[Federal Register Volume 61, Number 23 (Friday, February 2, 1996)]
[Rules and Regulations]
[Pages 3779-3787]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1578]



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 Rules and Regulations
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  Federal Register / Vol. 61, No. 23 / Friday, February 2, 1996 / Rules 
and Regulations  

[[Page 3779]]


DEPARTMENT OF AGRICULTURE

Rural Housing Service
Rural Business--Cooperative Service
Rural Utilities Service
Farm Service Agency

7 CFR Parts 1901, 1940, 1951, and 2003

Rural Business--Cooperative Service
Rural Utilities Service

7 CFR Chapter XLII and Part 4284

RIN 0570-AA02


Rural Technology and Cooperative Development Grants

AGENCY: Rural Housing Service, Rural Business-Cooperative Service, 
Rural Utilities Service, and Farm Service Agency, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Rural Business-Cooperative Service (RBS) revises its 
regulations for Rural Technology and Cooperative Development Grants 
(RTCDG) and amends other regulations utilized by RBS in administering 
its grant programs. This action is necessary to comply with legislation 
which authorizes grants for establishing and operating centers for 
rural technology or cooperative development. The intended effect of 
this action is to implement this grant program.

EFFECTIVE DATE: February 2, 1996.

FOR FURTHER INFORMATION CONTACT: Joseph R. Binder, Director, Specialty 
Lenders Division, Rural Business-Cooperative Service, US Department of 
Agriculture, Room 2245, South Agriculture Building, 14th and 
Independence Ave. SW, Washington, D.C. 20250. Telephone (202) 720-1400.

SUPPLEMENTARY INFORMATION:

Classification

    We are issuing this final rule in conformance with Executive Order 
12866, and the Office of Management and Budget has determined that it 
is not a ``significant regulatory action.''

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' RBS has determined that this 
action does not constitute a major federal action significantly 
affecting the quality of the human environment, and in accordance with 
the National Environmental Policy Act of 1969, Pub. L. 91-190, an 
Environmental Impact Statement is not required.

Executive Order 12778

    This final rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. In accordance with this rule: (1) all state and 
local laws and regulations that are in conflict with this rule will be 
preempted; (2) no retroactive effect will be given to this rule and; 
(3) administrative proceedings in accordance with the regulations of 
the Agency at 7 CFR, part 1900, subpart B, or those regulations 
published by the Department of Agriculture to implement the provisions 
of the National Appeals Division as mandated by the Department of 
Agriculture Reorganization Act of 1994, whichever is applicable, must 
be exhausted before bringing suit in court challenging action taken 
under this rule unless those regulations specifically allow bringing 
suit at an earlier time.

Intergovernmental Review

    This program is listed in the Catalog of Federal Domestic 
Assistance under number 10.771 and is subject to the provisions of 
Executive Order 12372 which requires intergovernmental consultation 
with state and local officials. RBS has conducted intergovernmental 
consultation in the manner delineated in FmHA Instruction 1940-J.

National Performance Review

    This regulatory action is being taken as part of the National 
Performance Review program to eliminate unnecessary regulations and 
improve those that remain in force.

Unfunded Mandate Reform Act of 1995

    Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub. L. 
104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, RBS 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with ``Federal mandates'' that 
may result in expenditures to State, local, or tribal governments, in 
the aggregate, or to the private sector, of $100 million or more in any 
one year. When such a statement is needed for a rule, section 205 of 
the UMRA generally requires RBS to identify and consider a reasonable 
number of regulatory alternatives and adopt the least costly, more 
cost-effective or least burdensome alternative that achieves the 
objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State, local, and tribal 
governments or the private sector. Thus today's rule is not subject to 
the requirements of sections 202 and 205 of the UMRA.

Paperwork Reduction Act

    The information collection and record keeping requirements 
contained in these regulations were previously approved by the Office 
of Management and Budget (OMB) under the provisions of 44 U.S. C. 
Chapter 35 and have been assigned OMB control numbers 0575-0018, 0575-
0066, and 0570-0006, in accordance with the Paperwork Reduction Act of 
1980. This final rule does not impose any new information or record 
keeping requirements from those approved by OMB.

Background

    The RTCDG program was established by interim rule on August 12, 
1994 (59 Fed. Reg. 41386-98). The public comment period ended October 
11, 1994. The RTCDG program is authorized by section 310B(f) through 
(h) of the Consolidated Farm and Rural Development Act (7 U.S.C. 
Sec. 1932 Act). The primary objective of the program is to improve the 
economic condition of rural areas. The RTCDG program will achieve this 
objective by supporting the creation or enhancement of institutions 
including cooperatives capable of 

[[Page 3780]]
promoting the development and commercialization of new services, 
products, processes, and enterprises. The program is administered 
through Rural Economic and Community Development (RECD) State Offices 
acting on behalf of RBS. RBS, formerly known as the Rural Business and 
Cooperative Development Service, is the successor of the Rural 
Development Administration as to the RTCDG program pursuant to the 
Department of Agriculture Reorganization Act of 1994 (Pub. L. 103-354).

Discussion of Public Comments

    A total of 14 commenters offered comments to the interim rule. The 
commenters represented the federal agencies, Arkansas Enterprise 
Groups, National Rural Cooperative Development Task Force, New York 
Department of City & Regional Planning, Winrock International in 
Arkansas, Southwest Grain of North Dakota, The Maine Ambulatory Care 
Coalition, and The North Dakota Associations of Rural Electric and 
Telephone Cooperatives.
    Several respondents objected to the kinds of demographic data 
required because they believe it was not available, did not accurately 
represent, or only partially represented the distressed economic 
conditions of rural areas. The Agency agrees and, therefore, amends the 
regulation to allow applicants to use their choice of data as long as 
they reflect the intent of serving economically distressed communities 
and the data are from established official independent sources. This 
change will give applicants flexibility to use available data that best 
describe the conditions impacted by their proposal. The Agency, 
however, still will give preference in selecting those projects 
demonstrating their ability to effectively serve rural areas with few 
rural industries and agribusinesses, high levels of unemployment or 
underemployment, high rates of outmigration of people, businesses, and 
industries, or low levels of per capita income. This preferential 
treatment is required by Conact Sec. 310B (f) (3).
    Three respondents objected to the use of the terms, ``industry'' 
and ``agribusiness'' because there were no definitions provided and 
there is no consistent source of comprehensive data available. These 
terms also did not explain how to consider other points such as 
temporary businesses, and small vs. large businesses. These comments 
were adopted to allow applicants to use their choice of data with 
regard to industries and agribusinesses as long as they provided an 
accurate, comprehensive description of the economic conditions of their 
community and their data are secured from established official 
independent sources.
    Three respondents recommended that a higher score or priority be 
given to applicants who collaborate with others. The comment was not 
adopted because collaboration will strengthen the preapplication in all 
or most of the listed selection criteria so that it would not be a 
distinguishing factor. One respondent suggested that a higher priority 
be given to regional and multistate projects. The rule was not amended 
to adopt this comment because it would work unfairly against those 
organizations which do not have multistate responsibilities. Under the 
final rule there is no prohibition against multistate projects. In 
fact, applicants who propose multistate projects may get more points 
because of their project's ability to demonstrate national 
applicability of innovations developed under the program. One of the 
preferential selection criteria is the transferability or demonstration 
value of the project in helping rural areas outside the project area.
    One respondent suggested that a higher priority be given to 
applicants in states who have not received RTCDG grants. This comment 
was not adopted because it would work unfairly against organizations 
which produce multiple quality applications.
    One respondent suggested that a higher priority be given to 
organizations which administer multiple projects through several 
organizations. Another respondent suggested that fewer points be given 
to organizations which administer multiple projects. These comments 
were not adopted because the Agency sees no clear advantages or 
disadvantages to funding organizations who administer multiple 
projects. The possibility exists that organizations which administer 
multiple projects would have a broader perspective, a better ability to 
disseminate their innovations nationally, and a stronger capacity to 
manage projects effectively; however, the possibility also exists that 
this organization would increase overhead costs and provide fewer 
resources to benefit rural communities. Thus, the Agency finds no basis 
for treating multiple project applicants differently than single 
project applicants.
    Two respondents suggested that a higher priority be given to 
organizations with demonstrated ability to administer effective 
projects. The Agency agrees and has adopted the comment as part of the 
criteria for scoring. Specifically, the Agency will consider the 
experience, organizational skills, and background needed to 
successfully carry out the project.
    One respondent suggested that the requirement for 25 percent 
matching funds be limited to administrative costs. The rule was not 
amended because program funds are limited and it is believed that 
organizations need to match some of the funding to demonstrate local 
support for the application.
    One respondent suggested that all projects must be exclusively 
rural. The comment was not adopted. The projects will serve rural 
areas; however, there is nothing wrong with indirect benefits 
supporting urban interests as well as rural.
    Two respondents recommended that the requirement to secure 
``evidence of support'' for the project from all of the affected local 
governmental bodies be dropped. The rule was not amended because all 
affected governmental bodies should be on record as supporting the 
project. The time spent documenting this support will be worth the time 
spent in order to avoid misunderstandings later.
    One respondent recommended that projects be selected in all major 
rural areas of the United States. The comment was not adopted in order 
to allow for the highest quality preapplications to be selected.
    One respondent recommended that a different theme be selected each 
year. The Agency agrees that this is a desirable policy and plans to 
adopt it to the extent possible in keeping with rule-making 
requirements of the Administrative Procedures Act.
    One respondent recommended that the preapplications be sent to the 
RECD State Office for initial processing to determine eligibility and 
to ensure that all necessary forms were in place before sending the 
preapplications to the RBS National Office for scoring and selection. 
The RBS National Office will follow this process. This is a better 
process because the RECD State Office employees know the area, 
applicants, and conditions of the communities better and can advise the 
National Office. Organizations who prepare multistate preapplications 
are to submit their preapplications through the state where the 
organization's headquarters are located.
    One respondent commented that using RTCDG funds for revolving loans 
should be given a low priority. The Agency agrees that the RTCDG 
program should emphasize those statutory factors that will benefit 
economically distressed communities. However, Conact Sec. 310B (f) (2) 
(C) specifically 

[[Page 3781]]
provides that an acceptable center activity is a program providing 
loans and grants to individuals, small businesses, and cooperatives in 
rural areas served by the center for purposes of generating, 
evaluating, developing, and commercializing new products, processes, or 
services. The Agency will continue to carry out this mandate in its 
review and selection process.
    In addition to the changes made in response to public comments, the 
Agency has made some administrative revisions. The Agency has revised 
its selection criteria to provide for Administrator's points. The 
Administrator may give emphasis to geographical distribution, 
interagency cooperation, or other appropriate factors. This change will 
allow the Administrator the flexibility to choose the best applicants 
for limited grant funds.
    The Agency has added definitions for ``center'' and ``subcenter'' 
for clarity.
    The Agency also has added references to the applicability of 
recently adopted departmental regulations to RTCDG grants made to 
nonprofit institutions. The Uniform Administrative Requirements For 
Grants and Agreements with Institutions of Higher Education, Hospitals, 
and Other Non-profit Organizations, 7 CFR part 3019, were adopted by 
interim final rule (60 Fed. Reg. 44122-39) on August 24, 1995.
    The final rule removes the points from the selection criteria. The 
points assigned to each of the selection criteria will be given in the 
Federal Register notice to be published in advance each year. This will 
allow the Agency to adjust the priorities given to each of the 
preferential factors on a yearly basis to best meet the objectives set 
forth in the regulations.
    All references to Farmers Home Administration in the organization 
procedures of 7 CFR part 2003 will be left in place but will be revised 
in the near future. At that time they will be changed to reflect the 
current names of the new agencies which were formed as a result of the 
reorganization.
    Internal management procedures have been removed from the 
regulations but will appear in internal agency instructions.

List of Subjects

7 CFR Part 1901

    Civil rights, Compliance reviews, Fair housing, Minority groups.

7 CFR Part 1940

    Allocations, Administrative practice and procedure, Agriculture, 
Grant programs--Housing and community development, Loan programs--
Agriculture, Rural areas.

7 CFR Part 1951

    Account servicing, Grant programs--Housing and community 
development, Reporting requirements, Rural areas.

7 CFR Part 2003

    Organization and functions (Government agencies).

7 CFR Part 4284

    Business and Industry, Grant programs--Housing and community 
development, Rural areas.

    Accordingly, chapters XVIII and XLII, title 7, Code of Federal 
Regulations, are amended as follows:
CHAPTER XVIII--RURAL HOUSING SERVICE, RURAL BUSINESS COOPERATIVE 
SERVICE, RURAL UTILITIES SERVICE, AND FARM SERVICE AGENCY

PART 1901--PROGRAM-RELATED INSTRUCTIONS

    1. The authority citation for part 1901, subpart E, is revised as 
follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 40 U.S.C. 442; 42 U.S.C. 
1480, 2942.

Subpart E--Civil Rights Compliance Requirements *C*

    2. Section 1901.204 is amended by revising paragraph (a)(27) to 
read as follows:


Sec. 1901.204  Compliance reviews.

    (a) * * *
    (27) Rural Technology and Cooperative Development Grants in subpart 
F of part 4284 of this title.
* * * * *

PART 1940--GENERAL

    3. The authority citation for part 1940 is revised to read as 
follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

Subpart L--Methodology and Formulas for Allocation of Loan and 
Grant Program Funds


Sec. 1940.590  [Removed and Reserved]

    4. Section 1940.590 is removed and reserved.

PART 1951--SERVICING AND COLLECTIONS

    5. The authority citation for part 1951 is revised to read as 
follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

Subpart E--Servicing of Community and Insured Business Programs 
Loans and Grants

    6. Section 1951.201 is revised to read as follows:


Sec. 1951.201  Purpose.

    This subpart prescribes the Rural Economic and Community 
Development (RECD) mission area policies, authorizations, and 
procedures for servicing Water and Waste Disposal System loans and 
grants; Community Facility loans; Rural Business Enterprise/Television 
Demonstration grants; loans for Grazing and other shift-in-land-use 
projects; Association Recreation loans; Association Irrigation and 
Drainage loans; Watershed loans and advances; Resource Conservation and 
Development loans; Insured Business loans; Economic Opportunity 
Cooperative loans; loans to Indian Tribes and Tribal Corporations; 
Rural Renewal loans; Energy Impacted Area Development Assistance 
program grants; National Nonprofit Corporation grants; Water and Waste 
Disposal Technical Assistance and Training grants; Emergency Community 
Water Assistance grants; System for Delivery of Certain Rural 
Development Programs panel grants; section 306C WWD loans and grants in 
subpart E of part 4284 of this title; and Rural Technology and 
Cooperative Development Grants in subpart F of part 4284 of this title. 
RECD State Offices act on behalf of the Rural Housing Service, the 
Rural Business-Cooperative Service and the Rural Utilities Service as 
to loan and grant programs formerly administered by the Farmers Home 
Administration, the Rural Development Administration, and the Rural 
Electrification Administration. Loans sold without insurance to the 
private sector will be serviced in the private sector and will not be 
serviced under this subpart. The provisions of this subpart are not 
applicable to such loans. Future changes to this subpart will not be 
made applicable to such loans.
* * * * *

PART 2003--ORGANIZATION

    7. The authority citation for part 2003 is revised to read as 
follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480; Public 
Law 100-82, 101 Stat. 545. 

[[Page 3782]]


Subpart A--Functional Organization of the Farmers Home 
Administration or its Successor Agency Under Public Law 103-354
Exhibit A to part 2003  [Amended]
    8. In part 2003, Exhibit A of subpart A, paragraph 2, under the 
heading of Assistant Administrator--Community and Business Programs is 
amended by revising ``rural technology development grants'' to read 
``rural technology and cooperative development grants.''
    9. The heading of 7 CFR chapter XLII is revised to read as follows:
CHAPTER XLII--RURAL BUSINESS-COOPERATIVE SERVICE AND RURAL UTILITIES 
SERVICE, DEPARTMENT OF AGRICULTURE
Chapter XLII (Parts 4284 and 4285)  [Amended]

    10. In 7 CFR chapter XLII (consisting of parts 4284 and 4285), 
everywhere ``Farmers Home Administration'', ``FmHA'', ``Rural 
Development Administration'', or ``RDA'' appear, except ``FmHA 
Instruction'' and ``Form FmHA'' references, add the phrase ``or its 
successor agency'' immediately thereafter.
PART 4284--GRANTS
    11. The authority citation for part 4284 is revised to read as 
follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005.
    12-13. Subpart F of part 4284 is revised to read as follows:

Subpart F--Rural Technology and Cooperative Development Grants

Sec.
4284.501  Purpose.
4284.502  Policy.
4284.503  [Reserved]
4284.504  Definitions.
4284.505  Applicant eligibility.
4284.506-4284.514  [Reserved]
4284.515  Grant purposes.
4284.516  Ineligible grant purposes.
4284.517-4284.526  [Reserved]
4284.527  Other considerations.
4284.528  Application processing.
4284.529-4284.539  [Reserved]
4284.540  Grant selection criteria.
4284.541  Grant approval, fund obligation, grant closing, and third-
party financial assistance.
4284.542-4284.556  [Reserved]
4284.557  Fund disbursement.
4284.558  Reporting.
4284.559-4284.570  [Reserved]
4284.571  Audit requirements.
4284.572  Grant servicing.
4284.573  Programmatic changes.
4284.574  Subsequent grants.
4284.575  Grant suspension, termination, and cancellation.
4284.576-4284.586  [Reserved]
4284.587  Exception authority.
4284.588-4284.599  [Reserved]
4284.600  OMB control number.

Subpart F-Rural Technology and Cooperative Development Grants


Sec. 4284.501  Purpose.

    (a) This subpart outlines the Rural Business-Cooperative Service's 
(RBS) policies and authorizations and sets forth procedures to provide 
grants for technology and cooperative development in rural areas.
    (b) Grants for establishing and operating centers for rural 
technology or cooperative development will be for the primary purpose 
of improving the economic condition of rural areas by promoting the 
development (through technological innovation, cooperative development, 
and adaptation of existing technology) and commercialization of new 
services and products that can be produced or provided in rural areas; 
new processes that can be utilized in the production of products in 
rural areas; and new enterprises or cooperatives that can add value to 
on-farm production through processing or marketing.
    (c) Copies of all forms and Instructions referenced in this subpart 
are available in the RBS National Office or any RECD State Office.


Sec. 4284.502  Policy.

    (a) The grant program will be used to assist in the economic 
development of rural areas.
    (b) Funds allocated for use in accordance with this subpart are 
also to be considered for use by Native American tribes within the 
state regardless of whether state development strategies include Indian 
reservations within the state's boundaries. Native American tribes 
residing on such reservations must have equal opportunity along with 
other rural residents to participate in the benefits of these programs. 
This includes equal application of outreach activities of RECD 
servicing offices.


Sec. 4284.503  [Reserved]


Sec. 4284.504  Definitions.

    Approval official--Any authorized agency official.
    Center--The place established and operated by the grantee for rural 
technology or cooperative development.
    Cooperative--An association organized to provide a specific service 
with open membership, equality in ownership and control, limited return 
on members' capital, and equitable methods to distribute any excess 
earnings back to its members.
    Cooperative development--The startup, expansion, or operational 
improvement of a cooperative which will promote the development of new 
services and products that can be produced or provided in rural areas, 
new processes that can be utilized in the production of products in 
rural areas, or new enterprises that can add value to on-farm 
production through processing or marketing. Operational improvement 
includes making the cooperative more efficient, better managed, etc.
    Economic development--The growth of an area as evidenced by 
increases in total income, employment opportunities, decreased 
outmigration of populations, value of production, increased 
diversification of industry, higher labor force participation rates, 
increased duration of employment, higher wage levels, or gains in other 
measurements of economic activity, such as land values.
    Nonprofit institution--Any organization or entity, including an 
accredited institution of higher education, no part of the net earnings 
of which inures, or may lawfully inure, to the benefit of any private 
shareholder or individual.
    Project--The undertaking for which funds will be used to develop or 
operate a technology or cooperative development center.
    Public body--Any state, county, city, township, incorporated town 
or village, borough, authority, district, economic development 
authority, or Indian tribe on federal and state reservation or other 
federally recognized Indian tribe in rural areas.
    RBS--The Rural Business-Cooperative Service, an agency of the 
United States Department of Agriculture, or a successor agency.
    RECD--Rural Economic and Community Development mission area.
    Rural and rural area--Includes all territory of a state that is not 
within the outer boundary of any city having a population of 50,000 or 
more and its immediately adjacent urbanized and urbanizing areas with a 
population density of more than 100 persons per square mile, as 
determined by the Secretary of Agriculture according to the latest 
decennial census of the United States.
    Servicing office. Any RECD State Office or successor office.
    Small business--A business which does not exceed the maximum number 
of employees or annual receipts allowed for a concern (including its 
affiliates) to be considered small according to the established size 
standards for Small Business Administration (SBA) assistance as set 
forth in Sec. 121.601, 13 CFR, part 121. The business may be operated 
on a profit or nonprofit basis but must rely primarily on revenues of 
the business for operation rather than outside support.

[[Page 3783]]

    State--Any of the 50 States, the Commonwealth of Puerto Rico, the 
Virgin Islands of the United States, Guam, American Samoa, the 
Commonwealth of the Northern Mariana Islands, the Republic of Palau, 
the Federated States of Micronesia, and the Republic of the Marshall 
Islands.
    Subcenter--A unit of a center acting under the same direction as 
and having a purpose consistent with that of the center.
    Technology--The application of science to industrial or commercial 
objectives. The entire body of methods and material used to achieve 
such objectives.
    Technology development--The creation of new technology or the use 
and application of existing technology to promote the development and 
commercialization of new products, new processes, and new services that 
can be produced or provided in rural areas.
    Urbanized area--An area immediately adjacent to a city having a 
population of 50,000 or more which, for general social and economic 
purposes, constitutes a single community and has a boundary contiguous 
with that of the city. Such community may be incorporated or 
unincorporated to extend from the contiguous boundaries to recognizable 
open country, less densely settled areas, or natural boundaries such as 
forests or water. Minor open spaces such as airports, industrial sites, 
recreational facilities, or public parks shall be disregarded. Outer 
boundaries of an incorporated community extend at least to its legal 
boundaries. Cities which may have a contiguous border with another 
city, but are located across a river from such city, are recognized as 
a separate community and are not otherwise considered a part of an 
urbanized or urbanizing area, as defined in this section, are not in a 
nonrural area.
    Urbanizing area--A community which is not now, or within the 
foreseeable future not likely to be, clearly separate from and 
independent of a city of 50,000 or more population and its immediately 
adjacent urbanized areas. A community is considered ``separate from'' 
when it is separated from the city and its immediately adjacent 
urbanized area by open country, less densely settled areas, or natural 
barriers such as forests or water. Minor open spaces such as airports, 
industrial sites, recreational facilities, or public parks shall be 
disregarded. A community is considered ``independent of'' when its 
social and economic structure (e.g. government; educational, health, 
and recreational facilities; and business, industry, tax base, and 
employment opportunities) is not primarily dependent on the city and 
its immediately adjacent urbanized areas.


Sec. 4284.505  Applicant eligibility.

    (a) Grants may be made to public bodies or nonprofit institutions.
    (b) Grants may be made for technology and cooperative development 
in ``rural areas.'' In determining whether an area is rural, the Agency 
will determine whether the area is urbanized or urbanizing and then the 
population density per square mile. All such density determinations 
will be made on the basis of minor civil division or census county 
division as used by the Bureau of the Census. In making the density 
calculations, large nonresidential tracts devoted to urban land uses 
such as railroad yards, airports, industrial sites, parks, golf 
courses, and cemeteries or land set aside for such purposes will be 
excluded.
    (c) An outstanding judgement obtained against an applicant by the 
United States in a Federal Court (other than in the United States Tax 
Court), which has been recorded, shall cause the applicant to be 
ineligible to receive any grant or loan until the judgement is paid in 
full or otherwise satisfied. RBS grant funds may not be used to satisfy 
the judgement.


Secs. 4284.506-4284.514   [Reserved]


Sec. 4284.515  Grant purposes.

    Grant funds may be used to pay up to 75 percent of the costs for 
establishing or operating centers for rural technology or cooperative 
development. Applicant's contribution may be in cash or third party in-
kind contribution in accordance with parts 3015, 3016 and 3019 of this 
title and must be from nonfederal funds except that a loan from another 
federal source can be used for the applicant's contribution. Grant 
funds may be used for, but are not limited to, the following purposes:
    (a) Technology research, investigations, and basic feasibility 
studies in any field or discipline for the purpose of generating 
principles, facts, technical knowledge, new technology, or other 
information that may be useful to rural industries, cooperatives, 
agribusinesses, and other persons or entities in rural areas served by 
such centers in the development and commercialization of new products, 
processes, or services.
    (b) The collection, interpretation, and dissemination of 
principles, facts, technical knowledge, new technology, or other 
information that may be useful to rural industries, cooperatives, 
agribusinesses, and other persons or entities in rural areas served by 
the center in the development and commercialization of new products, 
processes, or services.
    (c) Providing training and instruction for individuals residing in 
rural areas served by the center with respect to the development 
(through technological innovation, cooperative development, and 
adaptation of existing technology) and commercialization of new 
products, processes, or services.
    (d) Providing loans and grants to individuals, small businesses and 
cooperatives in rural areas for purposes of generating, evaluating, 
developing and commercializing new products, processes, or services.
    (e) Providing technical assistance and advisory services to 
individuals, small businesses, cooperatives, and industries in rural 
areas served by the center for purposes of developing and 
commercializing new products, processes, or services.
    (f) Providing research and support to individuals, small 
businesses, cooperatives, and industries in rural areas served by the 
center for purposes of developing new agricultural enterprises to add 
value to on-farm production through processing or marketing.
    (g) Paying up to 75 percent of the administrative costs of the 
applicant in carrying out its projects.
    (h) Equipment and materials necessary to carry out other eligible 
grant purposes under this section.


Sec. 4284.516  Ineligible grant purposes.

    Grant funds may not be used to:
    (a) Pay more than 75 percent of project costs.
    (b) Pay more than 75 percent of administrative costs.
    (c) Duplicate current services or replace or substitute support 
previously provided.
    (d) Pay costs of preparing the application package for funding 
under this program.
    (e) Pay costs incurred prior to the effective date of the grant 
made under this subpart.
    (f) Pay for building construction or the purchase of real estate or 
vehicles; improving or renovation of office space; or repair or 
maintenance of privately-owned property.
    (g) Fund political activities.
    (h) Pay for assistance to any private business enterprise which 
does not have at least 51 percent ownership by those who are either 
citizens of the United States or reside in the United States after 
being legally admitted for permanent residence. 

[[Page 3784]]



Secs. 4284.517-4284.526  [Reserved]


Sec. 4284.527  Other considerations.

    (a) Civil rights compliance requirements. All grants made under 
this subpart are subject to the requirements of title VI of the Civil 
Rights Act of 1964 which prohibits discrimination on the basis of race, 
color, and national origin as outlined in subpart E of part 1901 of 
this title. In addition, the grants made under this subpart are subject 
to the requirements of section 504 of the Rehabilitation Act of 1973, 
as amended, which prohibits discrimination on the basis of handicap; 
the requirements of the Age Discrimination Act of 1975 which prohibits 
discrimination on the basis of age; and title III of the Americans with 
Disabilities Act, Pub. L. 101-336, which prohibits discrimination on 
the basis of disability by private entities in places of public 
accommodations.
    (b) Environmental requirements.
    (1) General applicability. Unless specifically modified by this 
section, the requirements of subpart G of part 1940 of this title apply 
to this subpart. For example, the Agency's general and specific 
environmental policies contained in Secs. 1940.303 and 1940.304 of 
subpart G of part 1940 of this title must be met. Although the purpose 
of the grant program established by this subpart is to improve 
business, industry, and employment in rural areas, this purpose is to 
be achieved, to the extent practicable, without adversely affecting 
important environmental resources of rural areas such as important 
farmland and forest lands, prime rangelands, wetland, and flood plains. 
Prospective recipients of grants, therefore, must consider the 
potential environmental impacts of their applications at the earliest 
planning stages and develop plans and projects that minimize the 
potential to adversely impact on the environment.
    (2) Technical assistance. An application for a technical assistance 
project is generally excluded from the environmental review process by 
Sec. 1940.333 of subpart G of part 1940 of this title. However, as 
further specified in that section, the grantee of a technical 
assistance grant, in the process of providing technical assistance, 
must consider and generally document within their plans the potential 
environmental impacts of the plan and recommendations provided to the 
recipient of the technical assistance.
    (3) Applications for grants to provide financial assistance to 
third-party recipients. As part of the preapplication, the applicant 
must provide a complete Form FmHA 1940-20, ``Request for Environmental 
Information,'' for each project specifically identified in its plan to 
provide financial assistance to third parties who will undertake 
eligible projects with such assistance. The Agency will review the 
preapplication, supporting materials, and any required Forms FmHA 1940-
20 and initiate an appropriate environmental review for the 
preapplication. This assessment will focus on the potential cumulative 
impacts of the projects as well as any environmental concerns or 
problems that are associated with individual projects that can be 
identified at this time from the information submitted. Because the 
Agency's approval of this type of grant application does not constitute 
a commitment to the use of grant funds for any identified third-party 
projects (see Sec. 4284.541 of this subpart), no public notification 
requirements will apply to the preapplication. After the grant is 
approved, each third-party project to be assisted under the grant will 
undergo the applicable environmental review and public notification 
requirements in subpart G of part 1940 of this title prior to the 
Agency providing its consent to the grantee to assist the third-party 
project. If the preapplication reflects only one specific project which 
is specifically identified as the third-party recipient for financial 
assistance, the Agency may perform the appropriate environmental 
assessment with no public notification. However, the applicant must be 
advised that if the recipient or project changes after the grant is 
approved, the project to be assisted under the grant will undergo the 
applicable environmental review and public notification requirements .
    (c) Government wide debarment and suspension (non-procurement) and 
requirements for drug-free workplace. Persons who are disbarred or 
suspended are excluded from federal assistance and benefits including 
grants under this subpart. Grantees must certify that they will provide 
a drug free workplace. See part 3017 of this title and FmHA Instruction 
1940-M (available in any RECD State Office) for further guidance.
    (d) Restrictions on lobbying. All grants must comply with the 
lobbying restrictions set forth in part 3018 of this title.
    (e) Excess capacity or transfer of employment.
    (1) If a proposed grant is for more than $1 million and will 
increase direct employment by more than 50 employees, the applicant 
will be requested to provide written support for an Agency 
determination that the proposal will not result in a project which is 
calculated to, or likely to, result in:
    (i) The transfer of any employment or business activity from one 
area to another (this limitation will not prohibit assistance for the 
expansion of an existing business entity through the establishment of a 
new branch, affiliate, or subsidiary of such entity if the expansion 
will not result in an increase in the unemployment in the area of 
original location or in any other area where such entity conducts 
business operations, or
    (ii) An increase in the production of goods, materials, or 
commodities or the availability of services or facilities in the area 
when there is not sufficient demand for such goods, materials, 
commodities, services, or facilities to employ the efficient capacity 
of existing competitive commercial or industrial enterprises, unless 
such financial or other assistance will not have an adverse effect upon 
existing competitive enterprises in the area. The applicant's written 
support will consist of a resolution from the applicant and Form FmHA 
449-22, ``Certification of Non-Relocation and Market and Capacity 
Information Report,'' from each existing and future occupant of the 
site. The applicant may use Guide 2 of subpart G of part 1942 of this 
title (available in any RECD State Office) as an example in preparing 
the resolution. Future occupants of the site must be certified by the 
Department of Labor (DOL) as outlined in paragraph (e)(3) of this 
section for a period of 3 years after the initial certification by DOL.
    (2) [Reserved]
    (3) Grants shall not be made if the Secretary of Labor certifies 
within 30 days after the matter has been submitted by the Secretary of 
Agriculture that the provisions of paragraph (e) (1) of this section 
have not been met. Information for obtaining this certification will be 
submitted, in writing, by the applicant to RECD. Grant approval may be 
given and funds may be obligated, subject to the DOL certification 
being received, provided RBS has made its own separate determinations 
of paragraphs (e) (1) (i) and (ii) of this section when applicable.
    (f) Management assistance. Grant recipients will be supervised, as 
necessary, to ensure that projects are completed in accordance with 
approved plans and specifications and that funds are expended for 
approved purposes. Grants made under this subpart will be administered 
under, and are subject to, parts 3015, 3016, 3017 and 3019 of this 
title, as appropriate, and established RBS guidelines. 

[[Page 3785]]

    (g) National Historic Preservation Act of 1966. All projects will 
be in compliance with the National Historic Preservation Act of 1966 in 
accordance with subpart F of part 1901 of this title.
    (h) Uniform Relocation Assistance and Real Property Acquisition 
Policies Act. All projects must comply with the requirements set forth 
in part 21 of this title.
    (i) Flood plains and wetlands. All projects must comply with 
Executive Order 11988, ``Flood Plain Management,'' and Executive Order 
11990, ``Protection of Wetlands.''
    (j) Flood or mudslide hazard area precautions. If the grantee 
financed project is in a flood or mudslide area, flood or mudslide 
insurance must be provided.
    (k) Termination of Federal requirements. Once the grantee has 
provided assistance with project loans in an amount equal to the grant 
provided by RBS, the requirements imposed on the grantee shall not be 
applicable to any new projects thereafter financed from the RTCDG 
funds. Such new projects shall not be considered as being derived from 
federal funds. The purposes of such new projects , however, shall be 
consistent with these regulations.
    (l) Intergovernmental review. Grant projects are subject to the 
provisions of Executive Order 12372 which requires intergovernmental 
consultation with state and local officials. A loan fund established in 
whole, or in part, with grant funds will also be considered a project 
for the purpose of intergovernmental review as well as the specific 
projects funded with grant funds from the RTCDG funds. For each project 
to be assisted with a grant under this subpart and which the state has 
elected to review under their intergovernmental review process, the 
state point of contact must be notified. Notification, in the form of a 
project description, can be initiated by the grantee. Any comments from 
the state must be included with the grantee's request to use RBS grant 
funds for the specific project. Prior to RBS's decision on the request, 
compliance with requirements of intergovernmental consultation must be 
demonstrated for each project. These requirements should be completed 
in accordance with ``Intergovernmental Review of Department of 
Agriculture Programs and Activities,'' subpart V of part 3015 of this 
title (see FmHA Instruction 1940-J, available in any RECD State 
Office).


Sec. 4284.528  Application processing.

    (a) Preapplications.
    (1) Applicants will file an original and one copy of Standard Form 
(SF)-424.1, ``Application for Federal Assistance (For Non-
construction),'' with the appropriate RECD State Office. This form is 
available in any RECD State Office.
    (2) All preapplications shall be accompanied by:
    (i) Evidence of applicant's legal existence and authority to 
perform the proposed activities under the grant.
    (ii) Latest financial information to show the organization's 
financial capacity to carry out the proposed work. At a minimum, the 
information should include a balance sheet and an income statement. A 
current audit report is preferred where one is reasonably obtainable.
    (iii) Estimated breakdown of total costs, including costs to be 
funded by the applicant as well as other sources. Other sources should 
be identified. Certification must be provided from the applicant that 
its matching share to the project is available and will be used for the 
project. The matching share must meet the requirements of parts 3015, 
3016 and 3019 of this title. Certifications from an authorized 
representative of each source of funds must be provided indicating that 
funds are available and will be used for the proposed project.
    (iv) Budget and description of the accounting system in place or 
proposed.
    (v) Area to be served, identifying each government unit, i.e., 
town, county, etc., if affected by the proposed project and evidence of 
support and concurrence in the proposed project from the affected local 
governmental bodies as evidenced by a resolution or a written statement 
from the chief elected local official.
    (vi) Evidence that the proposed project will serve or have the 
potential to serve economically distressed areas supported by 
established official independent sources of data which are sufficient 
to verify the extent to which economically distressed conditions exist. 
(Preference will be given in selecting projects demonstrating their 
ability to effectively serve rural areas with few rural industries and 
agribusinesses, high levels of unemployment or underemployment, high 
rates of outmigration of people, businesses, and industries, or low 
levels of per capita income).
    (vii) A listing of businesses to be assisted.
    (viii) Applicant's experience, including experience of key staff 
members and persons who will be providing the proposed services and 
managing the project.
    (ix) The number of months duration of the project or service and 
the estimated time it will take from grant approval to beginning of 
service.
    (x) Method and rationale used to select the areas or businesses 
that will receive the service.
    (xi) Brief description of how the work will be performed and 
whether organizational staff, consultants or contractors will be used.
    (xii) Evaluation method to be used by the applicant to determine if 
objectives of the proposed activity are being accomplished.
    (xiii) A brief plan which contains the following provisions and 
describes how the applicant will meet those provisions:
    (A) A provision that substantiates that the applicant will 
effectively serve rural areas in the United States.
    (B) A provision that the primary objective of the applicant will be 
to improve the economic condition of rural areas by promoting the 
development (through technological innovation, cooperative development, 
and adaptation of existing technology) and commercialization of:
    (1) New services and products that can be produced or provided in 
rural areas;
    (2) New processes that can be utilized in the production of 
products in rural areas; and
    (3) New enterprises that can add value to on-farm production 
through processing or marketing.
    (C) Copies of the established official independent sources of data 
need to be included in the plan along with any documentation that more 
fully explains the date produced, methodology, source, or 
interpretation of the data.
    (D) A description of the activities that the applicant will carry 
out to accomplish such objective.
    (E) A description of the proposed activities to be funded under 
this subpart.
    (F) A description of the contributions that the applicant's 
proposed activities are likely to make to the improvement of the 
economic conditions of the rural areas served by the applicant.
    (G) Provisions that the applicant, in carrying out its activities, 
will seek, where appropriate, the advice, participation, expertise, and 
assistance 

[[Page 3786]]

of representatives of business, industry, educational institutions, the 
federal government, and state and local governments.
    (H) Provisions that the applicant will consult with any college or 
university administering Extension Service programs and cooperate with 
such college or university in the coordination of the center's 
activities and programs.
    (I) Provisions that the applicant will take all practicable steps 
to develop continuing sources of financial support for the center, 
particularly from sources in the private sector.
    (J) Provisions for:
    (1) Monitoring and evaluating its activities; and
    (2) Accounting for money received and expended by the institution 
under this subpart.
    (K) Provisions that the applicant will provide for the optimal 
application of technology and cooperative development in rural areas, 
especially those areas adversely affected by agricultural economic 
conditions, through the establishment of demonstration projects and 
subcenters for:
    (1) Rural technology development where the technology can be 
implemented by communities, community colleges, businesses, 
cooperatives, and other institutions; or
    (2) Cooperative development where such development can be 
implemented by cooperatives to improve local economic conditions.
    (xiv) If grant funds are to be used for the purpose of making loans 
or grants to individuals, small businesses, or cooperatives (ultimate 
recipients) in rural areas for eligible purposes under this subpart, 
the preapplication must include the agreement proposed to be used 
between the applicant and the ultimate recipients which includes the 
following:
    (A) An assurance that the responsibilities of the grantee, as a 
recipient of grant funds under this subpart, are passed on to the 
ultimate recipient and the ultimate recipient understands its 
responsibilities to comply with the requirements set forth in this 
subpart, including parts 3015, 3016, and 3019 of this title.
    (B) Provisions that the ultimate recipient will comply with 
debarment and suspension requirements contained in part 3017 of this 
title and will execute Form AD-1048, ``Certification Regarding 
Debarment, Suspension, Ineligibility and Voluntary Exclusion--Lower 
Tier Covered Transactions.''
    (C) Provisions that the ultimate recipient will execute Forms FmHA 
400-1, ``Equal Opportunity Agreement,'' and FmHA 400-4, ``Assurance 
Agreement.''
    (D) Documentation that the ultimate recipient understands its 
responsibilities to the applicant.
    (E) Documentation that the applicant understands its 
responsibilities in monitoring the ultimate recipient's activities 
under the grant and the applicant's plan for such monitoring.
    (F) Documentation when other references or sources of information 
are used, along with copies if possible, to provide dates, addresses, 
page numbers and explanations of how interpretations are made to 
substantiate that such things as economically distressed conditions do 
exist.
    (G) Narrative addressing all items in Sec. 4284.540 (a) of this 
subpart regarding grant selection criteria.
    (b) Applications. Upon notification that the applicant has been 
selected for funding, the following will be submitted to the RECD by 
the applicant:
    (1) SF 424.1, ``Application for Federal Assistance (for Non-
construction)''.
    (2) Proposed scope of work, detailing the proposed activities to be 
accomplished and time frames for completion of each activity.
    (3) Proposed budget, including source and amount of applicant 
contribution and any other funding sources for the proposed project.
    (4) Other information requested by RECD to make a grant award 
determination.
    (c) Applicant response. If the applicant fails to submit the 
application and related material by the date shown on the notice, RECD 
may discontinue consideration of the preapplication.


Secs. 4284.529-4284.539  [Reserved]


Sec. 4284.540  Grant selection criteria.

    Grants will be awarded under this subpart on a competitive basis. 
The priorities described in this paragraph will be used by RBS to rate 
preapplications. Preference will be given to applicants demonstrating 
factors in paragraphs (a) (4) and (5) of this section. RBS' review of 
preapplications will include the complete preapplication package 
submitted to the RECD State Office. Points will be distributed 
according to ranking as compared with other preapplications on hand. 
Recognizing that a wide variety of individual strategies and approaches 
may be used to promote economic development and that specific needs 
vary according to geographic region and over time, the Agency has 
determined to publish an informational notice annually in the Federal 
Register which will contain those objective strategies or approaches, 
consistent with this subpart with weighted priorities, that the Agency 
wishes to emphasize during that year. The notice will establish the 
period of time that the Agency will accept preapplications for 
consideration of that fiscal year's funding.
    (a) The selection criteria are as follows:
    (1) Likelihood of project being effective in achieving one or more 
of the following: technological innovation, adaptation of existing 
technology, cooperative development, commercialization of new services 
and products, and promotion of new processes and enterprises.
    (2) Innovativeness or originality of project in addressing 
authorized grant purposes.
    (3) Experience, organizational skills, and background that are 
needed for applicant to successfully carry out project.
    (4) Transferability or demonstration value of project to help rural 
areas outside of project area.
    (5) Ability of project to contribute to the improvement of economic 
conditions in rural areas with one or more of the following: few rural 
industries and agribusinesses; high levels of unemployment or 
underemployment; high rates of outmigration of people, businesses, 
industries; and low levels of per capita income.
    (6) The Administrator may award discretionary points to focus on 
geographical distribution, interagency cooperation or other appropriate 
factors.
    (b) Each preapplication for assistance will be carefully reviewed 
in accordance with the priorities established in this section. A 
priority rating will be assigned to each preapplication. 
Preapplications selected for funding will be based on the priority 
rating assigned each preapplication and the total funds available. All 
preapplications submitted for funding should contain sufficient 
information to permit RBS to complete a thorough priority rating.


Sec. 4284.541  Grant approval, fund obligation, grant closing, and 
third-party financial assistance.

    The grantee will execute all documents required by the Agency to 
make a grant under this subpart.


Secs. 4284.542-4284.556  [Reserved]


Sec. 4284.557  Fund disbursement.

    Grants will be disbursed as follows:
    (a) An SF-270, ``Request for Advance or Reimbursement,'' will be 
completed by the applicant and submitted to RECD 

[[Page 3787]]
not more frequently than monthly. The grantee will only be reimbursed 
for allowable costs incurred.
    (b) [Reserved]
    (c) The grantee's share in the cost of the project will be 
disbursed in advance of grant funds or on a pro-rata distribution basis 
with grant funds during the disbursement period. The grantee may not 
provide its contribution at the end of the grant period.


Sec. 4284.558  Reporting.

    An SF-269, ``Financial Status Report,'' and a project performance 
activity report will be required of all grantees on a quarterly basis. 
A final project performance report will be required with the last SF-
269. The final report may serve as the last quarterly report. The final 
report must include a final evaluation of the project. Grantees shall 
constantly monitor performance to ensure that time schedules are being 
met, projected work by time periods is being accomplished, and other 
performance objectives are being achieved. Grantees are to submit an 
original of each report to RECD. The project performance reports shall 
include, but not be limited to, the following:
    (a) A comparison of actual accomplishments to the objectives 
established for that period;
    (b) Reasons why established objectives (if any) were not met;
    (c) Problems, delays, or adverse conditions which will affect 
attainment of overall project objectives, prevent meeting time 
schedules or objectives, or preclude the attainment of particular 
project work elements during established time periods. This disclosure 
shall be accompanied by a statement of the action taken or planned to 
resolve the situation; and
    (d) Objectives and timetable established for the next reporting 
period.


Secs. 4284.559-4284.570  [Reserved]


Sec. 4284.571  Audit requirements.

    The grantee will provide an audit report in accordance with 
Sec. 1942.17 of subpart A of part 1942 of this title. The audit 
requirements only apply to the years in which grant funds are received. 
Audits must be prepared in accordance with general accounting 
principles and standards using the publication, ``Standards for Audit 
of Governmental Organizations, Programs, Activities and Functions.''


Sec. 4284.572  Grant servicing.

    Grants will be serviced in accordance with subpart E of part 1951 
of this title.


Sec. 4284.573  Programmatic changes.

    The grantee shall obtain prior approval for any change to the scope 
or objectives of the approved project. Failure to obtain prior approval 
of changes to the scope or budget can result in suspension or 
termination of grant funds.


Sec. 4284.574  Subsequent grants.

    Subsequent grants will be processed in accordance with the 
requirements set forth in this subpart.


Sec. 4284.575  Grant suspension, termination, and cancellation.

    Grants may be canceled by RBS by written notice. Grants may be 
suspended or terminated for cause or convenience in accordance with 
parts 3015, 3016, and 3019 of this title.


Secs. 4284.576-4284.586  [Reserved]


Sec. 4284.587  Exception authority.

    The Administrator may, in individual cases, make an exception to 
any requirement or provision of this subpart which is not inconsistent 
with the authorizing statute, an applicable law, or a decision of the 
Comptroller General, if the Administrator determines that application 
of the requirement or provision would adversely affect the Government's 
financial interest and shows how the adverse impact will be eliminated 
or minimized if the exception is made.


Secs. 4284.588-4284.599  [Reserved]


Sec. 4284.600  OMB control number.

    The reporting and record keeping requirements contained in this 
regulation have been approved by the Office of Management and Budget 
(OMB) and have been assigned OMB control number 0570-0006. Public 
reporting burden for this collection of information is estimated to 
vary from 30 minutes to 8 hours per response, with an average of 1.85 
hours per response, including time for reviewing instructions, 
searching existing data sources, gathering and maintaining the data 
needed, and completing and reviewing the collection of information. 
Send comments regarding this burden estimate or any other aspect of 
this collection of information, including suggestions for reducing this 
burden, to Department of Agriculture, Clearance Officer, OIRM, AG Box 
7630, Washington, DC 20250, and to the Office of Management and Budget, 
Paperwork Reduction Project (OMB#0570-0006), Washington, D.C. 20503.

    Dated: January 3, 1996.
Jill Long Thompson,
Under Secretary, Rural Economic and Community Development.
[FR Doc. 96-1578 Filed 2-1-96; 8:45 am]
BILLING CODE 3410-32-U