any other information that may reasonably be 
required for HUD review of the plan. Except for the IHA-HUD 
implementing agreement under Sec. 950.1019, HUD approval is not 
required for documents to be prepared and used by the IHA in 
implementing the plan (such as contracts, applications, deeds, 
mortgages, promissory notes, and cooperative or condominium documents), 
if their essential terms and conditions are described in the plan. 
Consequently, those documents need not be submitted as part of the plan 
or the supporting documentation. (Approved by the Office of Management 
and Budget under control number 2577-0201).

Subpart Q--[Reserved]

Subpart R--Family Self-Sufficiency


Sec. 950.3001  Purpose, scope, and applicability.

    (a) Purpose. The purpose of the Family Self-Sufficiency (FSS) 
program is to develop local strategies to coordinate the use of public 
and Indian housing assistance and housing assistance under the section 
8 rental certificate and rental voucher programs with public and 
private resources, to enable families eligible to receive assistance 
under these programs to achieve economic independence and self-
sufficiency.
    (b) Applicability. This subpart applies to Indian housing 
authorities (IHA) that elect to operate a local FSS program, and when 
such an election is made, to Indian housing assisted under the United 
States Housing Act of 1937, and developed or operated by an IHA in an 
Indian area, as defined in Sec. 950.102. This subpart does not apply to 
the Mutual Help Homeownership Program or the Turnkey III Program. IHAs 
that elect to participate in the FSS program are not subject to minimum 
program size requirements. Additionally, IHAs that received Indian 
housing units under the FSS incentive award competitions are not 
subject to the minimum program size requirements.


Sec. 950.3002  Program objectives.

    The objective of the FSS program is to reduce the dependency of 
low-income families on welfare assistance, on section 8, public, or 
Indian housing assistance, or any Federal, State, or local rent or 
homeownership subsidies. The FSS program provides low-income families 
opportunities for education, job training, counseling, and other forms 
of social service assistance, while living in assisted housing, so that 
they may obtain the education, employment, and business and social 
skills necessary to achieve self-sufficiency, as this term is defined 
in Sec. 950.3003. HUD will measure the success of a local FSS program 
not only by the number of families who achieve self-sufficiency, but 
also by the number of FSS families who, as a result of participation in 
the program, have family members who obtain their first job, or who 
obtain higher paying jobs; no longer need benefits received under one 
or more welfare programs; obtain a high school diploma or higher 
education degree; or accomplish similar goals that will assist the 
family in obtaining economic independence.


Sec. 950.3003  Definitions.

    As used in this subpart R:
    Certification means a written assertion based on supporting 
evidence, provided by the FSS family or the IHA, as may be required 
under this subpart R, and that:
    (1) Shall be maintained by the IHA in the case of the family's 
certification, or by HUD in the case of the IHA's certification;
    (2) Shall be made available for inspection by HUD, the IHA, and the 
public, as appropriate; and
    (3) Shall be deemed to be accurate for purposes of this subpart R, 
unless the Secretary or the IHA, as applicable, determines otherwise 
after inspecting the evidence and providing due notice and opportunity 
for comment.
    Contract of participation means a contract in a form approved by 
HUD, entered into between a participating family and an IHA operating 
an FSS program that sets forth the terms and conditions governing 
participation in the FSS program. The contract of participation 
includes all individual training and services plans, attached to the 
contract as exhibits, entered into between the IHA and all members of 
the family who will participate in the FSS program. For additional 
details, see Sec. 950.3022.
    Earned income means income or earnings included in annual income 
from wages, tips, salaries, other employee compensation, and self-
employment. (See Sec. 950.102.) Earned income does not include any 
pension or annuity, transfer payments, any cash or in-kind benefits, or 
funds deposited in or accrued interest on the FSS escrow account 
established by an IHA on behalf of a participating family.
    Effective date of contract of participation means the first day of 
the month following the month in which the FSS family and the IHA 
entered into the contract of participation.
    Eligible families mean current residents of Indian housing.
    Enrollment means the date that the FSS family entered into the 
contract of participation with the IHA.
    Family Self-Sufficiency program or FSS program means the program 
established by an IHA within its jurisdiction to promote self-
sufficiency among participating families, including the provision of 
supportive services to these families, as authorized by section 23 of 
the United States Housing Act of 1937 (42 U.S.C. 1437u). 
[[Page 18287]] 
    FSS account means the FSS escrow account authorized by section 23 
of the Act, and as provided by Sec. 950.3025.
    FSS credit means the amount credited by the IHA to the 
participating family's FSS account.
    FSS family or participating family means a family that resides in 
Indian housing, that elects to participate in the FSS program, and 
whose designated head of the family has signed the contract of 
participation.
    FSS related service program means any program, publicly or 
privately sponsored, that offers the kinds of supportive services 
described in the definition of ``supportive services'' set forth in 
this section.
    FSS slots means the total number of Indian housing units that 
comprise the minimum size of an IHA's Indian housing FSS program.
    Head of FSS family means the adult member of the FSS family who is 
the head of the household for purposes of determining income 
eligibility and rent.
    Housing subsidies means assistance to meet the costs and expenses 
of temporary shelter, rental housing, or homeownership, including rent, 
mortgage, or utility payments.
    Individual training and services plan means:
    (1) A written plan that is prepared for the head of the FSS family, 
and each adult member of the FSS family who elects to participate in 
the FSS program, by the IHA in consultation with the family member, and 
that sets forth:
    (i) The supportive services to be provided to the family member;
    (ii) The activities to be completed by that family member; and
    (iii) The agreed upon completion dates for the services and 
activities.
    (2) Each individual training and services plan shall be signed by 
the IHA and the participating family member, and is attached to and 
incorporated as part of the contract of participation. An individual 
training and services plan shall be prepared for the head of the FSS 
family.
    JOBS Program means the Job Opportunities and Basic Skills Training 
Program authorized under part F, title IV of the Social Security Act 
(42 U.S.C. 402(a)(19)).
    JTPA means the Job Training Partnership Act (29 U.S.C. 1579(a)).
    Program Coordinating Committee or PCC means the committee described 
in Sec. 950.3012.
    Secretary means the Secretary of Housing and Urban Development.
    Self-sufficiency means that an FSS family is no longer receiving 
section 8, public, or Indian housing assistance, or any Federal, State, 
or local rent or homeownership subsidies or welfare assistance. 
Achievement of self-sufficiency, although an FSS program objective, is 
not a condition for receipt of the FSS account funds. (See 
Sec. 950.3025).
    Supportive services means those appropriate services that an IHA 
will make available, or cause to be made available, to an FSS family 
under a contract of participation, and may include:
    (1) Child care--child care of a type that provides sufficient hours 
of operation and serves an appropriate range of ages;
    (2) Transportation--transportation necessary to enable 
participating family members to receive available services, or to 
commute to their places of employment;
    (3) Education--remedial education; education for completion of 
secondary or post secondary schooling;
    (4) Employment--job training, preparation, and counseling; job 
development and placement; and follow-up assistance after job placement 
and completion of the contract of participation;
    (5) Personal welfare--substance/alcohol abuse treatment and 
counseling;
    (6) Household skills and management--training in homemaking and 
parenting skills; household management; and money management;
    (7) Counseling--counseling in the areas of:
    (i) The responsibilities of homeownership;
    (ii) Opportunities available for affordable rental and 
homeownership in the private housing market; and
    (iii) Money management; and
    (8) Other services--any other services and resources, including 
case management, reasonable accommodations for individuals with 
disabilities, that the IHA may determine to be appropriate in assisting 
FSS families to achieve economic independence and self-sufficiency.
    Unit size or size of unit refers to the number of bedrooms in a 
dwelling unit.


Sec. 950.3004  Basic requirements of the FSS program.

    (a) Compliance with program regulations. An FSS program established 
under this subpart shall be operated in conformity with the regulations 
of this part.
    (b) Compliance with Action Plan. An FSS program established under 
this subpart shall be operated in compliance with an Action Plan, as 
described in Sec. 950.3011, and provide comprehensive supportive 
services as defined in Sec. 950.3003.
    (c) Compliance with equal opportunity requirements. An FSS program 
established under this subpart shall be operated in compliance with all 
applicable Indian housing regulations and all applicable civil rights 
authorities, including: the Indian Civil Rights Act of 1968 (25 U.S.C. 
1301-1303); title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d), 
the Fair Housing Act (42 U.S.C. 3601-3619); section 504 of the 
Rehabilitation Act of 1973 (29 U.S.C. 794); the Age Discrimination Act 
of 1975 (42 U.S.C. 6101-6107); Executive Order 11063 (3 CFR, 1959-1963 
Comp., p. 652), as amended by Executive Order 12259 (3 CFR, 1980 Comp., 
p. 307); section 7(b) of the Indian Self-Determination and Education 
Assistance Act (25 U.S.C. 450(e)(b)); section 3 of the Housing and 
Urban Development Act of 1968 (12 U.S.C. 1701u); and the regulations 
implementing these authorities. (The Indian Civil Rights Act applies to 
IHAs organized pursuant to tribal laws; and Title VI of the Civil 
Rights Act of 1964 and the Fair Housing Act applies to State authorized 
IHAs.)


Sec. 950.3011  Action Plan.

    (a) General. To participate in the FSS program, an IHA shall have a 
HUD-approved Action Plan that complies with the requirements of this 
section.
    (b) Development of Action Plan. The Action Plan shall be developed 
by the IHA in consultation with the chief executive officer of the 
applicable unit of general local government, and the Program 
Coordinating Committee.
    (c) Initial submission and revisions. (1) Initial submission. 
Unless the dates set forth in this paragraph are extended by HUD for 
good cause, an IHA that is establishing its first FSS program shall 
submit an Action Plan to HUD for approval within 90 days of 
notification by HUD of approval of the IHA's first application for new 
housing units.
    (2) Revision. Following initial approval of the Action Plan by HUD, 
no further approval of the Action Plan is required unless the IHA 
proposes to make policy changes to the Action Plan, or HUD requires 
changes. Any changes to the Action Plan shall be submitted to and 
approved by HUD.
    (d) Contents of Plan. The Action Plan shall describe the policies 
and procedures of the IHA for operation of a local FSS program, and 
shall contain, at a minimum, the following information:
    (1) Family demographics--a description of the number, size, 
characteristics, and other demographics (including racial and ethnic 
data), and the supportive service needs of the [[Page 18288]] families 
expected to participate in the FSS program;
    (2) Estimate of participating families--an estimate of the number 
of eligible FSS families who can reasonably be expected to receive 
supportive services under the FSS program, based on available and 
anticipated Federal, tribal, State, local, and private resources;
    (3) Eligible families from other self-sufficiency programs--if 
applicable, the number of eligible families, by program type, who are 
participating in Operation Bootstrap, Project Self-Sufficiency, or any 
other local self-sufficiency program who are expected to agree to 
execute an FSS contract of participation;
    (4) FSS family selection procedures--a statement indicating the 
procedures to be utilized to select families for participation in the 
FSS program, subject to the requirements governing the selection of FSS 
families, set forth in Sec. 950.3013.
    (5) Incentives to encourage participation--a description of the 
incentives that the IHA's intends to offer eligible families to 
encourage their participation in the FSS program (incentives plan). The 
incentives plan shall provide for the establishment of the FSS account 
in accordance with the requirements set forth in Sec. 950.3025, and 
other incentives, if any, designed by the IHA. The incentives plan 
shall be part of the Action Plan.
    (6) Outreach efforts--a description of:
    (i) The IHA's efforts, including notification and outreach efforts, 
to recruit FSS participants from among eligible families; and
    (ii) The IHA's actions to be taken to assure that both minority and 
nonminority groups are informed about the FSS program, and how the IHA 
will make this information known (e.g., through door-to-door flyers, 
posters in any common rooms, advertisements in newspapers of general 
circulation, as well as any media targeted to minority groups).
    (7) FSS activities and supportive services--a description of the 
activities and supportive services to be provided by both public and 
private resources to FSS families, and identification of the public and 
private resources that are expected to provide the supportive services.
    (8) Method for identification of family support needs--a 
description of how the FSS program will identify the needs and deliver 
the services and activities according to the needs of the FSS families;
    (9) Program termination, withholding of services, and grievance 
procedures--a description of the IHA's policies concerning: termination 
of participation in the FSS program, withholding of supportive services 
on the basis of a family's failure to comply with the requirements of 
the contract of participation, and the grievance and hearing procedures 
available to FSS families.
    (10) Assurances of noninterference with rights of nonparticipating 
families--an assurance that a family's election not to participate in 
the FSS program will not affect the family's admission to Indian 
housing or the family's right to occupancy in accordance with its 
lease.
    (11) Timetable for program implementation--a timetable for 
implementation of the FSS program, as provided in Sec. 950.3020(a)(1), 
including the schedule for filling FSS slots with eligible FSS 
families, as provided in Sec. 950.3013;
    (12) Certification of coordination--a certification that 
development of the services and activities under the FSS program has 
been coordinated with the JOBS Program; the programs provided under the 
JTPA; and any other relevant employment, child care, transportation, 
training, and education programs (e.g., Job Training for the Homeless 
Demonstration program) in the applicable area, and that implementation 
will continue to be coordinated, in order to avoid duplication of 
services and activities; and
    (13) Optional additional information--such other information that 
would help HUD determine the soundness of the IHA's proposed FSS 
program.
    (e) Eligibility of a combined program. An IHA that wishes to 
operate a joint FSS program with other IHAs may combine its resources 
with one or more IHAs to deliver supportive services under a joint 
Action Plan that will provide for the establishment and operation of a 
combined FSS program that meets the requirements of this subpart.
    (f) Single action plan. IHAs implementing both a section 8 FSS 
program and an Indian housing FSS program may submit one Action Plan.


Sec. 950.3012  Program Coordinating Committee (PCC).

    (a) General. Each participating IHA shall establish a PCC whose 
functions will be to assist the IHA in securing commitments of public 
and private resources for the operation of the FSS program within the 
IHA's jurisdiction, including assistance in developing the Action Plan 
and in implementing the program.
    (b) Membership. (1) The PCC may consist of representatives of the 
IHA and of residents of Indian housing.
    (2) Recommended membership. Membership on the PCC also may include 
representatives of the unit of general local government served by the 
IHA, local agencies (if any) responsible for carrying out JOBS training 
programs or programs under the JTPA, and other organizations, such as 
other State, local, or tribal welfare and employment agencies, public 
and private education or training institutions, child care providers, 
nonprofit service providers, private business, and any other public and 
private service providers with resources to assist the FSS program.
    (c) Alternative committee. The IHA may, in consultation with the 
chief executive officer of the unit of general local government served 
by the IHA, utilize an existing entity as the PCC if the membership of 
the existing entity consists or will consist of the individuals 
identified in paragraph (b)(1) of this section, and also includes 
individuals from the same or similar organizations identified in 
paragraph (b)(2) of this section.


Sec. 950.3013  FSS family selection procedures.

    (a) Preference in the FSS selection process. An IHA has the option 
of giving a selection preference for up to 50 percent of its FSS slots 
to eligible families, as defined in Sec. 950.3003, who have one or more 
family members currently enrolled in an FSS related service program or 
on the waiting list for such a program. The IHA may limit the selection 
preference given to participants in and applicants for FSS-related 
service programs to one or more eligible FSS-related service programs. 
An IHA that chooses to exercise the selection preference option shall 
include the following information in its Action Plan:
    (1) The percentage of FSS slots, not to exceed 50 percent of the 
total number of FSS slots, for which it will give a selection 
preference;
    (2) The FSS related service programs to which it will give a 
selection preference to the programs' participants and applicants; and
    (3) The method of outreach to, and selection of, families with one 
or more members participating in the identified programs.
    (b) FSS selection without preference. For those FSS slots for which 
the IHA chooses not to exercise the selection preference provided in 
paragraph (a) of this section, the FSS slots shall be filled with 
eligible families in accordance with an objective selection system, 
such [[Page 18289]] as a lottery, the length of time living in 
subsidized housing, or the date the family expressed an interest in 
participating in the FSS program. The objective system to be used by 
the IHA shall be described in the IHA's Action Plan.
    (c) Motivation as a selection factor. (1) General. An IHA may 
screen families for interest and motivation to participate in the FSS 
program, provided that the factors utilized by the IHA are those which 
solely measure the family's interest and motivation to participate in 
the FSS program.
    (2) Permissible motivational screening factors. Permitted 
motivational factors include requiring attendance at FSS orientation 
sessions or preselection interviews, and assigning certain tasks that 
indicate the family's willingness to undertake the obligations that may 
be imposed by the FSS contract of participation (e.g., contacting job 
training or educational program referrals). However, any tasks assigned 
shall be those that may be readily accomplishable by the family, based 
on the family members' educational level and disabilities, if any. 
Reasonable accommodations shall be made for individuals with mobility, 
manual, sensory, speech impairments, mental, or developmental 
disabilities.
    (3) Prohibited motivational screening factors. Prohibited 
motivational screening factors include the family's educational level, 
educational or standardized motivational test results, previous job 
history or job performance, credit rating, marital status, number of 
children, or other factors, such as sensory or manual skills, and any 
factors that may result in discriminatory practices or treatment toward 
individuals with disabilities or minority or nonminority groups.


Sec. 950.3014  On-site facilities.

    Each IHA may, subject to the approval of HUD, make available and 
utilize common areas or unoccupied units in Indian housing projects to 
provide supportive services under an FSS program.


Sec. 950.3020  Program implementation.

    (a) Program implementation deadline. (1) Program start-up. Full 
delivery of the supportive services to be provided to the total number 
of families required to be served under the program need not occur 
within 12 months, but shall occur by the deadline set forth in 
paragraph (a)(2) of this section.
    (2) Full enrollment and delivery of services. Except as provided in 
paragraph (a)(3) of this section, the IHA shall have completed 
enrollment of the total number of families to be served under the FSS 
program and shall have begun delivery of the supportive services within 
two years from the date of notification of approval of the application 
for new Indian housing units.
    (3) Extension of program deadlines for good cause. HUD may extend 
the deadline set forth in either paragraph (a)(1) or paragraph (a)(2) 
of this section if the IHA requests an extension, and the HUD Area ONAP 
determines that, despite best efforts on the part of the IHA, the 
development of new Indian housing units will not occur within the 
deadlines set forth in this paragraph (a), the commitment by public or 
private resources to deliver supportive services has been withdrawn, 
the delivery of such services has been delayed, or other local 
circumstances that the HUD Area ONAP determines warrants an extension 
of the deadlines set forth in paragraph (a) of this section.
    (b) Program administration. An IHA may employ appropriate staff, 
including a service coordinator or program coordinator, to administer 
its FSS program, and may contract with an appropriate organization to 
establish and administer the FSS program, including the FSS account, as 
provided by Sec. 950.3025.


Sec. 950.3021  Administrative fees.

    The performance funding system (PFS), provided under section 9(a) 
of the Act, shall provide for the inclusion of reasonable and 
administrative costs incurred by IHAs in carrying out the local FSS 
programs. These costs are subject to appropriations by the Congress.


Sec. 950.3022  Contract of participation.

    (a) General. Each family that is selected to participate in an FSS 
program shall enter into a contract of participation with the IHA that 
operates the FSS program in which the family will participate. The 
contract of participation shall be signed by the head of the FSS 
family.
    (b) Form and content of contract. (1) General. The contract of 
participation, which incorporates the individual training and services 
plan, shall be in the form prescribed by HUD, and shall set forth the 
principal terms and conditions governing participation in the FSS 
program, including the rights and responsibilities of the FSS family 
and of the IHA, the services to be provided to, and the activities to 
be completed by, the head of the FSS family, and each adult member of 
the family who elects to participate in the program.
    (2) Interim goals. The individual training and services plan, 
incorporated in the contract of participation, shall establish specific 
interim and final goals by which the IHA and the family may measure the 
family's progress toward fulfilling its obligations under the contract 
of participation, and becoming self-sufficient. For each participating 
FSS family that is a recipient of welfare assistance, the IHA shall 
establish as an interim goal that the family become independent from 
welfare assistance and remain independent from welfare assistance for 
at least one year before expiration of the term of the contract of 
participation, including any extension thereof.
    (3) Compliance with lease terms. The contract of participation 
shall provide that one of the obligations of the FSS family is to 
comply with the terms and conditions of the Indian housing lease.
    (4) Employment obligation. (i) Head of family's obligation. The 
head of the FSS family shall be required under the contract of 
participation to seek and maintain suitable employment during the term 
of the contract and any extension thereof. Although other members of 
the FSS family may seek and maintain employment during the term of the 
contract, only the head of the FSS family is required to seek and 
maintain suitable employment.
    (ii) Seek employment. The obligation to seek employment means that 
the head of the FSS family has applied for employment, attended job 
interviews, and has otherwise followed through on employment 
opportunities.
    (iii) Determination of suitable employment. A determination of 
suitable employment shall be made by the IHA based on the skills, 
education, and job training of the individual that has been designated 
the head of the FSS family, and based on the available job 
opportunities within the jurisdiction served by the IHA.
    (5) Consequences of noncompliance with contract. The contract of 
participation shall specify that if the FSS family fails to comply with 
the terms and conditions of the contract of participation, the IHA may:
    (i) Withhold the supportive services; or
    (ii) Terminate the family's participation in the FSS program.
    (c) Contract term. The contract of participation shall provide that 
each FSS family will be required to fulfill those obligations to which 
the participating family has committed itself under the contract of 
participation no later than 5 years after the effective date of the 
contract. [[Page 18290]] 
    (d) Contract extension. The IHA shall, in writing, extend the term 
of the contract of participation for a period not to exceed two years 
for any FSS family that requests, in writing, an extension of the 
contract, provided that the IHA finds that good cause exists for 
granting the extension. The family's written request for an extension 
shall include a description of the need for the extension. As used in 
this paragraph (d) of this section, ``good cause'' means circumstances 
beyond the control of the FSS family, as determined by the IHA, such as 
a serious illness or involuntary loss of employment. Extension of the 
contract of participation will entitle the FSS family to continue to 
have amounts credited to the family's FSS account in accordance with 
Sec. 950.3025.
    (e) Unavailability of supportive services. (1) Good faith effort to 
replace unavailable services. If a social service agency fails to 
deliver the supportive services pledged under an FSS family member's 
individual training and services plan, the IHA shall make a good faith 
effort to obtain these services from another agency.
    (2) Assessment of necessity of services. If the IHA is unable to 
obtain the services from another agency, the IHA shall reassess the 
family members' needs, and determine whether other available services 
would achieve the same purpose. If other available services would not 
achieve the same purpose, the IHA shall determine whether the 
unavailable services are integral to the FSS family's advancement or 
progress toward self-sufficiency. If the unavailable services are:
    (i) Determined not to be integral to the FSS family's advancement 
toward self-sufficiency, the IHA shall revise the individual training 
and services plan to delete these services, and modify the contract of 
participation to remove any obligation on the part of the FSS family to 
accept the unavailable services, in accordance with paragraph (f) of 
this section; or
    (ii) Determined to be integral to the FSS family's advancement 
toward self-sufficiency (which may be the case if the affected family 
member is the head of the FSS family), the IHA shall declare the 
contract of participation null and void.
    (f) Modification. The IHA and the FSS family may mutually agree to 
modify the contract of participation. The contract of participation may 
be modified in writing with respect to the individual training and 
services plan, the contract term in accordance with paragraph (d) of 
this section, and designation of the head of the family.
    (g) Completion of the contract. The contract of participation is 
considered to be completed, and a family's participation in the FSS 
program is considered to be concluded, when one of the following 
occurs:
    (1) The FSS family has fulfilled all of its obligations under the 
contract of participation on or before the expiration of the contract 
term, including any extension thereof; or
    (2) Thirty (30) percent of the monthly adjusted income of the FSS 
family equals or exceeds the published existing housing fair market 
rent for the size of the unit for which the FSS family qualifies based 
on the IHA's occupancy standards. The contract of participation will be 
considered completed and the family's participation in the FSS program 
concluded on this basis even though the contract term, including any 
extension thereof, has not expired, and the family members who have 
individual training and services plans, have not completed all the 
activities set forth in their plans.
    (h) Termination of the contract. The contract of participation may 
be terminated before the expiration of the contract term, and any 
extension thereof, by:
    (1) Mutual consent of the parties;
    (2) The failure of the FSS family to meet its obligations under the 
contract of participation without good cause;
    (3) The family's withdrawal from the FSS program;
    (4) Such other act as is deemed inconsistent with the purpose of 
the FSS program; or
    (5) By operation of law.
    (i) Transitional supportive service assistance. An IHA may continue 
to offer to a former FSS family who has completed its contract of 
participation and whose head of the family is employed, appropriate FSS 
supportive services in becoming self-sufficient (if the family still 
resides in Indian housing), or in remaining self-sufficient (if the 
family no longer resides in Indian or other assisted housing).


Sec. 950.3024  Total tenant payment and increases in family income.

    (a) Calculation of total tenant payment. Total tenant payment for a 
family participating in the FSS program is determined in accordance 
with the regulations set forth in Secs. 950.315 through 950.325.
    (b) Increases in FSS family income. Any increase in the earned 
income of an FSS family during its participation in an FSS program may 
not be considered as income or a resource for purposes of eligibility 
of the FSS family for other benefits, or amount of benefits payable to 
the FSS family, under any other program administered by HUD, unless the 
income of the FSS family equals or exceeds 80 percent of the median 
income of the area (as determined by HUD, with adjustments for smaller 
and larger families).


Sec. 950.3025  FSS account.

    (a) Establishment of FSS account. (1) General. The IHA shall 
deposit the FSS account funds of all families participating in the 
IHA's FSS program into a single depository account. The IHA shall 
deposit the FSS account funds in one or more of the HUD-approved 
investments.
    (2) Accounting for FSS account funds. (i) Accounting records. The 
total of the FSS account funds will be supported in the IHA accounting 
records by a subsidiary ledger showing the balance applicable to each 
FSS family. During the term of the contract of participation, the IHA 
shall credit monthly, to each family's FSS account, the amount of the 
FSS credit determined in accordance with paragraph (b) of this section.
    (ii) Proration of investment income. The investment income for 
funds in the FSS account will be prorated and credited to each family's 
FSS account based on the balance in each family's FSS account at the 
end of the period for which the investment income is credited.
    (iii) Reduction of amounts due by FSS family. If the FSS family has 
not paid the family contribution towards rent, or other amounts, if 
any, due under the Indian housing lease, the balance in the family's 
FSS account shall be reduced by that amount before prorating the 
interest income. If the FSS family has fraudulently under-reported 
income, the amount credited to the FSS account will be based on the 
income amounts originally reported by the FSS family.
    (3) Reporting on FSS account. Each IHA will be required to make a 
report, at least once annually, to each FSS family on the status of the 
family's FSS account. At a minimum, the report will include:
    (i) The balance at the beginning of the reporting period;
    (ii) The amount of the family's rent payment that was credited to 
the FSS account, during the reporting period;
    (iii) Any deductions made from the account for amounts due the IHA 
before interest is distributed;
    (iv) The amount of interest earned on the account during the year; 
and
    (v) The total in the account at the end of the reporting period.
    (b) FSS credit. (1) Computation of amount. For purposes of 
determining the FSS credit, ``family rent'' means the 
[[Page 18291]] total tenant payment as defined in this part 950. The 
FSS credit shall be computed as follows:
    (i) For FSS families that are very low-income families, the FSS 
credit shall be the amount that is the lesser of:
    (A) Thirty (30) percent of the family's current monthly adjusted 
income less the family rent, which is obtained by disregarding any 
increase in earned income (as defined in Sec. 950.3003) from the 
effective date of the contract of participation; or
    (B) The current family rent less the family rent at the time of the 
effective date of the contract of participation.
    (ii) For FSS families that are low-income families but not very 
low-income families, the FSS credit shall be the amount determined 
according to paragraph (b)(1)(i) of this section, but that shall not 
exceed the amount computed for 50 percent of median income.
    (2) Ineligibility for FSS credit. FSS families that are not low-
income families shall not be entitled to any FSS credit.
    (3) Cessation of FSS credit. The IHA shall not make any additional 
credits to the FSS family's FSS account when the FSS family has 
completed the contract of participation, as defined in 
Sec. 950.3022(g), or when the contract of participation is terminated 
or otherwise nullified.
    (c) Disbursement of FSS account funds. (1) General. The amount in 
an FSS account, in excess of any amount owed to the IHA by the FSS 
family, as provided in paragraph (a)(3)(iii) of this section, shall be 
paid to the head of the FSS family when the contract of participation 
has been completed as provided in Sec. 950.3022(g), and if at the time 
of contract completion, the head of FSS family submits to the IHA a 
certification, as defined in Sec. 950.3003, that, to the best of his or 
her knowledge and belief, no member of the FSS family is a recipient of 
welfare assistance.
    (2) Disbursement before expiration of contract term. (i) If the IHA 
determines that the FSS family has fulfilled its obligations under the 
contract of participation before the expiration of the contract term, 
and the head of the FSS family submits a certification that, to the 
best of his or her knowledge, no member of the FSS family is a 
recipient of welfare assistance, the amount in the family's FSS 
account, in excess of any amount owed to the IHA by the FSS family as 
provided in paragraph (a)(3)(iii) of this section, shall be paid to the 
head of the FSS family.
    (ii) If the IHA determines that the FSS family has fulfilled 
certain interim goals established in the contract of participation and 
needs a portion of the FSS account funds for purposes consistent with 
the contract of participation, such as completion of higher education 
(i.e., college, graduate school), or job training, or to meet start-up 
expenses involved in creation of a small business, the IHA may, at the 
IHA's sole option, disburse a portion of the funds from the family's 
FSS account to assist the family to meet those expenses.
    (3) Verification of family certification. Before disbursement of 
the FSS account funds to the family, the IHA may verify that the FSS 
family is no longer a recipient of welfare assistance by requesting 
copies of any documents that may indicate whether the family is 
receiving any welfare assistance, and contacting welfare agencies.
    (d) Succession to FSS account. If the head of the FSS family ceases 
to reside with other family members in the Indian housing unit, the 
remaining members of the FSS family, after consultation with the IHA, 
shall have the right to designate another family member to receive the 
funds in accordance with paragraph (d) (1) or (2) of this section.
    (e) Use of FSS account funds for homeownership. An FSS family may 
use its FSS account funds for the purchase of a home, including the 
purchase of a home under one of HUD's homeownership programs, or other 
Federal, State, or local homeownership programs, unless such use is 
prohibited by the statute or regulations governing the particular 
homeownership program.
    (f) Forfeiture of FSS account funds. (1) Conditions for forfeiture. 
Amounts in the FSS account shall be forfeited upon the occurrence of 
the following:
    (i) The contract of participation is terminated, as provided in 
Secs. 950.3022(e) or 950.3022(h); or
    (ii) The contract of participation is completed by the family, as 
provided in Sec. 950.3022(g), but the FSS family is receiving welfare 
assistance at the time of expiration of the term of the contract of 
participation, including any extension thereof.
    (2) Treatment of forfeited FSS account funds. FSS account funds 
forfeited by the FSS family will be credited to the IHA's operating 
reserves and counted as other income in the calculation of the PFS 
operating subsidy eligibility for the next budget year.


Sec. 950.3030  Reporting.

    Each IHA that carries out an FSS program under this subpart shall 
submit to HUD, in the form prescribed by HUD, a report regarding its 
FSS program. The report shall include the following information:
    (a) A description of the activities carried out under the program;
    (b) A description of the effectiveness of the program in assisting 
families to achieve economic independence and self-sufficiency;
    (c) A description of the effectiveness of the program in 
coordinating resources of communities to assist families to achieve 
economic independence and self-sufficiency; and
    (d) Any recommendations by the IHA or the appropriate local program 
coordinating committee for legislative or administrative action that 
would improve the FSS program and ensure the effectiveness of the 
program.

    Dated: March 30, 1995.
Joseph Shuldiner,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 95-8346 Filed 4-7-95; 8:45 am]
BILLING CODE 4210-33-P