[Federal Register Volume 61, Number 44 (Tuesday, March 5, 1996)]
[Rules and Regulations]
[Pages 8712-8748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-4814]




[[Page 8711]]

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Part II





Department of Housing and Urban Development





_______________________________________________________________________



24 CFR Part 941, et al.



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Streamlining the Comprehensive Improvement Assistance and Comprehensive 
Grant Programs; Final Rule

  Federal Register / Vol. 61, No. 44 / Tuesday, March 5, 1996 / Rules 
and Regulations   

[[Page 8712]]


DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Public and Indian Housing

24 CFR Parts 941, 950, 965, and 968

[Docket No. FR-3967-F-01]
RIN 2577-AB59


Streamlining the Comprehensive Improvement Assistance Program and 
Comprehensive Grant Program

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

ACTION: Final rule.

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

SUMMARY: This rule amends 24 CFR parts 950 (formerly 905) and 968 to 
streamline, simplify and eliminate unnecessary requirements for the 
Department's two modernization programs used in the public housing and 
Indian housing programs. The Comprehensive Improvement Assistance 
Program (CIAP) is used by Public Housing Agencies (PHAs) and Indian 
Housing Authorities (IHAs) that own or operate fewer than 250 public 
housing units. The Comprehensive Grant Program (CGP) is used by PHAs 
and IHAs that own or operate 250 or more public housing units.
    The rule also combines into provisions of a part dealing with 
general provisions applicable to PHA-owned projects (part 965) the 
nearly identical provisions concerning prevailing wage rates that have 
been found in the development and modernization parts for public 
housing (parts 941 and 968).

EFFECTIVE DATE: April 4, 1996.

FOR FURTHER INFORMATION CONTACT:
    For Public Housing: William J. Flood, Director, Office of Capital 
Improvements, Public and Indian Housing, Department of Housing and 
Urban Development, Room 4134, 451 Seventh Street, S.W., Washington, 
D.C. 20410-5000, telephone (202) 708-1640.
    For Indian Housing: Deborah M. LaLancette, Director, Housing 
Management Division, Office of Native American Programs, Public and 
Indian Housing, Room B-133, Department of Housing and Urban 
Development, 451 Seventh Street S.W., Washington, D.C. 20410, telephone 
(202) 755-0088.
    Hearing- or speech-impaired persons may use the Telecommunications 
Devices for the Deaf (TDD) by contacting the Federal Information Relay 
Service on 1-800-877-TDDY (1-800-877-8339) or (202) 708-9300. (Other 
than the ``800'' TDD number, telephone numbers are not toll-free.)

SUPPLEMENTARY INFORMATION:

I. Paperwork Burden

    The information collection requirements contained in this rule 
remain essentially unchanged. They are merely moved to different 
section numbers as part of this consolidation effort. (See 
Secs. 950.618, 950.622, 950.630, 950.632, 950.634, 950.636, 968.135, 
968.145, 968.210, 968.215, 968.225, and 968.230, previously approved by 
the Office of Management and Budget (OMB) in accordance with the 
Paperwork Reduction Act (44 U.S.C. 3501-3520) under OMB control number 
2577-0044 (CIAP). See also Secs. 950.650, 950.656, 950.658, 968.310, 
968.325, and 968.330, previously approved by OMB under control number 
2577-0157 (CGP).)

II. Background

    Upon assuming the leadership of the Department of Housing and Urban 
Development (HUD) in 1993, Secretary Cisneros made the reinvention of 
HUD one of his first priorities. HUD's reinvention efforts took place 
in the context of a broader, government-wide reinvention process, the 
National Performance Review, under the leadership of Vice President 
Gore. At that time, HUD established five program goals to accomplish 
its mission that involved working for healthy growth in cities, 
providing adequate housing for all, and protection of society's most 
vulnerable people.
    HUD determined that one of the first steps needed in its 
transformation from the old HUD to a new HUD was the consolidation and 
streamlining of funding programs. HUD recently submitted to Congress 
sweeping changes to transform public housing to a resident-based 
program.
    Another aspect of the reinvention involves HUD's rules, which have 
been at the forefront of HUD's reinvention efforts since those efforts 
commenced in 1993. The foundation of HUD's regulatory process is 
Executive Order 12866 (Regulatory Planning and Review) issued by 
President Clinton on September 30, 1993. This order directs agencies 
to, among other things, explore regulatory alternatives and, if 
regulations are determined to be necessary, to select approaches that 
maximize benefits and involve enhanced public accessibility and 
participation in the rulemaking process.
    HUD has done a comprehensive review of 24 CFR part 968, Public 
Housing Modernization. Part 968 contains 3 subparts, covering general 
requirements and separate requirements for the Comprehensive 
Improvement Assistance Program (CIAP) and Comprehensive Grant Program 
(CGP). Based on its comprehensive review, HUD has determined that 
certain provisions from CIAP and CGP can be consolidated in the general 
provisions, subpart A. HUD also has determined that there are a number 
of revisions that should be made to simplify subpart B for CIAP and 
subpart C for CGP. Similar changes are also being made to 24 CFR part 
950, subpart I, which covers the modernization program requirements for 
Indian Housing.
    In addition to the simplifications mentioned above and described in 
more detail in Part III below, the Department is also responding in 
this rule to public comments received on the interim CIAP rule 
published March 15, 1993 (58 FR 13916). This rule also makes changes 
resulting from experience gained during the Federal Fiscal Years (FFYs) 
1993, 1994, and 1995 funding competitions (see Part IV below).
    [The reader should note that, hereafter, for ease of discussion, 
the preamble to this final rule uses the term ``housing authorities 
(HAs)'' to refer to both public housing agencies (PHAs) and Indian 
Housing Authorities (IHAs) and the term ``public housing'' to refer to 
both Public and Indian housing, unless otherwise stated. In addition, 
the term ``development'' is used to refer to ``low-income projects,'' 
as defined at section 3(b)(l) of the Act.]

III. Reinvention Changes for CIAP and CGP

    As a part of other pending rulemakings, various Federal 
requirements that are applicable to a number of the Department's 
programs, including modernization, are being moved to Department-wide 
common rules. One example of such provisions are those now contained in 
Sec. 968.110, Other Federal requirements.
    The current section covers civil rights compliance, minority and 
women's business enterprise opportunity, lead-based paint poisoning 
prevention, environmental clearance, flood insurance, and wage rates, 
as well as audits, uniform administrative requirements, and energy 
conservation. Most of the civil rights authorities, including 
references to minority and women's business enterprise opportunity, 
have been consolidated into the Department-wide rule (24 CFR part 5) 
listing provisions applicable to all of the Department's programs. That 
rulemaking revised Sec. 968.110 to refer to the Department-wide rule, 
leaving a few additional authorities in Sec. 968.110(a). Another 
pending rulemaking addresses 

[[Page 8713]]
the applicability of lead-based paint poisoning prevention.
    This rulemaking also revises Sec. 968.110 as follows: 
Sec. 968.110(i), Audits, is being moved to a new Sec. 968.145, Fiscal 
closeout; Sec. 968.110(j), Uniform administrative requirements, is 
being moved to a new Sec. 968.135, Contracting requirements; 
Sec. 968.110(l), Energy conservation, is being moved to a revised 
Sec. 968.115, Modernization and energy conservation standards; and the 
cross-reference in paragraph (e)(3) for preemption of prevailing wage 
rates is changed to 24 CFR 965.101. (Section 965.101 is amended in this 
rulemaking to broaden the coverage of its preemption of prevailing wage 
rates to extend to development and modernization, as well as to 
operations.)
    Existing Sec. 968.120, dealing with preemption of State prevailing 
wage requirements, is being moved to and combined with Sec. 965.101.
    The Indian housing program is not affected by the consolidation of 
general provisions by the other pending rulemaking. Consequently, 
Sec. 950.120 still contains comparable provisions.

IV. Relation of Current Regulations Sections to Final Rule Sections

    The following chart shows the locations of similar provisions:

------------------------------------------------------------------------
             New section                       Current sections         
------------------------------------------------------------------------
950.604.............................  950.601                           
950.606.............................  950.667                           
950.608.............................  950.615, 950.666                  
950.610.............................  950.603                           
950.612.............................  [New provision]                   
950.614.............................  950.635                           
950.616.............................  950.639                           
950.618.............................  950.642                           
950.620.............................  950.645                           
950.622.............................  950.657                           
950.630.............................  950.618                           
950.632.............................  950.624                           
950.634.............................  950.648                           
950.636.............................  950.651                           
950.638.............................  [New provision]                   
950.640.............................  950.654, 950.675                  
950.650.............................  950.669                           
950.652.............................  950.672                           
950.654.............................  950.675                           
950.656.............................  950.678                           
950.658.............................  950.684                           
950.660.............................  950.687                           
968.104.............................  968.312                           
968.112.............................  968.210, 968.310                  
968.125.............................  968.225                           
968.130.............................  968.230                           
968.135.............................  968.235                           
968.140.............................  968.240                           
968.145.............................  968.260                           
968.210.............................  968.215                           
968.215.............................  968.220                           
968.225.............................  968.245                           
968.230.............................  968.250                           
968.235.............................  [New provision]                   
968.240.............................  968.345                           
968.310.............................  968.315                           
968.315.............................  968.320                           
968.320.............................  968.325                           
968.325.............................  968.330                           
968.330.............................  968.340                           
968.335.............................  968.345                           
------------------------------------------------------------------------

V. Public Comments and Description of the Simplified CIAP

A. Public Comments

    The Department received public comments on the March 1993 interim 
rule from four HAs and two HA interest groups (National Association of 
Housing and Redevelopment Officials (NAHRO) and Public Housing 
Authorities Directors Association (PHADA)). The commenters agreed that 
HUD has made substantial progress in simplifying the CIAP, and pointed 
out additional areas for simplification or clarification.
    Relocation requirements. The March 1993 interim rule revised parts 
905 (now 950) and 968 by updating the displacement, relocation and 
acquisition requirements pursuant to the Uniform Relocation Assistance 
and Real Property Acquisition Policies Act of 1970, as amended, and by 
removing the relocation requirements from the ``Other program 
requirements'' sections and creating separate sections for the 
relocation requirements at new Secs. 905.117 (now 950.117) and 968.108.
    Comment: PHADA and two HAs recommended that HUD be required to 
respond to an HA's request for a determination of coverage under the 
relocation requirements (Secs. 968.108(g)(3) and 950.117(g)(3)) within 
30 calendar days or within a longer stated period or provide a rebuttal 
period or the HA's interpretation would be accepted as final.
    Response: The Department agrees that dialogue between HUD and an HA 
is important and should start in the planning stage. Technical 
assistance on relocation matters is readily available from Community 
Planning and Development relocation staff in HUD Field Offices. HUD 
will make every effort to respond promptly to HA requests for 
assistance. However, HUD cannot restrict the time period for a response 
as suggested. HUD's relocation rules implementing statutory 
requirements guaranteeing benefits to eligible persons cannot be 
amended by this rulemaking. In fact, HUD relies on regulations issued 
by the Department of Transportation for government-wide requirements, 
at 49 CFR part 24 (see 24 CFR part 42). A delay in HUD's response does 
not relieve an HA of its responsibility to comply with the Uniform 
Relocation Act, where applicable.
    Definition of modernization capability. Comment: PHADA commented 
that the determination of no modernization capability be afforded an 
appeal to the Regional Administrator, and that HUD be required to 
inform the HA as to why the determination was made and what facts the 
determination is based on. Response: With regard to the Public Housing 
Management Assessment Program (PHMAP), the PHA may appeal its score on 
the Modernization indicator to the Field Office; if that appeal is 
denied, the PHA may appeal to HUD Headquarters. The HUD reorganization 
eliminated the Regional Offices. With regard to the CIAP technical 
review factor of modernization capability, HUD will provide guidance in 
the revised CIAP Handbook on how Field Offices should score the 
technical review factors, including modernization capability, to ensure 
greater uniformity among Field Offices. In addition, HUD has made 
clarifying changes to the definitions of modernization capability at 
Secs. 950.102 and 968.205 to ensure that no arbitrary exclusion of 
participation due to lack of modernization capability will occur.
    Management improvement costs. Comment: PHADA agreed with HUD on 
allowing CIAP programs composed solely of management improvements. Two 
HAs questioned whether training related to management improvements is 
eligible. Response: Training costs related to carrying out CIAP-
approved physical and management improvements are eligible. See 
Secs. 950.608(g)(2)(ii) and 968.112(g)(2)(ii).
    Comment: Two HAs also asked if office space and storage space are 
eligible costs. Response: Such costs are eligible. See Secs. 950.608(c) 
and 968.112(c).
    Comment: PHADA indicated that some Field Offices have traditionally 
frowned on management improvement requests. Response: This rule 
clarifies that eligible management improvements, either development 
specific or HA-wide, may be approved as single work items under Other 
Modernization. In addition, this rule specifically states that the 
establishment of a preventive maintenance system or improvement of an 
existing system is an eligible management improvement. See 
Secs. 950.608(g)(2)(v) and 968.112(g)(2)(v).
    Reasonable cost and total development cost (TDC). Comment: PHADA 
agreed with the definition of reasonable cost (hard costs not exceeding 
90% of TDC) for most cases, but suggested exceptions for compliance 
with accessibility requirements and 

[[Page 8714]]
remedying environmental problems, such as asbestos and lead-based 
paint. It was suggested that these types of situations are not taken 
into account by the cost indices upon which TDC is based and, 
therefore, should be excluded from the definition. In addition, many 
IHAs with large numbers of homeownership (Mutual Help) units are 
performing comprehensive-type, not piecemeal, modernization.
    Response: The rule has been revised to use the previous definition 
of reasonable cost (90% of TDC) and to handle any special cases on a 
case-by-case basis. The Department had tried a method that allowed more 
flexibility, which we have now determined to be inappropriate.
    In the August 30, 1995, final rule streamlining the CGP, the 
Department added a second method of determining cost reasonableness to 
provide HAs with greater flexibility in determining the cost of 
rehabilitation versus the cost of demolition and new development. HAs 
could choose one of two methods which were: (1) unfunded modernization 
hard costs do not exceed 90 percent of computed total development cost 
(TDC); or (2) individual work items are reasonable in accordance with 
National cost indices, adjusted by local conditions and the HA's own 
recent procurement experience. During the FY 1995 program year, it 
became evident that use of the second method was having unintended 
consequences by allowing some very high cost developments to be 
determined to have reasonable cost. This result is inappropriate in the 
current environment of limited funding. Since it is clear that 
resources for Public and Indian Housing will remain constrained, it is 
incumbent on both the Department and the HAs to assure maximum return 
for the dollars invested. It is not tolerable to allow large-scale 
Federal investments to be made in properties which will remain 
uneconomical or provide marginally suitable housing even after such 
investments are made.
    Accordingly, the Department has eliminated the second method of 
determining cost reasonableness, but has provided that the 90 percent 
of TDC limit may be exceeded where justified, and applied this 
procedure to both CIAP and CGP. If the HA and the Field Office 
recommend funding for a development which exceeds 90 percent of TDC, 
the Field Office must submit written justification to Headquarters for 
final decision.
    Social services. Comment: PHADA and three HAs suggested that 
eligible costs include the direct provision of social services, because 
it is essential to enhance the living conditions and self-sufficiency 
opportunities for residents of small HAs. It was suggested that HUD 
allow start-up costs and reasonable operating costs for three years 
conditioned on the HA being able to provide HUD up-front with a 
reasonable plan for continuing the program after the CIAP funds are 
expended. Response: Although the 1995 Rescissions Act expanded the 
eligible activities that may be funded under Section 14 of the Act with 
FFY 1995 and prior year modernization funds, to include the direct 
provision of social services, there is no permanent statutory authority 
for eligibility of such activities. Therefore, the rule excludes the 
direct provision of social services from future year funding unless 
otherwise provided by law. If a later appropriation act specifically 
permits eligibility for these services, that change will be handled by 
language in the Notices of Funding Availability for the affected years.
    Program benefit. Comment: PHADA and four HAs questioned the program 
benefit rules at Secs. 950.615(j)(3) and 968.210(j)(3) (now found in 
Secs. 950.608(n)(3) and 968.112(n)(3)). Response: The rule provides 
that where the physical or management improvement will benefit programs 
other than Public or Indian housing, such as Section 8 or local 
revitalization, eligible costs are limited to the amount directly 
attributable to the Public or Indian Housing Program. CIAP assistance 
must be used for the purposes expressed in the statute and not for 
other programs or purposes. OMB Circular A-87 also requires this 
program benefit rule. There is no statutory authority to use CIAP funds 
to subsidize the Section 8 program as suggested.
    Ineligible costs. Comment: PHADA and four HAs mentioned arguments 
HAs have had with Field Offices regarding ineligible costs. The rule at 
Secs. 950.615(k) and 968.210(k) stated that an HA shall not make luxury 
improvements, or carry out any other ineligible activities, as 
specified by HUD. Response: HUD has consulted with HA industry groups 
on the eligibility and ineligibility of various work items. In January 
1994, the Department revised its policy, under the Public Housing 
Development Program and the CGP, on work items previously considered 
amenities to provide HAs with maximum flexibility. The Department is 
now extending that revised policy to the CIAP to allow work items that 
are modest in design and cost, but still promote the blending in of 
Public and Indian housing with the design and architecture of the 
surrounding community by including amenities, quality materials and 
design and landscaping features that are customary for the locality and 
culture. However, no additional operating subsidy will be provided. 
Accordingly, the CIAP provisions on ineligible costs at 
Secs. 950.615(b) and 968.210(b) have been revised and moved to 
Secs. 950.608(o) and 968.112(o) to incorporate this policy. The CGP 
provisions on ineligible costs at Secs. 950.666(c) and 968.310(c) also 
have been revised and moved to Secs. 950.608 and 968.112 to incorporate 
this policy, consolidating in one section for IHAs and another for PHAs 
the policy applicable to both the CIAP and CGP.
    Administrative and maintenance space guidelines. Comment: PHADA and 
three HAs commented that HUD needs to reexamine the standards for 
allowable administrative and maintenance space. Response: HUD has 
consulted with HA industry groups on this issue during the CGP 
rulemaking. A survey by NAHRO concluded that the variation among HAs is 
so great in terms of the programs which they operate for the benefit of 
the Public or Indian Housing Program, it is impossible to establish 
standards for such space. The Department agrees that establishing space 
standards is very difficult and, accordingly, is eliminating the 
maximum space guidelines for management, maintenance and community 
space. Instead, Field Offices are given, at Secs. 950.608(c) and 
968.112(c), the authority to approve space in accordance with the 
general principles of program need and benefit, as well as sound 
business practices.
    Expedited NOFA publication. Comment: PHADA and two HAs urged HUD to 
publish CIAP NOFAs within 60 days of passage of an Appropriations Act 
or 30 calendar days from the start of a FFY, whichever is later, 
assuming there are no major statutory changes adopted in the 
Appropriations Act. Response: Secretary Cisneros has made expedited 
publication of NOFAs a priority. However, the amount of funds available 
for the CIAP each year cannot be determined until the modernization 
formula is run. The formula determines the funding split between the 
CIAP and the CGP. Revisions to the CGP (e.g., earlier update of the 
Formula Characteristics Report for CGP agencies) have enabled the 
Department to run the modernization formula earlier in the FFY, which, 
in turn, has benefitted the CIAP. The Department will continue its 
efforts to make CIAP funds available as soon as possible in the FFY.
    Application process. Comment: PHADA suggested that a general format 


[[Page 8715]]
should be developed by HUD to assist small HAs gather the information 
being requested. Response: The CIAP Application form (HUD-52822) 
provides a format for HAs to record their physical and management 
improvement needs. The Department believes that any other format may be 
burdensome to small HAs. The Department is open to the development of 
guidance material which may be helpful to small HAs and welcomes 
specific suggestions.
    Replacement estimate for equipment, systems or structural elements. 
Comment: PHADA and two HAs questioned why the CIAP Application required 
identification of a cost estimate for the equipment, systems or 
structural elements which would normally be replaced over the remaining 
period of the Annual Contributions Contract (ACC) or during the 30-year 
period beginning on the date of submission of the application. 
Response: This was a burdensome statutory requirement from which HUD 
sought legislative relief. A technical amendment to section 14(d)(2) of 
the Act, was signed into law on April 11, 1994 (Pub. L. 103-233, 108 
Stat. 369). Accordingly, the Department has eliminated this requirement 
on Form HUD-52822, CIAP Application.
    Application requirements for management improvements. Comment: 
PHADA requested simplification of the application requirements for 
management improvements. Response: It appeared to PHADA that the 
regulation at Secs. 950.610(g)(2)(i) and 968.215(c)(2) required a 
general recital of the management and administrative capabilities of 
the HA. In order to clarify that such items were only examples of 
eligible management improvements, the items have been moved to the 
eligible costs section at Secs. 950.608(g)(2)(i) and 968.112(g)(2)(i).
    Development deficiencies. Comment: PHADA pointed out a possible 
problem with Secs. 950.618(e)(1)(ii) and 968.215(e)(1)(ii). Each 
development for which work is proposed must be at least three years old 
from the end of the initial operating period (EIOP). Since warranties 
are generally one year and some builders may go bankrupt, PHADA asked 
for relief to be provided for the unusual circumstance in which early 
assistance from CIAP is required. Such relief would be simpler than 
having to come to the Assistant Secretary for Public and Indian Housing 
for a regulatory waiver. Response: In order to make the CIAP consistent 
with the CGP, the Department has changed the threshold for development 
eligibility from EIOP to Date of Full Availability (DOFA) and under ACC 
at Secs. 968.210(e)(1) and 950.630(e)(1). However, the Department 
stresses that the first avenue of correction of a development 
deficiency is from the architect or contractor, as appropriate. Where 
there is no approved actual development cost certificate (ADCC), HUD 
will continue to look to development funds first to correct the 
development deficiency; if development funds are not available, the 
Field Office may approve use of CIAP funds for correction, without 
Headquarters approval. Once there is an approved ADCC, any subsequently 
identified development deficiency may be funded by CIAP funds.
    Eligibility review. Comment: PHADA was concerned about a situation 
where an HA is improperly managed and may be found to be ineligible 
under the regulatory criteria even if a new executive director or key 
staff member has been employed and is sincerely trying to correct the 
HA's problems. PHADA thought this situation may require a waiver of the 
eligibility criteria at Secs. 950.618(e) or 968.215(e). Response: HUD 
disagrees with that interpretation and refers the commenter to the 
revised definitions of modernization and management capability found in 
Secs. 968.205 and 950.102. A Troubled PHA shall be considered for 
funding of non-emergency improvements where it is making reasonable 
progress toward meeting the performance targets established in its 
memorandum of agreement (or equivalent) or has obtained alternative 
oversight of its management functions. The Field Office shall determine 
whether the HA has a reasonable prospect of acquiring management or 
modernization capability through CIAP-funded management improvements 
and administrative support, such as hiring staff or contracting for 
assistance.
    Technical review factors. Comment: PHADA and two HAs questioned if 
the technical review factors are relevant for CIAP, considering the 
size of the HAs participating in CIAP. Specifically, items 5, 6, and 7 
which deal with resident involvement, initiatives, and employment are 
difficult for many small HAs. While PHADA was not opposed to these 
items in theory, it was concerned about their practicality. PHADA 
suggested reexamination of these technical review factors since small 
HAs find it is very difficult to get residents involved and the 
opportunities for resident employment with the HA are severely limited. 
NAHRO stated that the degree to which resident programs are operating 
is more often a function of fund availability and the type of unit, 
elderly or family. Also, in some small towns, the local elected 
leadership may be anti-public housing. Item 8 (local government support 
for proposed modernization) may prevent improvements needed by the 
residents. NAHRO urged that while vacancies are a problem which should 
be addressed whenever possible through CIAP, when assigning weights to 
this factor, the Department should utilize data from the Vacancy 
Reduction Program to ascertain the extent to which modernization needs 
are causing vacancies in this size category of HAs. NAHRO indicated 
that anecdotal evidence thus far indicates that the vacancies in this 
size group are often caused by market conditions or an insufficient 
number of applicants, not modernization need.
    Response: Section 14(d) of the Act requires CIAP Applications to be 
developed in consultation with the appropriate local officials and with 
residents of the housing developments for which assistance is 
requested; therefore, the technical review factors must, at a minimum, 
reflect these requirements. The other factors are a matter of 
Secretarial discretion. The Department supports strong resident 
involvement in all aspects of the Public or Indian Housing Program. 
These technical review factors reflect HUD's goals for the CIAP. HUD 
realizes that resident involvement varies depending on the size and 
resources of the HA, and those distinctions are considered in scoring 
the technical review factors. It also should be noted that the 
technical review factor on extent of vacancies has been clarified to 
indicate that points will be given only if the vacancies are not due to 
insufficient demand.
    PHMAP and rating. Comment: PHADA and one HA were concerned about 
reinventing CIAP and PHMAP. It was suggested that no PHA should be 
rated down in management capability unless there is a failing PHMAP 
score or some unusual change occurs at the PHA. Conversely, a low PHMAP 
score should be used to increase the chances of needed management 
improvements being funded. Response: If a PHA needs CIAP funds for a 
management improvement to address a low PHMAP score, it is not 
penalized. Again, refer to the revised definition of management 
capability in Sec. 968.205.
    Application review. Comment: PHADA suggested that an application 
should be rejected only on new grounds once. PHADA wanted to avoid 
possible endless resubmissions. Response: The Department notes that the 
completeness review is not complex and that operating experience has 
indicated that only a relatively small number of HAs are required to 
correct or resubmit 

[[Page 8716]]
documents. HUD cannot overlook deficiencies in HA submissions. Although 
HUD will make every effort to provide technical assistance to HAs 
before the application deadline date, HAs have a responsibility to 
prepare applications which meet HUD requirements.
    Debriefing for unsuccessful applications. Comment: PHADA and two 
HAs were concerned that too often an HA not receiving the CIAP 
assistance it requested is not adequately informed as to why it was not 
funded. PHADA requested that the regulation be modified to require a 
debriefing for HAs whose applications are not funded so they can 
improve their situation for the next funding round. Response: HUD 
already requires the Field Office to inform an HA in writing as to why 
its application was unsuccessful. This requirement has been included in 
the final rule at Secs. 950.630(i) and (j) and 968.210(i) and (j).
    Residual receipts. Comment: PHADA and NAHRO noted that an HA will 
not be selected for Joint Review if it has residual receipts to carry 
out the modernization activities for which it is applying. PHADA, NAHRO 
and one HA indicated that residual receipts should be used as long as a 
HA is allowed to retain 50 percent of the maximum allowable reserves or 
$50,000, whichever is higher. This way, a reasonable amount of reserves 
can be used and at the same time the HA is not placed in financial 
jeopardy. Response: The Department has eliminated the requirement for 
PHAs to remit residual receipts, effective for HAs with fiscal years 
beginning on or after January 1, 1995. This change will make the 
retention or return of residual receipts a moot issue since there will 
no longer be funds identified as residual receipts and no provision on 
residual receipts in the rule. Accordingly, the Department has 
eliminated the provision in Sec. 968.210(i) regarding non-selection for 
Joint Review where the PHA has residual receipts.
    Contracting and budget revisions approvals. Comment: PHADA, NAHRO 
and one HA disagreed with HUD's approval procedures for contracting and 
budget revisions. They suggested that these situations could be 
modified so that if HUD does not act on an HA's submission within 15 
calendar days, it is automatically approved and the project can 
proceed. NAHRO requested that HUD clarify the processes to be used by 
Field Offices in establishing more frequent reporting or more stringent 
requirements related to thresholds or prior HUD approval. NAHRO urged 
that PHMAP should be used and cross referenced here. Response: Field 
Offices are required to establish thresholds as high as possible to 
give CIAP agencies flexibility while protecting HUD's interests in the 
contracting area. These thresholds are based on an HA's in-house 
technical capability and past performance. The revised CIAP Handbook 
will establish time frames for Field Office review and action on 
documents which must be submitted for prior HUD approval. The 
Department will continue to urge Field Offices to respond in a timely 
manner, including use of form letters, where appropriate, and to 
monitor Field Office performance in this area.
    The Department has streamlined the requirements regarding budget 
revisions by requiring that a budget revision be submitted for prior 
HUD approval only where an HA plans to deviate from the competitively 
funded modernization program. Prior HUD approval is not required for 
revisions that are consistent with, and necessary to, completion of the 
original modernization program. The regulation also clarifies that 
modernization funds may not be used for developments that are not 
covered by the original CIAP application, even where there are leftover 
funds remaining after the originally approved modernization program has 
been completed. See Secs. 968.225 and 950.634.
    Modernization coordinator or contract administrator. Comment: PHADA 
seeks appeal rights whenever HUD requires an HA to hire a modernization 
coordinator or contract administrator in order to receive the CIAP 
grant. PHADA considers this to be justified in certain cases, but urges 
that the regulation specifically allow the HA to appeal this to the 
Regional Administrator and also be informed specifically why HUD feels 
this is necessary. PHADA suggest that if these modifications are not 
made, this provision could be abused by some due to petty personal 
differences. NAHRO suggested that the Department establish in PHMAP the 
requirements or conditions for HAs who have performed poorly in the 
past. Additionally, NAHRO suggested that if the Field Office requires a 
contract administrator, the HA must be notified at Joint Review. This 
practice would give the HA the opportunity to protest, or if there is 
agreement, the time to search for one who can take over immediately 
following the execution of the ACC.
    Response: It has been the Department's experience that some smaller 
HAs do not have in-house capacity to administer the CIAP and require 
administrative and technical assistance to implement their approved 
programs. The Department must be assured that approved programs will be 
carried out in an economical and effective manner. During Joint Review, 
the Field Office will discuss with the HA the type and amount of 
administrative and technical assistance which it may need during 
implementation of its CIAP program. However, such needs may not be 
finalized until the scope of work and amount of funding are determined 
after Joint Review. The Field Office has the final determination on 
this matter.
    Force account. Comment: PHADA and two HAs recommended that 
Secs. 950.635(a) and 968.225(a) be changed to allow HAs to use force 
account labor to carry out modernization in all cases except where it 
is specifically forbidden. Response: To provide a reward for high-
performing HAs and to achieve consistency with the CGP, the Department 
has eliminated prior HUD approval for use of force account labor by 
PHAs that are designated as both over-all high performers and mod-high 
performers under the PHMAP and by all IHAs. See Secs. 950.612(a) and 
968.120(a). PHAs that are not both over-all high performers and mod-
high performers will continue to obtain prior HUD approval to use force 
account labor through their CIAP budgets or budget revision 
submissions. The Field Office will approve or disapprove such use as 
part of the budget/budget revision approval process.
    Modernization priorities. Comment: Following the CGP model, PHADA 
urged HUD to respect an HA's priorities and only modify the priorities 
after the HA agrees to the modification. Response: The key difference 
between CIAP and CGP is that CIAP is a competitive, not a formula, 
program. Although HUD does not set priorities for HAs in either 
program, HUD must assess the relative extent and urgency of need among 
CIAP agencies in rating and ranking the CIAP Applications.
    Comparability with CGP. Comment: NAHRO noted that the CIAP is now 
similar in many respects to the CGP. It encouraged HUD to strive for 
comparability between the two programs on the issue of technical 
review. Response: Except for statutory differences, the Department has 
made every attempt to make the CIAP comparable to the CGP.
    Formula approach. Comment: PHADA and one HA requested HUD to 
examine whether the competitive CIAP process could be replaced by a CGP 
formula distribution. Response: As part of HUD's reinvention, the 
Department has proposed to the Congress the establishment of a Capital 
Fund in the first stage of transforming public and Indian housing. The 
Capital Fund 

[[Page 8717]]
would replace both the existing CIAP and CGP programs and provide 
formula funding to all HAs, regardless of size. In FFY 1995, the 904 
CGP agencies were eligible to receive 89 percent of the available funds 
and the 2,496 CIAP agencies were eligible to receive 11 percent of the 
available funds.
    Board Resolution. Comment: NAHRO questioned the HUD requirement for 
the Board of Commissioners to certify that the budget, implementation 
schedule or other documents are accurate and complete. It was suggested 
that the Board should be able to delegate responsibility to the 
Executive Director to make certain certifications on behalf of the HA. 
Accountability could be achieved by the fact that the Executive 
Director is accountable to the Board. Response: HUD requires that, 
after an HA is selected for funding, the HA submit the Board Resolution 
Approving the CIAP Budget, Form HUD-52820, with the CIAP budget and 
other required documents. The Board resolution does not require 
certification as to the accuracy and completeness of the budget, 
including the implementation schedule, and other documents. The Board 
resolution does contain various certifications and agreements regarding 
HA compliance with HUD policies, procedures, requirements, regulations 
and Federal statutes. The Department is willing to accept the 
certification by the Executive Director, in lieu of the Board, in these 
matters, where the Executive Director has been delegated this authority 
by the Board and is permitted to do so under State law.

B. Description of Simplified CIAP

    This final rule continues the simplification of the CIAP, as set 
forth in the interim rule, in the areas of HA application requirements, 
modernization types, application processing and implementation. The 
final rule provides increased efficiency, reduces unnecessary 
requirements, and provides new flexibility for both the participating 
HAs and HUD. The changes to CIAP are the same for both Public and 
Indian housing, with the exception of the Mutual Help Program. Many of 
these changes are the result of recent meaningful dialogue with small 
HAs and experience gained through administering CIAP.

C. Simplification of Procedures for Obtaining Approval of a 
Modernization Program

    Previously, the process for receiving CIAP funds involved multiple 
steps. This final rule continues the approach set forth in the interim 
rule regarding the elimination, combination or simplification of many 
of those previous requirements.
    HUD expects that after modernization funds for a particular Federal 
Fiscal Year become available, HUD would continue to publish in the 
Federal Register a NOFA and the time frame for submission for 
applications. HUD currently publishes an annual CIAP NOFA for this 
purpose and, in the last two years, the CIAP NOFA has been 
significantly improved to describe clearly submission requirements, 
available amounts, eligibility, technical review factors, application 
processing, Joint Review selections, and funding decisions. The 
improvements to the CIAP NOFA also are intended to promote fair 
competition in the program.
    This final rule establishes the following steps for obtaining 
approval of a modernization program: (1) application submission by the 
HA; (2) completeness review by HUD; (3) eligibility review by HUD; (4) 
technical review, including rating and ranking, by HUD; and (5) Joint 
Review by HUD and the HA; (6) funding decisions by HUD; (7) budget 
submission by HA; and (8) ACC amendment. Based on actual operating 
experience in FFYs 1993, 1994, and 1995, processing time was 
significantly reduced.
    The first step for obtaining a CIAP grant is the application 
submission by the HA. As previously noted, the requirement to provide a 
cost estimate for the replacement of equipment, systems or structural 
elements over a 30-year period is no longer mandated by the statute and 
has been eliminated.
    An HA has the option of including only the specific developments 
for which it is requesting funding or of including all its developments 
in the CIAP Application. The consequences of not including all its 
developments in the CIAP Application are that HUD may not, as a result 
of Joint Review, consider funding of any non-emergency work at excluded 
developments or subsequently approve use of leftover funds at excluded 
developments. The benefits derived from including all its developments 
are the ability to: (1) revise specific work items among developments 
at Joint Review; and (2) use leftover funds upon completion of the 
modernization for modernization needs at other developments covered by 
the application. An HA must evaluate and describe its modernization 
needs and the estimated costs for each development covered by the 
application.
    HUD will ensure that documentation and other information regarding 
each application submitted pursuant to the CIAP NOFA are sufficient to 
indicate the basis upon which assistance was provided or denied. This 
material, including any letters of support, will be made available for 
public inspection for a five-year period beginning not less than 30 
calendar days after the award of the assistance. Material will be made 
available in accordance with the Freedom of Information Act (5 U.S.C. 
552) and HUD's implementing regulation at 24 CFR part 15. In addition, 
HUD will include the recipients of assistance pursuant to the CIAP NOFA 
in its quarterly Federal Register notice of all recipients of HUD 
assistance awarded on a competitive basis. (See 24 CFR Secs. 12.14(a) 
and 12.16(b), and the notice published in the Federal Register on 
January 16, 1992 (57 FR 1942), for further information on these 
requirements.)
    The second step for obtaining a CIAP grant is the completeness 
review by HUD. The final rule clarifies that if the CIAP Application 
(Form HUD-52822) or any other essential document, as specified in the 
NOFA, is missing, the HA's application will be considered substantially 
incomplete and, therefore, ineligible for further processing. If there 
is a technical mistake, such as no signature on a submitted form, the 
HA will be given an opportunity to correct the deficiency. This is not 
additional time to substantially revise the application. Deficiencies 
that may be corrected at this time are inadvertently omitted documents, 
as specified in the NOFA, or clarifications of previously submitted 
material and other changes which are not of such a nature as to improve 
the competitive position of the application. In addition, the final 
rule clarifies that if the HA does not correct the deficiency within 
the specified time period, the HA is ineligible for further processing.
    The third step for obtaining a CIAP grant is the eligibility review 
by HUD. Based on operating experience in FFYs 1993, 1994, and 1995, the 
Department has made the following changes from the interim rule:
    (1) Eliminated work item eligibility and need which may be 
difficult to determine before Joint Review;
    (2) Changed the requirement that each development on which work is 
proposed be at least three years old from the End of Initial Operating 
Period (EIOP) to a requirement that each development must have reached 
the Date of Full Availability (DOFA) and be under ACC. Also, clarified 
the eligibility of a development/building/unit assisted with Major 
Reconstruction of Obsolete Projects (MROP) funding, under section 

[[Page 8718]]
5(j)(2) of the Act (see Section F of this Preamble). These changes make 
development eligibility under the CIAP consistent with the CGP;
    (3) Eliminated the restriction on processing where the HA has not 
submitted the fiscal audit to HUD within one year after the end of the 
audit period, or requested an extension for submission, in conformance 
with the Single Audit Act requirements. The Department has decided to 
use regular monitoring as a more effective method of obtaining audit 
compliance rather than eliminating the HA up-front from full funding 
consideration;
    (4) Eliminated the restriction on processing where the HA owes 
funds to the Department as a result of excess development, 
modernization or operating funds previously provided and the HA has not 
repaid the funds, or has not entered into a repayment agreement, or is 
not meeting its obligations under a repayment agreement. The Department 
has decided to use regular monitoring as a more effective method of 
obtaining funds owed to the Department rather than eliminating the HA 
up-front from full funding consideration;
    (5) Where the HA has not completed the structural changes 
identified by the Section 504 Needs Assessment, added the restriction 
on processing to Emergency Modernization or physical work needed to 
meet Section 504 requirements;
    (6) Where the HA has not complied with the statutory requirement to 
complete Lead Based Paint (LBP) testing on all pre-1978 family units, 
added the restriction on processing to Emergency Modernization or work 
needed to complete LBP testing; and
    (7) Where the HA has not complied with Fair Housing and Equal 
Opportunity (FHEO) requirements, continued the restriction on 
processing to Emergency Modernization or work needed to remedy civil 
rights deficiencies.
    The fourth step for obtaining a CIAP grant is technical review by 
HUD. The Department is retaining the provisions of the interim rule 
regarding technical processing, categorizing the eligible HAs and their 
developments into two processing groups (Group 1 for Emergency 
Modernization and Group 2 for Other Modernization), and rating and 
ranking of applications in Group 2. Preference is given to all HA 
applications in Group 1 since such applications involve emergencies 
which are an immediate threat to resident health or safety. 
Accordingly, such applications are not rated and ranked during 
technical processing and are automatically selected for Joint Review.
    The Field Office rates the Group 2 HAs/developments against the 
technical review factors to determine relative ranking. In accordance 
with section 14(h) of the Act, the Department will continue the 
preference given to HAs which request assistance for developments 
having conditions which threaten the health or safety of the residents 
or having a significant number of vacant, substandard units, and which 
have demonstrated a capability of carrying out the proposed activities. 
This preference is reflected in the technical review factors and their 
maximum point scores.
    The final rule recognizes the change in the Department's field 
structure by eliminating reference to the Regional Office. Since each 
Field Office receives its own allocation of CIAP funds, the Field 
Office will proceed to Joint Review selection after rating and ranking. 
The Field Office will identify for selection the highest ranking HA 
applications in Group 2 in descending order, and other Group 2 HAs with 
lower ranking applications but with high priority needs which most 
reasonably approximate the amount of modernization which can be funded 
by the Field Office. High priority needs are non-emergency needs, but 
related to: health or safety; vacant, substandard units; structural or 
system integrity; or compliance with statutory, regulatory or court-
ordered deadlines. Again, all Group 1 applications will be 
automatically selected for Joint Review.
    The fifth step for obtaining a CIAP grant is Joint Review. The 
purpose of Joint Review is for the Field Office to discuss with an HA 
the proposed modernization program, as set forth in the application, 
and determine the size of the grant, if any, to be awarded. The Field 
Office will notify those HAs whose applications have 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). If 
conducted on-site, the Joint Review may include an inspection of the 
proposed physical work. An HA will prepare for Joint Review by 
preparing a draft CIAP budget and reviewing the other items to be 
covered during Joint Review, as prescribed by HUD. The Field Office 
will review long-term viability and reasonable cost determinations 
during Joint Review.
    HAs not selected for Joint Review will be notified by letter 
stating the reasons, such as the low priority of its physical 
improvement needs relative to available funding. If, prior to 
scheduling the Joint Reviews, there is determined to be a duplication 
of funding, the HA will not be selected for Joint Review. Where a 
duplication of funding is determined during Joint Review, the HA will 
not be selected for funding.
    The sixth and seventh steps for obtaining a CIAP grant are funding 
decisions by HUD and budget submission by the HA. Upon completion of 
Joint Review, the Field Office will adjust the HAs/developments and 
work items to be funded and the amounts to be awarded, including 
processing groups, as necessary, based on information obtained at Joint 
Review, the results of FHEO review, and completion of the environmental 
reviews. After Congressional notification, the Field Office will 
announce the HAs selected for CIAP grants, subject to their submission 
of an approvable CIAP budget and other required documents. The Field 
Office will request the funded HA to submit a CIAP budget, which 
includes an implementation schedule, a resolution by the HA Board of 
Commissioners containing certifications required by HUD, and any other 
required documents. The Field Office will select all bona fide 
emergencies in Group 1 for funding before funding Group 2 applications. 
HAs not selected for funding will be notified in writing of the reason 
for non-selection.
    After Field Office approval of the CIAP budget, the eighth step for 
obtaining a CIAP grant is that the Field Office and the HA enter into 
an ACC Amendment in order for the HA to obtain modernization funds. The 
ACC Amendment will 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). It should 
be noted that HUD has the authority to condition the ACC Amendment 
(e.g., to require an HA to hire a modernization coordinator or contract 
administrator to administer its modernization program).
    The final rule continues the streamlined ACC Amendment process by 
allowing Field Office program staff to complete and forward the ACC 
Amendment to the HA with the budget approval letter, and by allowing 
the HA Executive Director, where authorized by the Board and permitted 
by State law, to sign and return the ACC Amendment to the Field Office 
for execution. This is identical to the ACC Amendment process in the 
CGP. Excluding Mutual Help developments, an HA also will, where 
necessary, execute and file for record a Declaration of Trust, as 
provided under the ACC, to protect the rights and interests of HUD 
throughout 

[[Page 8719]]
the 20-year period during which the HA is obligated to operate the 
developments receiving modernization funds in accordance with the ACC, 
the Act, and HUD regulations and requirements.

D. Other Simplifications and Revisions to CIAP

    When the revised CGP final rule was published on August 30, 1994, 
at 59 FR 44810, the Department eliminated the requirement that the cost 
of non-emergency health and safety work items increase the purchase 
price and amortization period for Turnkey III or Mutual Help homebuyer 
families. This requirement already was eliminated for the CGP and CIAP 
at Secs. 950.602 and 968.102.
    CIAP agencies shall administer previously approved CIAP grants 
under this final rule. It would be problematic for both HUD and CIAP 
agencies to administer CIAP programs in progress under differing 
requirements. HUD will continue to allow revisions to previously 
approved CIAP budgets, where appropriate.

E. Major Reconstruction of Obsolete Projects (MROP)

    Section 111(b) of the Housing and Community Development Act of 1992 
amended section 14(c) of the Act and provided that a building which is 
assisted with MROP funding (under section 5(j)(2) of the Act) is not 
eligible for CIAP funding. This statutory provision was implemented in 
the interim rule at Sec. 968.101(b)(5). To provide further 
clarification, Sec. 968.101(b)(5) is revised in the final rule to 
clarify that a development/building/unit is eligible for CIAP funding 
where it was funded under MROP after FFY 1988 and has reached DOFA or 
where it was funded under MROP during FFYs 1986-1988 and all MROP funds 
have been expended.

F. Long-Term Viability

    The final rule clarifies at Secs. 905.608(b) and 968.112(b) that 
HAs may expend funds on a non-viable development for essential non-
routine maintenance needed to keep the property habitable until the 
demolition or disposition application is approved and residents are 
relocated.

G. Previous Participation

    On June 20, 1994, the Department published at 59 FR 31521, an 
interim rule, which eliminated the requirement for HAs to submit Form 
HUD-2530, Previous Participation Certificate, on modernization 
contracts. Accordingly, Secs. 950.642(d)(3) and 968.235(d)(3), 
requiring previous participation clearance, have been eliminated and 
Secs. 950.642(g) (now 950.618) and 968.235 (now 968.135) have been 
modified to delete reference to previous participation.

H. Time Extensions

    The Department has added new Secs. 950.638 and 968.235 to specify 
requirements regarding time extensions to the obligation or expenditure 
deadline date approved by HUD in the original implementation schedule. 
HUD approves implementation schedules as part of the budget approval 
process (refer to Part III of the CIAP budget). The Department is 
allowing CIAP agencies to execute (as CGP agencies now are authorized 
to do), without prior HUD approval, time extensions commensurate with 
the delay no later than 30 calendar days after the obligation or 
expenditure deadline date where the HA is able to certify that the 
delay is due to reasons outside of the HA's control, such as the need 
to use leftover funds from a completed modernization program for 
additional work, unforeseen delays in contracting or contract 
administration, litigation, and HUD or other institutional delay. Where 
the delay is not due to reasons outside of the HA's control, the HA 
must request HUD approval of a time extension no later than 30 calendar 
days after the obligation or expenditure deadline date to avoid 
recapture of funds.

I. Threshold for Performance and Payment Bond for CGP Agencies

    The Department's procurement regulations, as set forth in 24 CFR 
85.36(h), require that HA contractors furnish a bid guarantee and a 
performance bond and payment bond for each construction or equipment 
contract over $100,000. For the CIAP and the CGP, the Department had 
reduced that threshold from $100,000 to $25,000 in order to protect the 
Federal interest. The Department has reconsidered this matter and has 
raised the threshold from $25,000 to $100,000 for both CIAP and CGP 
agencies at Secs. 950.618(b) and 968.135(b). The Department 
inadvertently omitted the requirement of the bid guarantee when it 
reduced the threshold for the performance and payment bonds and has 
included it with this rule. In addition, the Department is continuing 
its policy of allowing for both CGP and CIAP agencies two other 
alternative methods of assurance to performance and payment bonds, 
which are a twenty percent cash escrow or a twenty-five percent letter 
of credit.

VI. Findings and Certifications

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations at 24 CFR part 50 
which implement section 102(2)(C) of the National Environmental Policy 
Act of 1969, 42 U.S.C. 4332. The Finding of No Significant Impact is 
available for public inspection and copying during regular business 
hours (7:30 a.m. to 5:00 p.m. weekdays) in the Office of the Rules 
Docket Clerk, Room 10272, 451 Seventh Street, SW., Washington, DC 
20410.

Federalism Impact

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that the rule does 
not have substantial, direct effects on HAs. The revised modernization 
program is consistent with federalism principles since it reduces 
unnecessary burdens on HAs. While the program is revised, the primary 
change is only in the way that HUD processes and reviews HA 
modernization activities, and not the modernization activities 
themselves. This rule will not diminish the importance of State and 
local governments with respect to the Federal Government. As a result, 
the rule is not subject to review under the order.

Impact on the Family

    This rule has been developed in accordance with Executive Order 
12606, the Family. The General Counsel, as the Designated Official 
under the Executive Order, has determined that this rule does not have 
the potential for significant impact on family formation, maintenance, 
or general well-being, since its effect is limited to revising program 
procedures for HAs applying for discretionary grants. Families are not 
affected since HAs will continue to carry out modernization activities 
at public housing developments.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)) has reviewed and approved this rule, and in so doing 
certifies that this rule will not have a significant economic impact on 
a substantial number of small entities. The rule codifies revisions to 
the existing CIAP under which HAs receive modernization assistance from 
HUD on a competitive basis. HUD does not anticipate a significant 
economic impact on small entities since HAs will continue to carry out 
their modernization activities by entering 

[[Page 8720]]
into contracts for the work as they now do.

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 941

    Grant programs--housing and community development, Loan programs--
housing and community development, Public housing.

24 CFR Part 950

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

24 CFR Part 965

    Energy conservation, Government procurement, Grant programs--
housing and community development, Lead poisoning, Loan programs--
housing and community development, Public housing, Reporting and 
recordkeeping requirements, Utilities.

24 CFR Part 968

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

    For the reasons set forth in the preamble, parts 941, 950, 965, and 
968 of title 24 of the Code of Federal Regulations are amended as 
follows:

PART 941--PUBLIC HOUSING DEVELOPMENT

    1. The authority citation for 24 CFR part 941 continues to read as 
follows:

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

    2. In Sec. 941.208, paragraph (c) is revised to read as follows:


Sec. 941.208  Other Federal requirements.

* * * * *
    (c) Prevailing wage rates. See part 965 of this chapter for 
applicable requirements on this subject.
* * * * *
    3. In Sec. 941.503, paragraph (d) is revised to read as follows:


Sec. 941.503  Construction requirements.

* * * * *
    (d) Prevailing wage rates. See Sec. 965.101 of this chapter.

PART 950--INDIAN HOUSING PROGRAMS

    4. The authority citation for 24 CFR part 950 continues to read as 
follows:

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

    5-6. Section 950.102 is amended by adding a definition of ``other 
modernization (modernization other than emergency)'' in alphabetical 
order, and by revising the definitions of ``emergency modernization'', 
``modernization capability'', and ``modernization project'', to read as 
follows:


Sec. 950.102  Definitions.

* * * * *
    Emergency modernization (CIAP). A type of modernization program for 
a development that is limited to physical work items of an emergency 
nature, that pose an immediate threat to the health or safety of 
residents or is related to fire safety, and that must be corrected 
within one year of CIAP funding approval.
* * * * *
    Modernization capability. An IHA has modernization capability if it 
is:
    (1) Not designated as high risk under Sec. 950.135; or
    (2) Designated as high risk, but has a reasonable prospect of 
acquiring modernization capability through CIAP-funded management 
improvements and administrative support, such as hiring staff or 
contracting for assistance. An IHA that has been classified high risk 
with regard to modernization is eligible for emergency modernization 
only, unless it is making reasonable progress toward meeting the 
performance targets established in its management improvement plan 
under Sec. 950.135(f)(2) or has obtained alternative oversight of its 
modernization functions. Where an IHA does not have a funded 
modernization program in progress, the Area ONAP shall determine 
whether the IHA has a reasonable prospect of acquiring modernization 
capability through hiring staff or contracting for assistance.
* * * * *
    Modernization project. The improvement of one or more existing 
Indian housing developments under an unique 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).
* * * * *
    Other Modernization (modernization other than emergency). A type of 
modernization program 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 development specific 
or IHA-wide management work items (including planning costs), and/or 
LBP testing, professional risk assessments, interim containment, and 
abatement.
* * * * *
    7. Subpart I of Part 950, is revised to read as follows:

Subpart I--Modernization Program

General Provisions

Sec.
950.600  Purpose and applicability.
950.602  Special requirements for Turnkey III and Mutual Help 
developments.
950.604  Allocation of funds under section 14.
950.606  Reserve for emergencies and disasters.
950.608  Eligible costs.
950.610  Modernization and energy conservation standards.
950.612  Force account.
950.614  Initiation of modernization activities.
950.616  Fund requisition.
950.618  Contracting requirements.
950.620  On-site inspections.
950.622  Fiscal closeout.

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

950.630  Procedures for obtaining approval of a modernization 
program.
950.632  Resident and homebuyer participation.
950.634  Budget revisions.
950.636  Progress reports.
950.638  Time extensions.
950.640  HUD review of IHA performance.

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

950.650  Determination of formula amount.
950.652  Comprehensive plan (including Five-Year Action Plan).
950.654  HUD review and approval of comprehensive plan (including 
Five-Year Action Plan).
950.656  Annual submission of activities and expenditures.
950.658  IHA Performance and Evaluation Report.
950.660  HUD review of IHA performance.

[[Page 8721]]


Subpart I--Modernization Program

General Provisions


Sec. 950.600  Purpose and applicability.

    (a) Purpose. The purpose of this subpart is to set forth the 
policies and procedures for the Modernization program, authorizing HUD 
to provide financial assistance to Indian Housing Authorities (IHAs).
    (b) Applicability. (1) The sections under the undesignated heading 
``General Provisions'' apply 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. An IHA that has 
already qualified to participate in the CGP remains eligible to 
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). This subpart also 
applies to the implementation of modernization programs which were 
approved before FFY 1996. Rental developments that are planned for 
conversion to homeownership under sections 5(h), 21, or 301 of the Act 
(42 U.S.C. 1437c, 1437s, 1437aaa), but that have not yet been sold by 
an IHA, continue to qualify for assistance under this subpart. 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 shall 
be used for the purposes for which the funding was provided, or:
    (1) For a CGP IHA, for purposes consistent with an approved annual 
statement or five-year action plan submitted by the IHA, as the IHA 
determines to be appropriate; or
    (2) For a CIAP IHA, in accordance with a revised CIAP budget under 
Sec. 950.634.
    (d) Other applicable requirements. See subpart A of this part for 
applicable requirements, other than the Act, that apply to 
modernization under this subpart I.
    (e) Approved information collections. The following sections of 
this subpart have been approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act of 1995 and assigned OMB 
approval number 2577-0044: Secs. 950.618, 950.622, 950.630, 950.632, 
950.634, and 950.636. The following sections of this subpart have been 
similarly approved and assigned approval number 2577.0157: 
Secs. 950.650, 950.656, and 950.658.


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 that 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. 950.608. 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. 950.604  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, an amount not to exceed $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. Any unused funds from previous years may 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. 950.606.
    (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 

[[Page 8722]]
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 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. 950.610, 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. 950.610, 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 

[[Page 8723]]
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. 950.650. 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 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. 950.606  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. 950.604(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. 950.604(e) and (f), other unobligated 
modernization funds, and its replacement reserves under Sec. 950.608. 
An IHA is not required to have an approved Comprehensive Plan under 
Sec. 950.652 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. 950.604(b) shall repay such 
assistance from its future allocations of assistance, 

[[Page 8724]]
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. 950.604(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. 950.604(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. 950.652 before it can request 
assistance from the reserve under Sec. 950.604(b).
    (2) Procedure. To obtain funding for natural or other disasters 
under Sec. 950.604(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 are not required to be 
repaid.


Sec. 950.608  Eligible costs.

    (a) General. An IHA may use financial assistance received under 
this part for the following eligible costs:
    (1) For a CGP IHA, the eligible costs are:
    (i) Undertaking activities described in its approved Annual 
Statement under Sec. 950.656(e) and approved Five-Year Action Plan 
under Sec. 950.652(e)(5);
    (ii) 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 Statement;
    (iii) Funding a replacement reserve to carry out eligible 
activities in future years, subject to the restrictions set forth in 
paragraph (f) of this section;
    (iv) Preparing the Comprehensive Plan and Five-Year Action Plan 
under Sec. 950.652 and the Annual Submission under Sec. 950.656, 
including reasonable costs necessary to assist residents to participate 
in a meaningful way in the planning, implementation and monitoring 
process; and
    (v) Carrying out an audit, in accordance with 24 CFR part 44.
    (2) For a CIAP IHA, the eligible costs are activities approved by 
HUD and included in an approved CIAP budget.
    (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 determined, and HUD agrees, that the completion of the improvements 
and replacements (for CGP IHAs, as identified in the comprehensive 
plan) will reasonably ensure the long-term physical and social 
viability of the development at a reasonable cost (as defined in 
Sec. 950.102), or for essential non-routine maintenance needed to keep 
the property habitable until the demolition or disposition application 
is approved and residents are relocated.
    (c) Physical improvements. Eligible costs include alterations, 
betterments, additions, replacements, and non-routine maintenance that 
are necessary to meet the modernization and energy conservation 
standards prescribed in Sec. 950.610. These mandatory standards may be 
exceeded when the IHA (and HUD in the case of CIAP IHAs) determine that 
it is necessary or highly desirable for the long-term physical and 
social viability of the individual development. Development specific 
work includes work items that are modest in design and cost, but still 
blend in with the design and architecture of the surrounding community 
by including amenities, quality materials and design and landscaping 
features that are customary for the locality and culture. The Field 
Office has the authority to approve nondwelling space where such space 
is needed to administer, and is of direct benefit to, the Public and 
Indian Housing Program. If demolition or disposition is proposed, an 
IHA shall comply with subpart M of this part. Additional dwelling space 
may be added to existing units.
    (d) 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, or LBP testing, interim containment, 
professional risk assessment and abatement. In addition, management 
improvements are eligible costs.
    (2) Ineligible costs. Routine maintenance or replacements, 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 in order to return the unit to the inventory or make the unit 
suitable for homeownership purposes. An IHA that intends to use funds 
under this paragraph must identify in its CIAP Application or CGP 
Annual Submission the estimated number of units proposed for 
substantial rehabilitation and subsequent sale. In addition, an IHA 
must demonstrate that it has homebuyers who both are eligible for 
homeownership, in accordance with the requirements of this part, and 
have demonstrated their intent to be placed into each of the Turnkey 
III units proposed to be substantially rehabilitated.
    (ii) Before an IHA may be approved for substantial rehabilitation 
of a unit under this paragraph (d), it must 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 of a unit 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 non-dwelling facilities, where 
the demolition is 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 or to non-dwelling use.
    (f) Replacement reserve costs (for CGP only). (1) Funding a 
replacement reserve to carry out eligible activities in future years is 
an eligible cost, subject to the following restrictions: 

[[Page 8725]]

    (i) Annual CGP funds are not needed for existing needs, as 
identified by the IHA in its needs assessments; or
    (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% limit for management improvements (except as provided 
in paragraph (n)(2)(i) 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 must 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 must first use its replacement reserve, where 
funded, to meet emergency needs, before requesting funds from the 
reserve under Sec. 950.606.
    (5) An IHA is not required to use its replacement reserve for 
natural and other disasters.
    (g) Management improvement costs. (1) General. Management 
improvements that are development-specific or IHA-wide in nature are 
eligible costs where needed to upgrade the operation of the IHA's 
developments, sustain physical improvements at those developments or 
correct management deficiencies. An IHA's ongoing operating expenses 
are ineligible management improvement costs. For CIAP IHAs, management 
improvements may be funded as a single work item.
    (2) Eligible costs. Eligible costs include:
    (i) General management improvement costs. Eligible costs include 
general management improvement costs, such as: management, financial, 
and accounting control systems of the IHA; adequacy and qualifications 
of IHA personnel, including training; resident programs and services 
through the coordination of the provision of social services from 
tribal or local government or other public and private entities; 
resident and development security; resident selection and eviction; 
occupancy; rent collection; maintenance; and equal opportunity.
    (ii) Economic development costs. Eligible costs include job 
training for residents and resident business development activities, 
for the purpose of carrying out activities related to the 
modernization-funded management and physical improvements. HUD 
encourages IHAs, to the greatest extent feasible, to hire residents as 
trainees, apprentices, or employees to carry out the modernization 
program under this part, and to contract with resident-owned businesses 
for modernization work.
    (iii) Resident management costs. Eligible costs include technical 
assistance to a resident council or resident management corporation 
(RMC), as defined in Sec. 950.962, in order to: determine the 
feasibility of resident management to carry out management functions 
for a specific development or developments; train residents in skills 
directly related to the operations and management of the development(s) 
for potential employment by the RMC; train RMC board members in 
community organization, board development, and leadership; and assist 
in the formation of an RMC.
    (iv) Resident homeownership costs. Eligible costs are limited to 
the study of the feasibility of converting rental to homeownership 
units and the preparation of an application for conversion to 
homeownership or sale of units.
    (v) Preventive maintenance system. Eligible costs include the 
establishment of a preventive maintenance system or improvement of an 
existing system. A preventive maintenance system must provide for 
regular inspections of building structures, systems and units and 
determine the applicability of work eligible for operating funds 
(routine maintenance) and work eligible for modernization funding (non-
routine maintenance).
    (h) Drug elimination costs. Eligible costs include drug elimination 
activities involving management or physical improvements, as specified 
by HUD.
    (i) LBP costs. Eligible costs include professional risk assessments 
and interim containment of family developments/buildings constructed 
before 1980, testing and abatement of family developments/buildings 
constructed before 1978, and costs for insurance coverage for pollution 
hazards associated with the testing, abatement, clean-up and disposal 
of LBP on applicable surfaces of family developments/buildings 
constructed before 1978.
    (j) 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) Salaries. The salaries of non-technical and technical IHA 
personnel assigned full-time or part-time to modernization are eligible 
costs only where 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 non-modernization 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, CGP or operating budget);
    (2) Employee benefit contributions. IHA contributions to employee 
benefit plans on behalf of non-technical and technical IHA personnel 
are eligible costs in direct proportion to the amount of salary charged 
to the CIAP or CGP, as appropriate;
    (3) Preparation of CIAP or CGP required documents.
    (4) Resident participation. Eligible costs include those associated 
with ensuring the meaningful participation of residents in the 
development of the CIAP application or the CGP Annual Submission and 
Comprehensive Plan and the implementation and monitoring of the 
approved modernization program; and
    (5) Other administrative costs, such as telephone and facsimile, as 
specified by HUD.
    (k) Audit costs (for CGP only). Eligible costs are limited to the 
portion of the audit costs that are attributable to the modernization 
program.
    (l) Architectural/engineering and consultant fees. Eligible costs 
include fees for planning, identification of needs, detailed design 
work, preparation of construction and bid documents and other required 
documents, LBP professional risk assessments and testing, and 
inspection of work in progress.
    (m) Relocation costs. Eligible costs include relocation and other 
assistance for permanent and temporary relocation, as a direct result 
of rehabilitation, demolition or acquisition for a modernization-funded 
activity, where this assistance is required by 49 CFR part 24 or 24 CFR 
950.117.
    (n) Cost limitations. (1) CIAP costs. (i) Management improvement 
costs. Management improvement costs shall not exceed a percentage of 
the CIAP funds available to a Field Office in a particular FFY, as 
specified by HUD.
    (ii) Planning costs. Planning costs are costs that are 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 

[[Page 8726]]
solicitations, and LBP professional risk assessment and testing. 
Planning costs may be funded as a single work item. 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 5 percent of the CIAP 
funds available to a Field Office in a particular FFY.
    (2) CGP costs. (i) Management improvement costs. Notwithstanding 
the full fungibility of work items, 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.
    (ii) Administrative costs. Notwithstanding the full fungibility of 
work items, 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 tribal or State law, unless specifically approved by 
HUD.
    (3) Program benefit. Where the physical or management improvement, 
including administrative cost, will benefit programs other than Indian 
housing, such as Section 8 or local revitalization programs, eligible 
costs are limited to the amount directly attributable to the Indian 
housing program.
    (4) No duplication. Any eligible cost for an activity funded by 
CIAP or CGP shall not also be funded by any other HUD program.
    (o) Ineligible costs. Ineligible costs include:
    (1) Luxury improvements;
    (2) Indirect administrative costs (overhead), as defined in OMB 
Circular A-87;
    (3) Indian housing operating assistance;
    (4) Direct provision of social services, through either force 
account or contract labor, from FFY 1996 and future FFYs funds, unless 
otherwise provided by law; and
    (5) Other ineligible activities, as specified by HUD.
    (p) Expanded eligibility for FFY 1995 and prior year modernization 
funds. The FFY 1995 Rescissions Act expanded the eligible activities 
that may be funded with CIAP or CGP assistance provided from FFY 1995 
and prior FFY funds. Such activities include, but are not limited to:
    (1) New construction or acquisition of additional Indian housing 
units, including replacement units;
    (2) Modernization activities related to the Indian housing portion 
of housing developments held in partnership, or cooperation with non-
Indian housing entities; and
    (3) Other activities related to Indian housing, including 
activities eligible under the Urban Revitalization Demonstration (HOPE 
VI).


Sec. 950.610  Modernization and energy conservation standards.

    All improvements funded under this part shall:
    (a) Meet the modernization standards as prescribed by HUD;
    (b) Incorporate cost-effective energy conservation measures, 
identified in the IHA's most recently updated energy audit, conducted 
pursuant to part 950, subpart K;
    (c) Where changing or installing a new utility system, conduct a 
life-cycle cost analysis, reflecting installation and operating costs; 
and
    (d) Provide decent, safe, and sanitary living conditions in IHA-
owned and IHA-operated public housing.


Sec. 950.612  Force account.

    (a) An IHA may undertake the activities using force account or 
contract labor, including contracting with an RMC, without prior HUD 
approval.
    (b) If the entirety of modernization activity (including the 
planning and architectural design of the rehabilitation) is 
administered by the RMC, the IHA shall not retain for any 
administrative or other reason, any portion of the modernization funds 
provided, unless the IHA and the RMC provide otherwise by contract.


Sec. 950.614  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 or 
CGP Annual Statement/Five-Year Action Plan in a timely, efficient and 
economical manner. All approved funding must be obligated within two 
years of approval and expended within three years of approval unless 
HUD approves a longer time period in the IHA's implementation schedule, 
as set forth in the CIAP budget or CGP Annual Statement. HUD may 
approve a longer time period for such reasons as the large size of the 
grant or the complexity of the work.


Sec. 950.616  Fund requisitions.

    To draw down modernization funds against the approved CIAP budget 
or CGP Annual Statement, as appropriate, an IHA shall comply with 
requirements prescribed by HUD.


Sec. 950.618  Contracting requirements.

    In addition to the requirements specified in 24 CFR parts 85 and 
subpart B of this part, the following provisions apply:
    (a) Architect/engineer and other professional services contracts. 
For CIAP only and notwithstanding 24 CFR 85.36(g), an IHA shall comply 
with HUD requirements to either:
    (1) Where the proposed contract amount exceeds the HUD-established 
threshold, submit the contract for prior HUD approval before execution 
or issuance; or
    (2) Where the proposed contract amount does not exceed the HUD-
established threshold, certify that the scope of work is consistent 
with the originally approved modernization program, and that the amount 
is appropriate and does not result in the total HUD-approved CIAP 
budget being exceeded.
    (b) Assurance of completion. For CIAP and CGP and notwithstanding 
24 CFR 85.36(h), for each construction contract over $100,000, the 
contractor shall furnish a bid guarantee from each bidder equivalent to 
5% of the bid price; and one of the following:
    (1) A performance and payment bond for 100 percent of the contract 
price; or
    (2) Separate performance and payment bonds, each for 50% or more of 
the contract price; or
    (3) A 20% cash escrow; or
    (4) A 25% irrevocable letter of credit.
    (c) Construction solicitations. For CIAP only and notwithstanding 
24 CFR 85.36(g), an IHA shall comply with HUD requirements to either:
    (1) Where the estimated contract amount exceeds the HUD-established 
threshold, submit a complete construction solicitation for prior HUD 
approval before issuance; or
    (2) Where 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. (1) For CIAP only, an IHA shall obtain HUD 
approval of the proposed award of a contract if the contract work is 
inconsistent with 

[[Page 8727]]
the originally approved modernization program 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:
    (i) The solicitation and award procedures were conducted in 
compliance with tribal, State or local laws and Federal requirements;
    (ii) The award does not meet the criteria in 24 CFR 85.36(g)(2)(i) 
through (iv) for prior HUD approval; and
    (iii) The contractor is not on the Lists of Parties Excluded from 
Federal Procurement or Nonprocurement Programs.
    (2) For CGP only, an IHA shall obtain HUD approval of the proposed 
award of a contract if the procurement meets the criteria set forth in 
24 CFR 85.36(g)(2)(i) through (iv).
    (e) Contract modifications. For CIAP only and notwithstanding 24 
CFR 85.36(g), except in an emergency endangering life or property, an 
IHA shall comply with HUD requirements to either:
    (1) Where the proposed contract modification exceeds the HUD-
established threshold, submit the proposed modification for prior HUD 
approval before issuance; or
    (2) Where 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 total HUD-approved CIAP budget amount.
    (f) Construction requirements. Where indicated by poor performance, 
an IHA may be required to submit to HUD periodic progress reports and, 
for prior HUD approval, construction completion documents above a HUD-
specified amount. For CGP only, an IHA is notified of additional 
construction requirements by a notice of deficiency or a corrective 
action order.


Sec. 950.620  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. 950.622  Fiscal closeout.

    (a) Actual modernization cost certificate (AMCC). Upon expenditure 
by the IHA of all funds, or termination by HUD of the activities funded 
in a modernization program, an IHA shall submit the AMCC, in a form 
prescribed by HUD, to HUD for review and approval for audit. After 
audit verification, HUD shall approve the AMCC.
    (b) Audit. The audit shall follow the guidelines prescribed in 24 
CFR part 44, Non-Federal Government Audit Requirements. If the pre-
audit or post-audit AMCC indicates that there are excess funds, an IHA 
shall immediately remit the excess funds as directed by HUD. If the 
pre-audit or post-audit AMCC discloses unauthorized or ineligible 
expenditures, an IHA shall immediately take such corrective actions as 
HUD may direct.

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


Sec. 950.630  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 the CIAP application, and other pertinent information.
    (b) IHA consultation with tribal/local officials and residents/
homebuyers. An IHA shall develop the application in consultation with 
tribal and local officials and with residents and homebuyers, as set 
forth in Sec. 950.632.
    (c) IHA application. An IHA shall submit to HUD an application, in 
a form prescribed by HUD. Where an IHA has not included all its 
developments in the CIAP application, HUD may not consider funding any 
nonemergency work at excluded developments or subsequently approve use 
of leftover funds at excluded developments.
    (d) Completeness review. To be eligible for processing, an 
application must be physically received by HUD by the time and date 
specified in the NOFA. Immediately after the application deadline, HUD 
shall perform a completeness review to determine whether the 
application is complete, responsive to the NOFA, and acceptable for 
technical processing.
    (1) If the application form or any other essential document, as 
specified in the NOFA, is missing, the IHA's application will be 
considered substantially incomplete and, therefore, ineligible for 
further processing. HUD shall immediately notify the IHA in writing.
    (2) If other required documents, as specified in the NOFA, are 
missing or there is a technical mistake, such as no signature on a 
submitted form, HUD shall immediately notify the IHA in writing to 
submit or correct the deficiency 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 inadvertently omitted documents or 
clarifications of previously submitted material and other changes which 
are not of such a nature as to improve the competitive position of the 
application.
    (3) If an IHA fails to submit or correct the items within the 
required time period, the IHA's application will be ineligible for 
further processing. HUD shall immediately notify the IHA in writing 
after this occurs.
    (4) An IHA may submit an application for Emergency Modernization 
whenever needed.
    (e) Eligibility review. (1) Eligibility for processing. To be 
eligible for processing each eligible development for which work is 
proposed must have reached the Date of Full Availability (DOFA) and be 
under ACC amendment at the time of CIAP application submission.
    (2) Eligibility for processing on reduced scope. When the following 
conditions exist, an IHA will be reviewed on a reduced scope:
    (i) Section 504 compliance. Where an IHA has not completed all 
required structural changes to meet the need for accessible units, as 
identified in the IHA's Section 504 needs assessment, the IHA is 
eligible for processing only for Emergency Modernization or physical 
work needed to meet Section 504 requirements.
    (ii) Lead-based paint (LBP) testing compliance. Where an IHA has 
not complied with the statutory requirement to complete LBP testing on 
all pre-1978 family units, the IHA is eligible for processing only for 
Emergency Modernization or work needed to complete the testing.
    (iii) Fair Housing and Equal Opportunity (FHEO) compliance. Where 
an IHA has not complied with any applicable FHEO requirements set forth 
in Sec. 950.115, as evidenced by an enforcement action, finding or 
determination, the IHA is eligible for processing only for Emergency 
Modernization or for work needed to remedy civil rights deficiencies--
unless the IHA is implementing a voluntary compliance agreement or 
settlement agreement designed to correct the area(s) of noncompliance. 
The enforcement actions, findings, or determinations that trigger 
limited eligibility are described in paragraphs (e)(2)(iii)(A) through 
(E) of this section:
    (A) A pending proceeding against the IHA based upon a charge of 

[[Page 8728]]
    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 the Department's General Counsel 
or legally authorized designee;
    (B) A pending civil rights suit against the IHA, referred by the 
Department'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;
    (D) 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-1) and HUD implementing regulations (24 CFR 1.8), the 
Attorney General's Guidelines (28 CFR 50.3), and procedures (HUD 
Handbook 8040.1), or under Section 504 of the Rehabilitation Act of 
1973 (29 U.S.C. 794) and HUD implementing regulations (24 CFR 8.57); or
    (E) An adjudication of a violation under any of the authorities 
specified in Sec. 950.115 in a civil action filed against the IHA by a 
private individual.
    (f) Technical processing. After all CIAP applications are reviewed 
for eligibility, HUD 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. However, an IHA is only required to submit one CIAP application. 
Group 1 developments are not subject to the technical review rating and 
ranking and the long-term viability and reasonable cost determination. 
Group 2 developments are subject to the technical review rating and 
ranking and the long-term viability and reasonable cost determination. 
Preference will be given to IHAs which request assistance for 
developments that either have conditions that threaten the health or 
safety of the residents or have a significant number of vacant, 
substandard units, and which have demonstrated a capability of carrying 
out the proposed activities.
    (g) Rating on technical review factors. After categorizing the 
eligible IHAs/developments into Group 1 and Group 2, HUD shall review 
and rate each Group 2 IHA on each of the following technical review 
factors:
    (1) Extent and urgency of need, including need to comply with 
statutory, regulatory, or court-ordered deadlines;
    (2) Extent of vacancies, where the vacancies are not due to 
insufficient demand;
    (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) Tribal/local government support for proposed modernization; and
    (9) Such additional factors as the Secretary determines necessary 
and appropriate.
    (h) Ranking and selection for Joint Review. After rating all Group 
2 IHAs/developments, the Area ONAP shall then rank each Group 2 IHA 
based on its total score, list Group 2 IHAs in descending order, 
subject to confirmation of need and cost at Joint Review, and identify 
for Joint Review selection the highest IHA ranking applications in 
Group 2 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 are automatically selected for Joint Review.
    (i) Joint review. The purpose of the Joint Review is for HUD to 
discuss with an IHA the proposed modernization program, as set forth in 
the CIAP application, review long-term viability and cost 
reasonableness determinations, and determine the size of the grant, if 
any, to be awarded. HUD shall notify each IHA whose application has 
been selected for further processing as to whether Joint Review will be 
conducted on-site or off-site (e.g., by telephone or in-office 
meeting). An IHA shall prepare for Joint Review by preparing a draft 
CIAP budget, and reviewing the other items to be covered during Joint 
Review, as prescribed by HUD. If conducted on-site, 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 non-
selection.
    (j) Funding decisions. After all Joint Reviews are completed, HUD 
shall adjust the IHAs, developments, and work items to be funded and 
the amounts to be awarded, on the basis of information obtained from 
Joint Reviews, environmental reviews, and FHEO review, and make the 
funding decisions. An IHA will not be selected for CIAP funding if 
there is a duplication of funding. HUD shall select all bona fide 
emergencies in Group 1 before funding Group 2 applications. After 
funding announcement, HUD shall request a funded IHA to submit a CIAP 
budget, including an implementation schedule, and any other required 
documents, including the ACC amendment. IHAs not selected for funding 
will be advised in writing of the reasons for non-selection.
    (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 draw 
down 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). The IHA Executive Director, where authorized by 
the Board of Commissioners and permitted by tribal or State law, may 
sign the ACC amendment on behalf of the IHA. HUD has the authority to 
condition an ACC amendment (e.g., to require an IHA to hire a 
modernization coordinator or contract administrator to administer its 
modernization program).
    (l) Declaration of trust. As HUD may require, 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.

(Approved by the Office of Management and Budget under control 
number 2577-0044. An agency may not conduct or sponsor, and a person 
is not required to respond to, a collection of information unless 
the collection displays a valid control number.)


Sec. 950.632  Resident and homebuyer participation.

    An IHA shall establish a Partnership Process, as defined in 
Sec. 950.102, to develop, implement, and monitor the CIAP. Before 
submission of the CIAP application, an IHA shall consult with the 
residents, the resident organization, or the resident management 
corporation (see subpart O of this part) (herein referred to as the 
resident) of the development(s) being proposed for modernization, 
regarding its intent to submit an application and to solicit resident 
comments. An IHA shall give residents a reasonable opportunity to 
present their views on the proposed modernization and alternatives to 
it and 

[[Page 8729]]
shall give full and serious consideration to resident recommendations. 
An IHA shall respond in writing to the residents, 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 of the approved work items and its 
progress during implementation. Where HUD does not approve the 
modernization program, an IHA shall so inform the residents.


Sec. 950.634  Budget revisions.

    (a) 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 to deviate from the 
originally approved modernization program, as it was competitively 
funded, by deleting or substantially revising approved work items or 
adding new work items that are unrelated to the originally approved 
modernization program.
    (b) In addition to the provisions of paragraph (a) of this section, 
an IHA shall comply with the following requirements:
    (1) An IHA is not required to obtain prior HUD approval if, in 
order to complete the originally approved modernization program, the 
IHA needs to delete or revise approved work items or add new related 
work items consistent with the original modernization program. In such 
case, an IHA shall certify that the revisions are necessary to carry 
out the approved work and do not result in substantial changes to the 
competitively funded modernization program.
    (2) An IHA shall not incur any modernization cost on behalf of any 
development that is not covered by the original CIAP application.
    (3) Where there are funds leftover after completion of the 
originally approved modernization program, an IHA may, without prior 
HUD approval, use the remaining funds to carry out other eligible 
modernization activities at developments covered by the original CIAP 
application.


Sec. 950.636  Progress reports.

    For each six-month period ending March 31 and September 30, until 
completion of the modernization program or expenditure of all funds, an 
IHA shall submit a progress 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.


Sec. 950.638  Time extensions.

    An IHA shall not obligate or expend funds after the obligation or 
expenditure deadline date approved by HUD in the original 
implementation schedule without a time extension, as follows:
    (a) Certification. An IHA may extend an obligation or expenditure 
deadline date no later than 30 calendar days after the existing 
deadline date, without prior HUD approval, for a time period 
commensurate with the delay, where the IHA certifies that the delay is 
due to reasons outside the IHA's control, such as:
    (1) Need to use leftover funds from a completed modernization 
program for additional work;
    (2) Unforeseen delays in contracting or contract administration;
    (3) Litigation; and
    (4) Delay by HUD or other institutions. Delay by the IHA's staff or 
Board of Commissioners or a change in the Executive Director is not 
considered to be outside of the IHA's control.
    (b) Prior HUD approval. Where an IHA is unable to meet an 
obligation or expenditure deadline date and the delay is not due to 
reasons within the IHA's control, the IHA must request HUD approval of 
a time extension no later than 30 calendar days after the deadline 
date, to avoid recapture of funds. The request shall include an 
explanation of the delay, the steps taken to prevent future delay, and 
the requested extension.


Sec. 950.640  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. HUD's review may be 
conducted either in-office or on-site. Where conducted in-office, an 
IHA shall forward any requested documents to HUD for post-review. Where 
deficiencies are noted, 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. 950.650  Determination of formula amount.

    (a) Submission of formula characteristics report. (1) 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. 950.604(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 not required to submit formula 
characteristics report data to HUD, but 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 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.
    (2) IHA Board Resolution. In its first year of participation in the 
CGP, the IHA must include with its formula characteristics report under 
paragraph (a)(1) of this section, a resolution adopted by the IHA Board 
of Commissioners approving the report, and certifying that the data 
contained in the formula characteristics report are accurate.
    (b) HUD notification of formula amount; appeal rights. (1) Formula 
amounts notification. After HUD determines an IHA's formula allocation 
under Sec. 950.604(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. 950.652(a) and 950.656;
    (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 

[[Page 8730]]
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.


Sec. 950.652  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. 950.650(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 which 
may include resident leaders, resident organizations, resident advisory 
councils/boards and RMCs) must 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, tribal 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, tribal government officials, and other interested parties.
    (c) Tribal/local government participation. An IHA shall consult 
with and provide information to appropriate tribal and 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; and
    (3) An opportunity to express their priorities and concerns to 
ensure due consideration in the IHA's planning process.
    (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. 950.608. 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 

[[Page 8731]]
ensure the long-term physical and social viability of the development. 
Where long-term physical and social viability of the development is 
dependent upon revitalization of the surrounding neighborhood in the 
provision of or coordination of public services, or the consolidation 
or coordination of drug prevention and other human service initiatives, 
the IHA shall identify these needs and strategies. Each comprehensive 
plan shall contain the following elements:
    (1) Executive summary. An IHA shall include as part of its 
comprehensive plan an executive summary to facilitate review and 
comprehension by development residents and by the public. The executive 
summary shall include:
    (i) A summary of total preliminary estimated costs to address 
physical needs by each development and IHA-wide physical and management 
needs; 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 
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, 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 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:
    (A) A brief summary of the physical improvements necessary to bring 
each development to a level at least equal to the modernization and 
energy conservation standards set forth in Sec. 950.610, to comply with 
the lead-based paint testing and abatement requirements under 
Sec. 950.120(g), and to comply with other program requirements under 
Sec. 950.120. The IHA also should 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 must so 
indicate. Similarly, if the IHA intends to demolish, partially 
demolish, convert, or dispose of a development (or units within a 
development), it must 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; and
    (D) 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. 950.608(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)(2), 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 (e)(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; and
    (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.
    (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 paragraph (d)(3) of this section, 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 (e)(2) and (e)(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 
shall determine whether the unfunded hard costs satisfy the definition 
of ``reasonable cost.'' Where the IHA wishes to fund a development, for 
other than emergencies, where hard costs exceed that reasonable cost, 
the IHA shall submit written justification to the Field Office. If the 
Field Office agrees with the IHA's request, the Field Office shall 
forward its recommendation to Headquarters for final decision. Where 
the estimated per unit unfunded hard cost is equal to or less than the 
per unit TDC for the smallest bedroom size at the development, no 
further computation of the TDC limit is required. The IHA shall keep 
documentation in its files to support all cost determinations. The 
Field Office 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, taking into account broader efforts to revitalize 
the neighborhoods in which the development is located;
    (ii) Determination of non-viability. When an IHA's analysis of a 
development, under paragraph (e) of 

[[Page 8732]]
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 subpart M 
of this part).
    (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 (e)(2) and (e)(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 tribal, state, and local 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 must 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 must 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 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 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 timeframe; 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); and
    (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) Tribal/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 paragraphs (b) and (c) of this section;
    (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, in a form 
prescribed by HUD, adopted by the IHA Board of Commissioners, and 
signed by the Board Chairman of the IHA, approving the comprehensive 
plan or any amendments.
    (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 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. 950.656(b)), or at any other time. These amendments shall be 
reviewed by HUD in accordance with Sec. 950.654;
    (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. 950.652(e)(7).
    (f) Prerequisite for receiving assistance. (1) Prohibition of 
assistance. No financial assistance, except for emergency work to be 
funded under Secs. 950.604(b) and 950.606, and for modernization needs 
resulting from disasters under Sec. 950.604(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. 950.652. 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 

[[Page 8733]]
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 PHAs and IHAs participating in the CGP 
in accordance with the formula under Sec. 950.604(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 
even if HUD has not approved the IHA's comprehensive plan. To request 
such assistance, the 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. 950.654  HUD review and approval of comprehensive plan (including 
Five-Year 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. 950.652; 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 Sec. 950.604 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) Comprehensive plan is incomplete in significant matters;
    (ii) Identified needs are plainly inconsistent with facts and data;
    (A) Identified physical improvements and replacements are 
inadequate;
    (B) Identified management improvements are inadequate;
    (C) Proposed physical and management improvements fail to address 
identified needs;
    (iii) Action plan is plainly inappropriate to meeting identified 
needs;
    (iv) Inadequate demonstration of long-term viability at reasonable 
cost; or
    (v) Contradiction of tribal/local government certification or IHA 
resolution.
    (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. 950.658. 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. 950.660. 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. 950.656  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. 950.650 
in 

[[Page 8734]]
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 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. 950.652. 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. 950.652, 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 (see Sec. 950.614);
    (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. 950.652.
    (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. 950.652, 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. 950.654.
    (g) HUD review and approval of Annual Submission. (1) General. An 
Annual Submission accepted in accordance with paragraph (a) of this 
section shall be considered to be approved, unless HUD notifies the IHA 
in writing, postmarked within 75 calendar days of the date that HUD 
receives the Annual Submission for 

[[Page 8735]]
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. 950.658. 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. 950.660 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. 950.660 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 in order 
to draw down 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. 950.658   IHA Performance and Evaluation Report.

    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.


Sec. 950.660   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 (a), 
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 I in a timely 
manner and in accordance with its Comprehensive Plan.
    (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.
    (3) Reasonable progress. HUD shall determine whether the IHA has 
satisfied, or has made reasonable progress towards satisfying, the 
applicable performance standards.
    (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 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 paragraph (c) of this section, 
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. 950.658;

[[Page 8736]]

    (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 described 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 a 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. 950.650); 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. 950.604.
    (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 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 paragraph (h) 
of this section. Any reallocation of recaptured amounts will be in 
accordance with paragraph (g) of this section. The IHA's board of 
Commissioners shall notify affected residents of HUD's final 
determination to recapture any funds.

PART 965--PHA-OWNED OR LEASED PROJECTS--GENERAL PROVISIONS

    8. The heading for part 965 is revised to read as set forth above.
    9. The authority citation for part 965 continues to read as 
follows:

    Authority: 42 U.S.C. 1437, 1437a, 1437d, 1437g, and 3535(d). 
Subpart H is also issued under 42 U.S.C. 4821-4846.

Subpart A--Preemption of State Prevailing Wage Requirements

    10. The heading of subpart A is revised as set forth above.


Sec. 965.101  [Amended]

    11. Section 965.101 is amended by:
    a. Removing from the section heading the words, ``With Respect to 
Maintenance and Operation of Projects'';
    b. Removing the parenthetical phrase ``(including modernization)'' 
from the introductory text of paragraph (a); and
    c. Removing the words, ``maintenance and operation'' wherever they 
appear in paragraphs (a) introductory text, (a)(2), (b)(1) introductory 
text, (b)(2), and (b)(3), and adding in their place, the words, 
``development, maintenance, and modernization''.

PART 968--PUBLIC HOUSING MODERNIZATION

    12. The authority citation for 24 CFR part 968 continues to read as 
follows:


[[Page 8737]]

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

Subpart A--General

    13. Section 968.101 is amended by revising paragraph (a); removing 
the second sentence of paragraph (b)(2); revising paragraphs (b)(1), 
(b)(5), and (c); and adding a new paragraph (d), to read as follows:


Sec. 968.101  Purpose and applicability.

    (a) Purpose. The purpose of this part is to set forth the policies 
and procedures for the Modernization program authorizing HUD to provide 
financial assistance to Public Housing Agencies (PHAs).
    (b) Applicability. (1) Subpart A of this part applies to all 
modernization under this part. Subpart B of this part sets forth the 
requirements and procedures for the Comprehensive Improvement 
Assistance Program (CIAP) for PHAs that own or operate fewer than 250 
public housing units. Subpart C of this part sets forth the 
requirements and procedures for the Comprehensive Grant Program (CGP) 
for PHAs that own or operate 250 or more units. A PHA that qualifies 
for participation in the CGP is not eligible to participate in the 
CIAP. A PHA that has already qualified to participate in the CGP may 
elect to continue to participate in the CGP so long as it owns or 
operates at least 200 units.
* * * * *
    (5) A development/building/unit which is assisted under section 
5(j)(2) of the Act (Major Reconstruction of Obsolete Projects) (MROP) 
is eligible for section 14 funding (CIAP or CGP) where it received MROP 
funding after FFY 1988 and has reached Date of Full Availability (DOFA) 
or where it received MROP funding during FFYs 1986-1988 and all MROP 
funds have been expended.
    (c) Transition. Any amount that HUD has approved for a PHA must be 
used for the purposes for which the funding was provided, or:
    (1) For a CGP PHA, for purposes consistent with an approved Annual 
Statement or Five-Year Action Plan submitted by the PHA, as the PHA 
determines to be appropriate; or
    (2) For a CIAP PHA, in accordance with a revised CIAP budget.
    (d) Approved information collections. The following sections of 
this subpart have been approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act of 1995 and assigned OMB 
approval number 2577-0044: Secs. 968.135, 968.145, 968.210, 968.215, 
968.225, and 968.230. The following sections of this subpart have been 
similarly approved and assigned approval number 2577.0157: 
Secs. 968.310, 968.315, 968.325, and 968.330.


Sec. 968.102  [Amended]

    14. Section 968.102 is amended by removing the reference to 
``Sec. 968.310(d)'' in paragraph (b) and adding in its place a 
reference to ``Sec. 968.112(d)''.
    15. Section 968.103 is amended by revising paragraphs (a), (b), 
(c), (e)(1) (i) and (ii) introductory text, (f)(1), (f)(2) introductory 
text, (f)(2)(i), (f)(2)(ii) (f), (g), and (h), and the heading to 
paragraph (e)(4), to read as follows:


Sec. 968.103  Allocation of funds under section 14.

    (a) General. This section describes the process for allocating 
modernization funds to the aggregate of PHAs and IHAs participating in 
the CIAP and to individual PHAs and IHAs participating in the CGP.
    (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 950 of this title, an amount not to exceed $75 
million (which shall include unused reserve amounts carried over from 
previous FFYs), which shall be made available to PHAs and IHAs for 
modernization needs resulting from natural and other disasters, and 
from emergencies. HUD shall replenish this reserve at the beginning of 
each FFY. Any unused funds from previous years may remain in the 
reserve until allocated. The requirements governing the reserve for 
disasters and emergencies and the procedures by which a PHA may request 
such funds, are set forth in Sec. 968.104.
    (c) Set-aside for credits for mod troubled PHAs under subpart C of 
this part. After deducting an amount for the reserve for natural and 
other disasters and for emergencies under paragraph (b) of this 
section, HUD shall set aside from the funds remaining no more than five 
percent for the purpose of providing credits to PHAs that were formerly 
designated as mod troubled agencies under the Public Housing Management 
Assessment Program (PHMAP) (see 24 CFR part 901). The purpose of this 
set-aside is to compensate these PHAs for amounts previously withheld 
by HUD because of a PHA's prior designation as a mod troubled agency. 
Since part 901 of this chapter does not apply to IHAs, they are not 
classified as ``mod troubled'' and they do not participate in the set-
aside credits established under paragraph (c) of this section.
* * * * *
    (e) * * *
    (1) * * *
    (i) Statistically reliable data are available. 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 for the aggregate 
of IHAs and PHAs with fewer than 250 units, which are 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 PHAs and IHAs with 250 or more units, it 
will base its allocation of funds under this section on estimates of 
the categories of backlog need using:
* * * * *
    (4) Categories of backlog need. * * *
    (f) * * *
    (1) Statistically reliable data are available. Where HUD determines 
that statistically reliable data are available concerning the 
categories of need identified under paragraph (f)(3) of this section 
for individual PHAs and IHAs with 250 or more units, and for the 
aggregate of PHAs and IHAs 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;
    (2) Statistically reliable data are unavailable. Where HUD 
determines that statistically reliable data concerning the categories 
of need identified under paragraph (f)(3) of this section are not 
available for individual PHAs and IHAs 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 accrual 
need under paragraph (f)(3) of this section;
    (ii) * * *
    (F) The total number of units of each PHA or IHA that owns or 
operates 250 or more units. (weighted at .0144);
* * * * *
    (g) Allocation of CIAP. The formula amount determined under 
paragraphs 

[[Page 8738]]
(e) and (f) of this section for PHAs and IHAs with fewer than 250 units 
shall be allocated to PHAs in accordance with the requirements of 
subpart B of this part (the CIAP), and to IHAs in accordance with the 
requirements of 24 CFR part 950, subpart I.
    (h) Allocation for CGP. The formula amount determined under 
paragraphs (e) and (f) of this section for PHAs with 250 or more units 
shall be allocated in accordance with the requirements of subpart C of 
this part (the CGP), and for IHAs in accordance with the requirements 
of 24 CFR part 950, subpart I. A PHA that is eligible to receive a 
grant under the CGP may appeal the amount of its formula allocation in 
accordance with the requirements set forth in Sec. 968.310(b). A PHA 
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.
* * * * *
    16. Section 968.105 is amended by adding in alphabetical order new 
definitions for ``CGP'', ``modernization program'', ``modernization 
project'', and ``reasonable cost''; by revising the definition ``Force 
account labor''; removing the definition for ``CIAP program''; and 
adding a definition for ``CIAP'' to read as follows:


Sec. 968.105  Definitions.

* * * * *
    CGP. The Comprehensive Grant Program, which provides modernization 
funds on a formula basis to PHAs with 250 or more public housing units.
    CIAP. The Comprehensive Improvement Assistance Program, which 
provides modernization funds on a competitive basis to PHAs with fewer 
than 250 public housing units.
* * * * *
    Force account labor. Labor employed directly by the PHA on either a 
permanent or a temporary basis. See Sec. 968.120.
* * * * *
    Modernization program. A PHA's program for carrying out 
modernization, as set forth in the approved CIAP budget or CGP Annual 
Statement.
    Modernization project. The improvement of one or more existing 
public housing developments under a unique number designated for that 
modernization program. For each modernization project, HUD and the PHA 
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). The terms ``modernization project number'' and 
``comprehensive grant number'' are used interchangeably.
* * * * *
    Reasonable cost. Total unfunded hard cost needs for a development 
that do not exceed 90 percent of the computed Total Development Cost 
(TDC) for a new development with the same structure type and number and 
size of units in the market area.
* * * * *


Sec. 968.312  [Redesignated as Sec. 968.104]

    17. Section 968.312 is redesignated as Sec. 968.104; and newly 
redesignated Sec. 968.104 is amended by:
    a. Removing from paragraph (a)(1) the phrase ``under 
Sec. 968.310(a)(3)'';
    b. Removing references to ``PHAs participating in CGP'' and ``PHAs 
participating in CIAP'' in paragraphs (a) (1) and (a)(3), and adding in 
their place references to ``CGP PHAs'' and ``CIAP PHAs'', respectively;
    c. Removing references to ``PHA participating in CGP'' and ``PHA 
participating in CIAP'' in paragraph (a)(1), and adding in their place 
references to ``CGP PHA'' and ``CIAP PHA'', respectively;
    d. Adding a sentence at the end of paragraph (a)(3);
    e. Removing from paragraphs (a)(1) and (b)(1) the two references to 
``Sec. 968.320'' and adding in their place references to 
``Sec. 968.315'';
    f. Amending paragraph (b)(1) in the fourth sentence, by adding 
after the words ``insurance coverage'' and before the period, the words 
``or other Federal assistance''; and in the fifth sentence, by adding 
before the word ``PHA'', the word ``CGP''; and
    g. Amending paragraph (b)(3) by removing the phrase, ``shall be in 
the form of a grant, and''; to read as follows:


Sec. 968.104  Reserve for emergencies and disasters.

* * * * *
    (a) * * *
    (3) * * * A CIAP PHA is not required to repay assistance for its 
emergency needs from the reserve.
* * * * *


Sec. 968.108  [Amended]

    18. Section 968.108 is amended by removing paragraph (f)(2) and 
redesignating paragraph (f)(3) as paragraph (f)(2).


Sec. 968.110  [Amended]

    19. Section 968.110 is amended by removing and reserving paragraphs 
(i), (j), and (l), by removing from paragraph (e)(3) the words ``or 
tribal'', and by removing from paragraph (e)(3) the reference to 
``Sec. 968.120'' and adding in its place a reference to ``Sec. 965.101 
of this chapter''.
    20. A new Sec. 968.112 is added, to read as follows:


Sec. 968.112  Eligible costs.

    (a) General. A PHA may use financial assistance received under this 
part for the following eligible costs:
    (1) For a CGP PHA, the eligible costs are:
    (i) Undertaking activities described in its approved Annual 
Statement under Sec. 968.325 and approved Five-Year Action Plan under 
Sec. 968.315(e)(5);
    (ii) Carrying out emergency work, whether or not the need is 
indicated in the PHA's approved Comprehensive Plan, including Five-Year 
Action Plan, or Annual Statement;
    (iii) Funding a replacement reserve to carry out eligible 
activities in future years, subject to the restrictions set forth in 
paragraph (f) of this section;
    (iv) Preparing the Comprehensive Plan and Five-Year Action Plan 
under Sec. 968.315 and the Annual Submission under Sec. 968.325, 
including reasonable costs necessary to assist residents to participate 
in a meaningful way in the planning, implementation and monitoring 
process; and
    (v) Carrying out an audit, in accordance with 24 CFR part 44.
    (2) For a CIAP PHA, the eligible costs are activities approved by 
HUD and included in an approved CIAP budget.
    (b) Demonstration of viability. Except in the case of emergency 
work, a PHA shall only expend funds on a development for which the PHA 
has determined, and HUD agrees, that the completion of the improvements 
and replacements (for CGP PHAs, as identified in the Comprehensive 
Plan) will reasonably ensure the long-term physical and social 
viability of the development at a reasonable cost (as defined in 
Sec. 968.105), or for essential non-routine maintenance needed to keep 
the property habitable until the demolition or disposition application 
is approved and residents are relocated.
    (c) Physical improvements. Eligible costs include alterations, 
betterments, additions, replacements, and non-routine maintenance that 
are necessary to meet the modernization and energy conservation 
standards prescribed in Sec. 968.115. These mandatory standards may be 
exceeded when a PHA (and HUD in the case of CIAP PHAs) determines that 
it is necessary or highly desirable for the long-term physical and 
social viability of the individual development. Development specific 

[[Page 8739]]
work includes work items that are modest in design and cost, but still 
blend in with the design and architecture of the surrounding community 
by including amenities, quality materials and design and landscaping 
features that are customary for the locality and culture. The Field 
Office has the authority to approve nondwelling space where such space 
is needed to administer, and is of direct benefit to, the public 
housing program. If demolition or disposition is proposed, a PHA shall 
comply with 24 CFR part 970. Additional dwelling space may be added to 
existing units.
    (d) 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, or LBP testing, interim containment, 
professional risk assessment and abatement. In addition, management 
improvements are eligible costs.
    (2) Ineligible costs. Routine maintenance or replacements, 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, a PHA may substantially rehabilitate a Turnkey III unit 
whenever the unit becomes vacant or is occupied by a non-homebuyer 
family in order to return the unit to the inventory or make the unit 
suitable for homeownership purposes. A PHA that intends to use funds 
under this paragraph must identify in its CIAP application or CGP 
annual submission the estimated number of units proposed for 
substantial rehabilitation and subsequent sale. In addition, a PHA must 
demonstrate, for each of the Turnkey III units proposed to be 
substantially rehabilitated, that it has homebuyers who both are 
eligible for homeownership, in accordance with the requirements of 24 
CFR part 904, and have demonstrated their intent to be placed into the 
unit.
    (ii) Before a PHA may be approved for substantial rehabilitation of 
a unit under this paragraph, it must 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 of a unit caused by its substantial 
rehabilitation under this paragraph shall be reflected solely by its 
subsequent appraised value, and by an automatic increase in its selling 
price.
    (e) Demolition and conversion costs. Eligible costs include:
    (1) Demolition of dwelling units or non-dwelling facilities, where 
the demolition is approved by HUD under 24 CFR part 970, 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 non-dwelling use.
    (f) Replacement reserve costs (for CGP only). (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 PHA in its needs assessments; or
    (ii) A physical improvement requires more funds than the PHA would 
receive under its annual formula allocation; or
    (iii) A management improvement requires more funds than the PHA may 
use under its 20% limit for management improvements (except as provided 
in paragraph (n)(2)(i) of this section), and the PHA 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 PHA 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 PHA's income in the determination of a PHA's operating 
subsidy eligibility, but must 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, a PHA must first use its replacement reserve, where 
funded, to meet emergency needs, before requesting funds from the 
reserve under Sec. 968.104.
    (5) A PHA is not required to use its replacement reserve for costs 
related to natural and other disasters.
    (g) Management improvement costs. (1) General. Management 
improvements that are development-specific or PHA-wide in nature are 
eligible costs where needed to upgrade the operation of the PHA's 
developments, sustain physical improvements at those developments or 
correct management deficiencies. A PHA's ongoing operating expenses are 
ineligible management improvement costs. For CIAP PHAs, management 
improvements may be funded as a single work item.
    (2) Eligible costs. Eligible costs include:
    (i) General management improvement costs. Eligible costs include 
general management improvement costs, such as: management, financial, 
and accounting control systems of the PHA; adequacy and qualifications 
of PHA personnel, including training; resident programs and services 
through the coordination of the provision of social services from 
tribal or local government or other public and private entities; 
resident and development security; resident selection and eviction; 
occupancy; rent collection; maintenance; and equal opportunity.
    (ii) Economic development costs. Eligible costs include job 
training for residents and resident business development activities, 
for the purpose of carrying out activities related to the 
modernization-funded management and physical improvements. HUD 
encourages PHAs, to the greatest extent feasible, to hire residents as 
trainees, apprentices, or employees to carry out the modernization 
program under this part, and to contract with resident-owned businesses 
for modernization work.
    (iii) Resident management costs. Eligible costs include technical 
assistance to a resident council or resident management corporation 
(RMC), as defined in part 964, in order to: determine the feasibility 
of resident management to carry out management functions for a specific 
development or developments; train residents in skills directly related 
to the operations and management of the development(s) for potential 
employment by the RMC; train RMC board members in community 
organization, board development, and leadership; and assist in the 
formation of an RMC.
    (iv) Resident homeownership costs. Eligible costs are limited to 
the study of the feasibility of converting rental to homeownership 
units and the preparation of an application for conversion to 
homeownership or sale of units.
    (v) Preventive maintenance system. Eligible costs include the 
establishment of a preventive maintenance system or improvement of an 
existing system. A preventive maintenance system must provide for 
regular inspections of building structures, systems and units and 
distinguish between work eligible for operating funds (routine 
maintenance) and work eligible for modernization funding (non-routine 
maintenance). 

[[Page 8740]]

    (h) Drug elimination costs. Eligible costs include drug elimination 
activities involving management or physical improvements, as specified 
by HUD.
    (i) LBP costs. Eligible costs include professional risk assessments 
and interim containment of family developments/buildings constructed 
before 1980, testing and abatement of family developments/buildings 
constructed before 1978, and costs for insurance coverage for pollution 
hazards associated with the testing, abatement, clean-up and disposal 
of LBP on applicable surfaces of family developments/buildings 
constructed before 1978.
    (j) 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) Salaries. The salaries of non-technical and technical PHA 
personnel assigned full-time or part-time to modernization are eligible 
costs only where 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 non-modernization duties. A PHA 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 budget);
    (2) Employee benefit contributions. PHA contributions to employee 
benefit plans on behalf of non-technical and technical PHA personnel 
are eligible costs in direct proportion to the amount of salary charged 
to the CIAP or CGP, as appropriate;
    (3) Preparation of CIAP or CGP required documents;
    (4) Resident participation. Eligible costs include those associated 
with ensuring the meaningful participation of residents in the 
development of the CIAP Application or the CGP Annual Submission and 
Comprehensive Plan and the implementation and monitoring of the 
approved modernization program; and
    (5) Other administrative costs, such as telephone and facsimile, as 
specified by HUD.
    (k) Audit costs (CGP only). Eligible costs are limited to the 
portion of the audit costs that are attributable to the modernization 
program.
    (l) Architectural/engineering and consultant fees. Eligible costs 
include fees for planning, identification of needs, detailed design 
work, preparation of construction and bid documents and other required 
documents, LBP professional risk assessments and testing, and 
inspection of work in progress.
    (m) Relocation costs. Eligible costs include relocation and other 
assistance for permanent and temporary relocation, as a direct result 
of rehabilitation, demolition or acquisition for a modernization-funded 
activity, where this assistance is required by 49 CFR part 24 or 
Sec. 968.108.
    (n) Cost limitations. (1) CIAP costs. (i) Management improvement 
costs. Management improvement costs shall not exceed a percentage of 
the CIAP funds available to a Field Office in a particular FFY, as 
specified by HUD.
    (ii) Planning costs. Planning costs are costs incurred before HUD 
approval of the CIAP application and which are related to developing 
the CIAP application or carrying out eligible modernization planning, 
such as detailed design work, preparation of solicitations, and LBP 
professional risk assessment and testing. Planning costs may be funded 
as a single work item. If a PHA incurs planning costs without prior HUD 
approval, a PHA does so with the full understanding that the costs may 
not be reimbursed upon approval of the CIAP application. Planning costs 
shall not exceed 5 percent of the CIAP funds available to a Field 
Office in a particular FFY.
    (2) CGP costs. (i) Management improvement costs. Notwithstanding 
the full fungibility of work items, a PHA shall not use more than a 
total of 20 percent of its annual grant for management improvement 
costs in account 1408, unless specifically approved by HUD or the PHA 
has been designated as both an over-all high performer and mod-high 
performer under the PHMAP.
    (ii) Administrative costs. Notwithstanding the full fungibility of 
work items, a PHA 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 or local law, unless specifically approved by 
HUD.
    (3) Program benefit. Where the physical or management improvement, 
including administrative cost, will benefit programs other than Public 
Housing, such as Section 8 or local revitalization programs, eligible 
costs are limited to the amount directly attributable to the public 
housing program.
    (4) No duplication. Any eligible cost for an activity funded by 
CIAP or CGP shall not also be funded by any other HUD program.
    (o) Ineligible costs. Ineligible costs include:
    (1) Luxury improvements;
    (2) Indirect administrative costs (overhead), as defined in OMB 
Circular A-87;
    (3) Public housing operating assistance;
    (4) Direct provision of social services, through either force 
account or contract labor, from FFY 1996 and future FFYs funds, unless 
otherwise provided by law; and
    (5) Other ineligible activities, as specified by HUD.
    (p) Expanded eligibility for FFY 1995 and prior year modernization 
funds. The FFY 1995 Rescissions Act expanded the eligible activities 
that may be funded with CIAP or CGP assistance provided from FFY 1995 
and prior FFY funds. Such activities include, but are not limited to:
    (1) New construction or acquisition of additional public housing 
units, including replacement units;
    (2) Modernization activities related to the public housing portion 
of housing developments held in partnership, or cooperation with non-
public housing entities; and
    (3) Other activities related to public housing, including 
activities eligible under the Urban Revitalization Demonstration (HOPE 
VI).
    21. Section 968.115 is revised to read as follows:


Sec. 968.115  Modernization and energy conservation standards.

    All improvements funded under this part shall:
    (a) Meet the modernization standards as prescribed by HUD;
    (b) Incorporate cost-effective energy conservation measures, 
identified in the PHA's most recently updated energy audit, conducted 
pursuant to part 965, subpart C;
    (c) Where changing or installing a new utility system, conduct a 
life-cycle cost analysis, reflecting installation and operating costs; 
and
    (d) Provide decent, safe, and sanitary living conditions in PHA-
owned and PHA-operated public housing.
    22. Section 968.120 is revised to read as follows:


Sec. 968.120  Force account.

    (a) For both CIAP and CGP, a PHA may undertake the activities using 
force account labor, only where specifically approved by HUD in the 
CIAP budget or CGP Annual Statement, except no prior HUD approval is 
required where the PHA is designated as both an overall 

[[Page 8741]]
high performer and Modernization high performer under the PHMAP.
    (b) If the entirety of modernization activity (including the 
planning and architectural design of the rehabilitation) is 
administered by the RMC, the PHA shall not retain for any 
administrative or other reason, any portion of the modernization funds 
provided, unless the PHA and the RMC provide otherwise by contract.
    23. New Secs. 968.125, 968.130, and 968.135 are added, to read as 
follows:


Sec. 968.125  Initiation of modernization activities.

    After HUD has approved the modernization program and entered into 
an ACC amendment with the PHA, a PHA shall undertake the modernization 
activities and expenditures set forth in its approved CIAP budget or 
CGP Annual Statement/Five-Year Action Plan in a timely, efficient and 
economical manner. All approved funding must be obligated within two 
years of approval and expended within three years of approval unless 
HUD approves a longer time period in the PHA's implementation schedule, 
as set forth in the CIAP budget or CGP Annual Statement. HUD may 
approve a longer time period for such reasons as the large size of the 
grant or the complexity of the work.


Sec. 968.130  Fund requisitions.

    To draw down modernization funds against the approved CIAP budget 
or CGP Annual Statement, a PHA shall comply with requirements 
prescribed by HUD.


Sec. 968.135  Contracting requirements.

    In addition to the requirements specified in 24 CFR parts 5, 85, 
and 965, subpart A, and Sec. 968.110(e), the following provisions 
apply:
    (a) Architect/engineer and other professional services contracts. 
For CIAP only and notwithstanding 24 CFR 85.36(g), a PHA shall comply 
with the following HUD requirements:
    (1) Where the proposed contract amount exceeds the HUD-established 
threshold, submit the contract for prior HUD approval before execution 
or issuance; or
    (2) Where the proposed contract amount does not exceed the HUD-
established threshold, certify that the scope of work is consistent 
with the originally approved modernization program, and that the amount 
is appropriate and does not result in the total HUD-approved CIAP 
budget being exceeded.
    (b) Assurance of completion. For both CIAP and CGP and 
notwithstanding 24 CFR 85.36(h), for each construction contract over 
$100,000, the contractor shall furnish a bid guarantee from each bidder 
equivalent to 5% of the bid price; and one of the following:
    (1) A performance and payment bond for 100 percent of the contract 
price; or
    (2) Separate performance and payment bonds, each for 50% or more of 
the contract price; or
    (3) A 20% cash escrow; or
    (4) a 25% irrevocable letter of credit.
    (c) Construction solicitations. For CIAP only and notwithstanding 
24 CFR 85.36(g), a PHA shall comply with HUD requirements to either:
    (1) Where the estimated contract amount exceeds the HUD-established 
threshold, submit a complete construction solicitation for prior HUD 
approval before issuance; or
    (2) Where 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. (1) For CIAP only, a PHA shall obtain HUD 
approval of the proposed award of a contract if the contract work is 
inconsistent with the originally approved modernization program or the 
procurement meets the criteria set forth in 24 CFR 85.36(g)(2)(i) 
through (iv). In all other instances, a PHA shall make the award 
without HUD approval after the PHA has certified that:
    (i) The solicitation and award procedures were conducted in 
compliance with State or local laws and Federal requirements;
    (ii) The award does not meet the criteria in 24 CFR 85.36(g)(2)(i) 
through (iv) for prior HUD approval; and
    (iii) The contractor is not on the Lists of Parties Excluded from 
Federal Procurement or Nonprocurement Programs;
    (2) For CGP only, a PHA shall obtain HUD approval of the proposed 
award of a contract if the procurement meets the criteria set forth in 
24 CFR 85.36(g)(2)(i) through (iv).
    (e) Contract modifications. For CIAP only and notwithstanding 24 
CFR 85.36(g), except in an emergency endangering life or property, a 
PHA shall comply with HUD requirements to either:
    (1) Where the proposed contract modification exceeds the HUD-
established threshold, submit the proposed modification for prior HUD 
approval before issuance; or
    (2) Where 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 total HUD-approved CIAP budget amount.
    (f) Construction requirements. Where indicated by poor performance, 
a PHA may be required to submit to HUD periodic progress reports and, 
for prior HUD approval, construction completion documents above a HUD-
specified amount. For CGP only, a PHA is notified of additional 
construction requirements by a notice of deficiency or a corrective 
action order.
    (g) Reward for high performers. For CIAP only, if a PHA is both an 
overall high performer and a modernization high performer under the 
Public Housing Management Assessment Program (PHMAP), HUD will not 
establish thresholds, and the PHA is not required to obtain prior HUD 
approval, under paragraphs (a), (c), and (e) of this section.


Sec. 968.240  [Redesignated as Sec. 968.140]

    24. Section 968.240 is redesignated as Sec. 968.140.
    25. A new Sec. 968.145 is added to subpart A, to read as follows:


Sec. 968.145  Fiscal closeout.

    (a) Actual modernization cost certificate (AMCC). Upon expenditure 
by the PHA of all funds, or termination by HUD of the activities funded 
in a modernization program, a PHA shall submit the AMCC, in a form 
prescribed by HUD, to HUD for review and approval for audit. After 
audit verification, HUD shall approve the AMCC.
    (b) Audit. The audit shall follow the guidelines prescribed in 24 
CFR part 44, Non-Federal Government Audit Requirements. If the pre-
audit or post-audit AMCC indicates that there are excess funds, a PHA 
shall immediately remit the excess funds as directed by HUD. If the 
pre-audit or post-audit AMCC discloses unauthorized or ineligible 
expenditures, a PHA shall immediately take such corrective actions as 
HUD may direct.
    26. Subpart B is revised to read as follows:
Subpart B--Comprehensive Improvement Assistance Program (For PHAs That 
Own or Operate Fewer Than 250 Units)
968.205  Definitions.
968.210  Procedures for obtaining approval of a modernization 
program.
968.215  Resident and homebuyer participation.

[[Page 8742]]

968.225  Budget revisions.
968.230  Progress reports.
968.235  Time extensions.
968.240  HUD review of PHA performance.

Subpart B--Comprehensive Improvement Assistance Program (For PHAs 
That Own or Operate Fewer Than 250 Units)


Sec. 968.205  Definitions.

    In addition to the definitions in Sec. 968.105, the following 
definitions apply to this subpart:
    Emergency Modernization (CIAP). A type of modernization program for 
a development that is limited to physical work items of an emergency 
nature that poses an immediate threat to the health or safety of 
residents or is related to fire safety, and that must be corrected 
within one year of CIAP funding approval.
    Management capability. A PHA has management capability if it is:
    (1) Not designated as Troubled under part 901 of this chapter, 
Public Housing Management Assessment Program (PHMAP); or
    (2) Designated as Troubled, but has a reasonable prospect of 
acquiring management capability through CIAP-funded management 
improvements and administrative support. A Troubled PHA is eligible for 
Emergency Modernization only, unless it is making reasonable progress 
toward meeting the performance targets established in its memorandum of 
agreement or equivalent under Sec. 901.140 of this chapter or has 
obtained alternative oversight of its management functions.
    Modernization capability. A PHA has modernization capability if it 
is:
    (1) Not designated as Modernization Troubled under part 901 of this 
chapter, PHMAP; or
    (2) Designated as Modernization Troubled, but has a reasonable 
prospect of acquiring modernization capability through CIAP-funded 
management improvements and administrative support, such as hiring 
staff or contracting for assistance. A Modernization Troubled PHA is 
eligible for Emergency Modernization only, unless it is making 
reasonable progress toward meeting the performance targets established 
in its memorandum of agreement or equivalent under Sec. 901.140 of this 
chapter or has obtained alternative oversight of its modernization 
functions. Where a PHA does not have a funded modernization program in 
progress, the Field Office shall determine whether the PHA has a 
reasonable prospect of acquiring modernization capability through 
hiring staff or contracting for assistance.
    Other Modernization (modernization other than emergency). A type of 
modernization program 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 development specific 
or PHA-wide management work items (including planning costs), and/or 
lead-based paint testing, professional risk assessments, interim 
containment, and abatement.
    Work item. Any separately identifiable unit of work constituting a 
part of a modernization program.


Sec. 968.210  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), the time frame for submission of 
the CIAP Application, and other pertinent information.
    (b) PHA consultation with local officials and residents/homebuyers. 
A PHA shall develop the application in consultation with local 
officials and residents/homebuyers, as set forth in Sec. 968.215.
    (c) PHA application. A PHA shall submit to HUD an application, in a 
form prescribed by HUD. Where a PHA has not included some of its 
developments in the CIAP application, HUD may not consider funding any 
non-emergency work at excluded developments or subsequently approve use 
of leftover funds at excluded developments.
    (d) Completeness Review. To be eligible for processing, an 
application must be physically received by HUD by the time and date 
specified in the NOFA. Immediately after the application deadline, HUD 
shall perform a completeness review to determine whether the 
application is complete, responsive to the NOFA, and acceptable for 
technical processing.
    (1) If the application form or any other essential document, as 
specified in the NOFA, is missing, the PHA's application will be 
considered substantially incomplete and, therefore, ineligible for 
further processing. HUD shall immediately notify the PHA in writing.
    (2) If other required documents, including certifications, as 
specified in the NOFA, are missing or there is a technical mistake, 
such as no signature on a submitted form, HUD shall immediately notify 
the PHA in writing to submit or correct the deficiency 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 which may be corrected at this time are inadvertently 
omitted documents or clarifications of previously submitted material 
and other changes which are not of such a nature as to improve the 
competitive position of the application.
    (3) If a PHA fails to submit or correct the items within the 
required time period, the PHA's application will be ineligible for 
further processing. HUD shall immediately notify the PHA in writing 
after this occurs.
    (4) A PHA may submit an application for Emergency Modernization 
whenever needed.
    (e) Eligibility Review. (1) Eligibility for processing. To be 
eligible for processing:
    (i) Each eligible development for which work is proposed has 
reached the Date of Full Availability (DOFA) and is under ACC at the 
time of CIAP application submission; and
    (ii) Where funded under Major Reconstruction of Obsolete Projects 
(MROP) after FFY 1988, the development/building/unit has reached DOFA 
or, where funded during FFYs 1986-1988, all MROP funds for the 
development/building have been expended.
    (2) Eligibility for processing on reduced scope. When the following 
conditions exist, a PHA will be reviewed on a reduced scope:
    (i) Section 504 compliance. Where a PHA has not completed all 
required structural changes to meet the need for accessible units, as 
identified in the PHA's Section 504 needs assessment, the PHA is 
eligible for processing only for Emergency Modernization or physical 
work needed to meet Section 504 requirements.
    (ii) Lead-based paint (LBP) testing compliance. Where a PHA has not 
complied with the statutory requirement to complete LBP testing on all 
pre-1978 family units, the PHA is eligible for processing only for 
Emergency Modernization or work needed to complete the testing.
    (iii) Fair Housing and Equal Opportunity (FHEO) compliance. Where a 
PHA has not complied with FHEO requirements set forth in Sec. 968.110, 
as evidenced by an enforcement action, finding or determination, the 
PHA is eligible for processing only for Emergency Modernization or for 
work needed to remedy the civil rights deficiencies--unless the PHA is 
implementing a voluntary compliance agreement or settlement agreement 
designed to correct the area(s) of 

[[Page 8743]]
noncompliance. The enforcement actions, findings, or determinations 
that trigger limited eligibility are described in paragraphs 
(e)(2)(iii) (A) through (E) of this section:
    (A) A pending proceeding against the PHA 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 the Department's General Counsel 
or legally authorized designee;
    (B) A pending civil rights suit against the PHA, referred by the 
Department's General Counsel and instituted by the Department of 
Justice;
    (C) Outstanding HUD findings of PHA noncompliance with civil rights 
statutes and executive orders specified in 24 CFR part 5 and 
Sec. 968.110 or implementing regulations, as a result of formal 
administrative proceedings;
    (D) A deferral of the processing of applications from the PHA 
imposed by HUD under Title VI of the Civil Rights Act of 1964 (42 
U.S.C. 2000d-1) and HUD implementing regulations (24 CFR 1.8), the 
Attorney General's Guidelines (28 CFR 50.3), and procedures (HUD 
Handbook 8040.1), or under Section 504 of the Rehabilitation Act of 
1973 (29 U.S.C. 794) and HUD implementing regulations (24 CFR 8.57); or
    (E) An adjudication of a violation under any of the civil rights 
authorities specified in 24 CFR part 5 and Sec. 968.110 in a civil 
action filed against the PHA by a private individual.
    (f) Technical processing. After all CIAP applications are reviewed 
for eligibility, HUD shall categorize the eligible PHAs and their 
developments into two processing groups: Group 1 for Emergency 
Modernization; and Group 2 for Other Modernization. PHA developments 
may be included in both groups and the same development may be in each 
group. However, a PHA is only required to submit one CIAP application. 
Group 1 developments are not subject to the technical review rating and 
ranking and the long-term viability and reasonable cost determination. 
Group 2 developments are subject to the technical review rating and 
ranking and the long-term viability and reasonable cost determination. 
Preference will be given to PHAs which request assistance for 
developments having conditions which threaten the health or safety of 
the residents or having a significant number of vacant, substandard 
units, and which have demonstrated a capability of carrying out the 
proposed activities.
    (g) Rating on technical review factors. After categorizing the 
eligible PHAs/developments into Group 1 and Group 2, HUD shall review 
and rate each Group 2 PHA on each of the following technical review 
factors:
    (1) Extent and urgency of need, including need to comply with 
statutory, regulatory or court-ordered deadlines;
    (2) Extent of vacancies, where the vacancies are not due to 
insufficient demand;
    (3) PHA's modernization capability;
    (4) PHA's management capability;
    (5) Degree of resident involvement in PHA operations;
    (6) Degree of PHA 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) Ranking and selection for Joint Review. After rating all Group 
2 PHAs/developments, HUD shall then rank each Group 2 PHA based on its 
total score, list Group 2 PHAs in descending order, subject to 
confirmation of need and cost at Joint Review, and identify for Joint 
Review selection the highest PHA ranking applications in Group 2 and 
other Group 2 PHAs 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 non-
emergency 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 are 
automatically selected for Joint Review.
    (i) Joint Review. The purpose of Joint Review is for HUD to discuss 
with a PHA the proposed modernization program, as set forth in the CIAP 
Application, review long-term viability and cost reasonableness 
determinations, and determine the size of the grant, if any, to be 
awarded. HUD shall notify each PHA whose application has been selected 
for further processing as to whether Joint Review will be conducted on-
site or off-site (e.g., by telephone or in-office meeting). A PHA shall 
prepare for Joint Review by preparing a draft CIAP budget and reviewing 
the other items to be covered during Joint Review, as prescribed by 
HUD. If conducted on-site, Joint Review may include an inspection of 
the proposed physical work. PHAs not selected for Joint Review will be 
advised in writing of the reasons for non-selection.
    (j) Funding decisions. After all Joint Reviews are completed, HUD 
shall adjust the PHAs, developments, and work items to be funded and 
the amounts to be awarded, on the basis of information obtained from 
Joint Reviews, environmental reviews, and FHEO review, and make the 
funding decisions. A PHA will not be selected for CIAP funding if there 
is a duplication of funding. HUD shall select all bona fide emergencies 
in Group 1 before funding Group 2 applications. After funding 
announcement, HUD shall request a funded PHA to submit a CIAP budget, 
including an implementation schedule, and any other required documents, 
including the ACC amendment. PHAs not selected for funding will be 
advised in writing of the reasons for non-selection.
    (k) ACC amendment. After HUD approval of the CIAP budget, HUD and 
the PHA shall enter into an ACC amendment in order for the PHA to draw 
down 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). The PHA Executive Director, where authorized by 
the Board of Commissioners and permitted by State law, may sign the ACC 
amendment on behalf of the PHA. HUD has the authority to condition an 
ACC amendment (e.g., to require a PHA to hire a modernization 
coordinator or contract administrator to administer its modernization 
program).
    (l) Declaration of trust. As HUD may require, the PHA shall execute 
and file for record a Declaration of Trust, as provided under the ACC, 
to protect the rights and interests of HUD throughout the 20-year 
period during which the PHA is obligated to operate its developments in 
accordance with the ACC, the Act, and HUD regulations and requirements.


Sec. 968.215  Resident and homebuyer participation.

    A PHA shall establish a Partnership Process, as defined in 
Sec. 968.105, to develop, implement and monitor the CIAP. Before 
submission of the CIAP application, a PHA shall consult with the 
residents, the resident organization, or the resident management 
corporation (see part 964, subpart C of this chapter) (herein referred 
to as the resident) of the development(s) being proposed for 
modernization, regarding its intent to submit an application and to 
solicit resident comments. A PHA shall give residents a reasonable 
opportunity to present their views on the proposed modernization and 
alternatives to it and shall give full and serious consideration 

[[Page 8744]]
to resident recommendations. A PHA shall respond in writing to the 
residents, indicating its acceptance or rejection of resident 
recommendations, consistent with HUD requirements and the PHA's own 
determination of efficiency, economy, and need. After HUD approval of 
the modernization program, a PHA shall inform the residents of the 
approved work items and its progress during implementation. Where HUD 
does not approve the modernization program, a PHA shall so inform the 
residents.


Sec. 968.225  Budget revisions.

    (a) A PHA shall not incur any modernization cost in excess of the 
total HUD-approved CIAP budget. A PHA shall submit a budget revision, 
in a form prescribed by HUD, if the PHA plans to deviate from the 
originally approved modernization program, as it was competitively 
funded, by deleting or substantially revising approved work items or 
adding new work items that are unrelated to the originally approved 
modernization program, or to change the method of accomplishment from 
contract to force account labor, except as provided in paragraph (b)(4) 
of this section.
    (b) In addition to the requirements of paragraph (a) of this 
section, a PHA shall comply with the following requirements:
    (1) A PHA is not required to obtain prior HUD approval if, in order 
to complete the originally approved modernization program, the PHA 
needs to delete or revise approved work items or add new related work 
items consistent with the original modernization program. In such case, 
a PHA shall certify that the revisions are necessary to carry out the 
approved work and do not result in substantial changes to the 
competitively funded modernization program.
    (2) A PHA shall not incur any modernization cost on behalf of any 
development that is not covered by the original CIAP application.
    (3) Where there are funds leftover after completion of the 
originally approved modernization program, a PHA may, without prior HUD 
approval, use the remaining funds to carry out eligible modernization 
activities at developments covered by the original CIAP application.
    (4) If a PHA is both an overall high performer and a modernization 
high performer under the Public Housing Management Assessment Program 
(PHMAP), the PHA is not required to obtain prior HUD approval to change 
the method of accomplishment from contract to force account labor.


Sec. 968.230  Progress reports.

    For each six-month period ending March 31 and September 30, until 
completion of the modernization program or expenditure of all funds, a 
PHA shall submit to HUD a progress report, in a form prescribed by HUD. 
Where HUD determines that a PHA is having implementation problems, HUD 
may require more frequent reporting.


Sec. 968.235  Time extensions.

    A PHA shall not obligate or expend funds after the obligation or 
expenditure deadline date approved by HUD in the original 
implementation schedule without a time extension, as follows:
    (a) Certification. A PHA may extend an obligation or expenditure 
deadline date no later than 30 calendar days after the existing 
deadline date, without prior HUD approval, for a period commensurate 
with the delay, where the PHA certifies that the delay is due to 
reasons outside of the PHA's control, such as:
    (1) Need to use leftover funds from a completed modernization 
program for additional work;
    (2) Unforeseen delays in contracting or contract administration;
    (3) Litigation; and
    (4) Delay by HUD or other institutions. Delay by the PHA's staff or 
Board of Commissioners or a change in the Executive Director is not 
considered to be outside of the PHA's control.
    (b) Prior HUD approval. Where a PHA is unable to meet an obligation 
or expenditure deadline date and the delay is due to reasons within the 
PHA's control, the PHA may request HUD approval of a time extension no 
later than 30 calendar days after the deadline date, to avoid recapture 
of funds. The request shall include an explanation of the delay, steps 
take to prevent future delay, and the requested extension.


Sec. 968.240  HUD review of PHA performance.

    HUD shall periodically review PHA performance in carrying out its 
approved modernization program to determine compliance with HUD 
requirements, the adequacy of a PHA's inspections as evidenced by the 
quality of work, and the timeliness of the work. HUD's review may be 
conducted either in-office or on-site. Where conducted in-office, a PHA 
shall forward any requested documents to HUD for post-review. Where 
deficiencies are noted, a PHA shall take such corrective actions as HUD 
may direct.
    27. The heading for subpart C is revised to read as follows:

Subpart C--Comprehensive Grant Program (for PHAs That Own or 
Operate 250 or More Public Housing Units)


Sec. 968.301  [Removed]

    28. Section 968.301 is removed.


Sec. 968.305  [Amended]

    29. Section 968.305 is amended by:
    a. Removing the definition for ``comprehensive grant number''; and
    b. Removing references to ``Sec. 968.310(a)(3)'', 
``968.320(d)(5)'', and ``968.320(d)'', wherever they appear, and adding 
in their place, respectively, references to ``968.112(f)'', 
``968.315(e)(5)'', and ``968.315(e)''.


Sec. 968.310  [Removed]

    30. Section 968.310 is removed.


Sec. 968.315  [Redesignated as Sec. 968.310]

    31. Section 968.315 is redesignated as Sec. 968.310; and newly 
redesignated Sec. 968.310 is amended by:
    a. Removing from paragraph (a)(1) the phrase, ``under this 
subpart,'';
    b. Removing from paragraph (b)(1) the references to ``968.320'' and 
``968.330'' and adding in their place references to ``968.315'' and 
``968.325'', respectively;
    c. Removing from paragraph (c)(5) the references to ``part 905'' 
and ``Sec. 905.135'' and adding in their place references to ``part 
950'' and ``Sec. 950.135'', respectively;
    d. Removing paragraph (d); and
    e. Revising the section heading to read, ``Sec. 968.310 
Determination of formula amount.''
    32. A new Sec. 968.315 is added, to read as follows:


Sec. 968.315  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 
PHAs in writing of their formula amount. For planning purposes, PHAs 
may use the amount they received under CGP in the prior year in 
developing their comprehensive plan, or they may wait for the annual 
HUD notification of formula amount under Sec. 968.310(b)(1).
    (b)(1) Resident participation. A PHA 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. In addition, the PHA shall consult with resident 
management corporations (RMCs) to the extent that an RMC manages a 
development covered by the comprehensive plan. The PHA, in partnership 
with the residents, must develop and implement a process for 

[[Page 8745]]
resident participation that ensures that residents are involved in a 
meaningful way in all phases of the CGP. Such involvement shall involve 
implementing the Partnership Process as a critical element of the CGP.
    (2) Establishment of Partnership Process. The PHA, in partnership 
with the residents of the developments covered by the plan (and which 
may include resident leaders, resident councils, resident advisory 
councils/boards, and RMCs) must 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 ensure 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 PHA shall develop and 
implement capacity building strategies to ensure meaningful resident 
participation in CGP. Such technical assistance efforts for residents 
are eligible management improvement costs under CGP;
    (ii) To enable residents to participate, on a PHA-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 under paragraph (b)(4) of this section 
and the public hearing under paragraph (b)(5) of this section, the PHA 
shall provide public notice of the advance meeting and the public 
hearing in a manner determined by the PHA that ensures notice to all 
duly elected resident councils.
    (4) Advance meeting for residents. The PHA 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 councils at which the PHA shall explain the components of the 
comprehensive plan. The meeting shall be open to all residents and duly 
elected resident councils.
    (5) Public hearing. The PHA 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 approval programs. The public hearing shall provide ample 
opportunity for residents, local government officials, and other 
interested parties to express their priorities and concerns. The PHA 
shall give full consideration to the comments and concerns of 
residents, local government officials, and other interested parties.
    (c) Local government participation. A PHA shall consult with and 
provide information to appropriate local government officials with 
respect to the development of the comprehensive plan to ensure that 
there is coordination between the actions taken under the consolidated 
plan (see 24 CFR part 91) for project and neighborhood improvements 
where public housing units are located or proposed for construction 
and/or modernization and improvement and to coordinate meeting public 
and human service needs of the public and assisted housing projects and 
their residents. In the case of a PHA with developments in multiple 
jurisdictions, the PHA may meet this requirement by consulting with an 
advisory group representative of all the jurisdictions. At a minimum, 
such consultation must 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 PHA-wide and a specific description of the PHA's process for 
maximizing the level of participation by residents and a summary of the 
general issues raised on the plan by residents and others during the 
public comment process and the PHA's response to the general issues. 
PHA records, such as minutes of planning meetings or resident surveys, 
shall be maintained in the PHA's files and made available to residents, 
resident organizations, and other interested parties upon request; and
    (3) An opportunity to express their priorities and concerns to 
ensure due consideration in the PHA's planning process;
    (d) Participation in coordinating entities. To the extent that 
coordinating entities are set up to plan and implement the consolidated 
plans (under 24 CFR part 91), the PHA shall participate in these 
entities to ensure coordination with broader community development 
strategies.
    (e) Contents of comprehensive plan. The comprehensive plan shall 
identify all of the physical and management improvements needed for a 
PHA and all of its developments, and that represent needs eligible for 
funding under Sec. 968.112. The plan also shall 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. Where long-term 
physical and social viability of the development is dependent upon 
revitalization of the surrounding neighborhood in the provision of or 
coordination of public services, or the consolidation or coordination 
of drug prevention and other human service initiatives, the PHA shall 
identify these needs and strategies. In addition, the PHA shall 
identify the funds or other resources in the consolidated plan that are 
to be used to help address these needs and strategies and the 
activities in the comprehensive plan that strengthen the consolidated 
plan. Each comprehensive plan shall contain the following elements:
    (1) Executive summary. A PHA shall include as part of its 
comprehensive plan an executive summary to facilitate review and 
comprehension by development residents and by the public. The executive 
summary shall include the following:
    (i) A summary of total preliminary estimated costs to address 
physical needs by each development and PHA-wide physical and management 
needs; and
    (ii) A specific description of the PHA's process for maximizing the 
level of participation by residents during the development, 
implementation and monitoring of the Comprehensive Plan, a summary of 
the general issues raised on the plan by residents and others during 
the public comment process and the PHA's response to the general 
issues. PHA records, such as minutes of planning meetings or resident 
surveys, shall be maintained in the PHA's files and made available to 
residents, duly elected resident councils, and other interested 
parties, upon request;
    (2) Physical needs assessment. (i) Requirements. The physical needs 
assessment identifies all of the work that a PHA would need to 
undertake to bring each of its developments up to the modernization and 
energy conservation standards, as required by the Act, to comply with 
lead-based paint testing and abatement requirements under this part, 
and to comply with other program requirements under Sec. 968.110. The 

[[Page 8746]]
physical needs assessment is completed without regard to the 
availability of funds, and shall include the following:
    (A) A brief summary of the physical improvements necessary to bring 
each such development to a level at least equal to applicable HUD 
standards with respect to modernization standards, energy conservation 
and life-cycle cost effective performance standards, lead-based paint 
testing and abatement standards. This summary must indicate the 
relative urgency of need. If the PHA has no physical improvement needs 
at a particular development at the time it completes its comprehensive 
plan, it must so indicate. Similarly, if the PHA intends to demolish, 
partially demolish, convert, or dispose of a development (or units 
within a development) it must 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) Any physical disparities between buildings occupied 
predominantly by one racial or ethnic group and, in such cases, the 
physical improvements required to correct the conditions; and
    (E) In addition, with respect to vacant or non-homebuyer occupied 
Turnkey III units, the estimated number of units that the PHA is 
proposing for substantial rehabilitation and subsequent sale, in 
accordance with Sec. 968.112(d)(3).
    (ii) Source of data. The PHA shall identify in its needs assessment 
the sources from which it derived data to develop the physical needs 
assessment under this paragraph (e)(2) 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 PHA and of each viable 
development so 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 memorandum of agreement or improvement plan, the PHA may 
simply include a cross-reference to these documents):
    (1) The management, financial, and accounting control systems of 
the PHA;
    (2) The adequacy and qualifications of personnel employed by the 
PHA in its management and operation, 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 PHMAP, audits 
and HUD monitoring reviews that are not addressed under paragraph 
(e)(3)(i)(A) of this section. To the extent that any of these is 
addressed in a HUD-approved memorandum of agreement or improvement 
plan, the PHA may include a cross-reference to these documents;
    (C) Any other management and operations needs that the PHA wants to 
address at the PHA-wide or development level; and
    (D) A PHA-wide preliminary cost estimate for addressing all the 
needs identified in the management needs assessment, without regard to 
the availability of funds;
    (ii) Sources of funds. The PHA shall identify in its needs 
assessment the sources from which it derived data to develop the 
management needs assessment under this paragraph (e)(3) 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 (e)(2) and (e)(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 PHA 
shall determine whether the unfunded hard costs satisfy the definition 
of ``reasonable cost.'' Where the PHA wishes to fund a development, for 
other than emergencies, where hard costs exceed that reasonable cost, 
the PHA shall submit written justification to the Field Office. If the 
Field Office agrees with the PHA's request, the Field Office shall 
forward its recommendation to Headquarters for final decision. Where 
the estimated per unit unfunded hard cost is equal to or less than the 
per unit TDC for the smallest bedroom size at the development, no 
further computation of the TDC limit is required. The PHA shall keep 
documentation in its files to support all cost determinations. The 
Field Office 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 PHA's documentation in support of its 
cost reasonableness, taking into account broader efforts to revitalize 
the neighborhoods in which the development is located;
    (ii) Determination of non-viability. Where a PHA's analysis of a 
development under paragraph (e) of this section establishes that 
completion of the identified improvements and replacements will not 
result in the long-term physical and social viability of the 
development at a reasonable cost, the PHA shall not expend CGP funds 
for the development, except for emergencies and essential non-routine 
maintenance necessary to maintain habitability until residents can be 
relocated. The PHA shall specify in its comprehensive plan the actions 
it proposes to take with respect to the non-viable development (e.g., 
demolition or disposition under 24 CFR part 970);
    (5) Five-year action plan. (i) General. The comprehensive plan 
shall include a rolling five-year action plan to carry out the 
improvements and replacements (or a portion thereof) identified under 
paragraphs (e)(2) and (e)(3) of this section. In developing its five-
year action plan, the PHA shall assume that the current year funding or 
formula amount will be available for each year of its five-year action 
plan, whichever the PHA is using for planning purposes, plus the PHA's 
estimate of the funds that will be available from other sources, such 
as state and local governments. All activities specified in a PHA's 
five-year action plan are contingent upon the availability of funds;
    (ii) Requirements. Under the action plan, a PHA must indicate how 
it intends to use the funds available to it under the CGP to address, 
over a five-year period, the deficiencies (or a portion of the 
deficiencies) identified in its physical and management needs 
assessments, as follows:
    (A) Physical condition. With respect to the physical condition of a 
PHA's developments, a PHA must indicate in its action plan how it 
intends to address, over a five-year period, the 

[[Page 8747]]
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 conservation 
standards. This includes specifying the work to be undertaken by the 
PHA 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 
developing its action plan, a PHA shall give priority to the following:
    (1) Activities required to correct emergency conditions;
    (2) Activities required to meet statutory or other legally mandated 
requirements (e.g., compliance with a court-ordered desegregation plan 
or voluntary compliance agreement);
    (3) Activities required to meet the needs identified in the Section 
504 needs assessment within the regulatory timeframe; and
    (4) Activities required to complete lead-based paint testing and 
abatement requirements;
    (B) Management and operations. A PHA must 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 PHA, 
the PHA must 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 PHMAP, 
audits, HUD monitoring reviews, and self-assessments. The action plan 
must indicate the relative urgency of need;
    (2) A preliminary PHA-wide cost estimate, by major work category.
    (iii) Procedure for maintaining current five-year action plan. The 
PHA shall maintain a current five-year action plan by annually amending 
its five-year action plan, in conjunction with the annual submission;
    (6) Local government statement. The comprehensive plan shall 
include a statement signed by the chief executive officer of the unit 
of general local government (or, in the case of a PHA with developments 
in multiple jurisdictions, from the CEO of each such jurisdiction) 
certifying to the following:
    (i) The PHA developed the comprehensive plan/five-year action plan 
or amendments thereto in consultation with officials of the appropriate 
governing body and with development residents covered by the 
comprehensive plan/five-year action plan, in accordance with the 
requirements of paragraphs (b) and (c) of this section;
    (ii) The comprehensive plan/five-year action plan or amendments 
thereto are consistent with the appropriate governing body's assessment 
of its low income housing needs (as evidenced by its consolidated plan 
under 24 CFR part 91, if applicable), and that the appropriate 
governing body will cooperate in providing resident programs and 
services; and
    (iii) The PHA's proposed drug elimination activities are 
coordinated with, and supportive of, local drug elimination strategies 
and neighborhood improvement programs, if applicable; and
    (7) PHA resolution. The plan shall include a resolution, in a form 
prescribed by HUD, adopted by the PHA Board of Commissioners, and 
signed by the Board Chairman of the PHA, approving the comprehensive 
plan or any amendments.
    (f) Amendments to the comprehensive plan.--(1) Extension of time 
for performance. A PHA 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 forth in the 
comprehensive plan or has not provided the assistance in a timely 
manner;
    (2) Amendments to needs assessments. The PHA 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 PHA may propose an amendment to its needs 
assessments, in connection with the submission of its annual submission 
(see Sec. 968.325) or at any other time. These amendments shall be 
reviewed by HUD in accordance with Sec. 968.320.
    (3) Six-year revision of comprehensive plan. Every sixth year 
following the initial year of participation, the PHA shall submit to 
HUD, with its annual submission, a complete update of its comprehensive 
plan. A PHA may elect to revise some or all parts of the comprehensive 
plan more frequently.
    (4) Annual revision of five-year action plan. Annually, the PHA 
shall submit to HUD, with its annual submission, an update of its five-
year action plan, eliminating the previous year and adding an 
additional year. The PHA 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 must be submitted with the PHA resolution under 
Sec. 968.315(e)(7).
    (g) Prerequisite for receiving assistance.--(1) Prohibition of 
assistance. No financial assistance, except for emergency work to be 
funded under Secs. 968.103(b) and 968.112(a)(1)(ii), and for 
modernization needs resulting from disasters under Sec. 968.103(b), may 
be made available under this subpart unless HUD has approved a 
comprehensive plan submitted by the PHA that meets the requirements of 
this section. A PHA 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 PHA 
for emergencies) added to the subsequent year's appropriation of funds 
for grants under this part. HUD shall allocate such funds to PHAs and 
IHAs participating in the CGP in accordance with the formula under 
Sec. 968.103(e) and (f) in the subsequent FFY. A PHA that elects in any 
FFY not to participate in the CGP may participate in the CGP in 
subsequent FFYs;
    (2) Requests for emergency assistance. A PHA may receive funds from 
its formula allocation to address emergency modernization needs where 
HUD has not approved a PHA's comprehensive plan. To request such 
assistance, a PHA 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. 968.305. (Approved by the 
Office of Management and Budget under control number 2577-0157)


Sec. 968.320  [Removed]

    33. Section 968.320 is removed.


Sec. 968.325  [Redesignated as Sec. 968.320]

    34. Section 968.325 is redesignated as Sec. 968.320; and newly 
redesignated Sec. 968.320 is amended by:
    a. Removing from paragraph (a)(1)(i) the reference to 
``Sec. 968.320(d)'' and adding in its place a reference to 
``Sec. 968.315(e)'';
    b. Removing from paragraph (c) the references to ``Sec. 968.340'' 
and ``Sec. 968.345'' and adding in their place references to 
``Sec. 968.330'' and ``Sec. 968.335'', respectively; and 

[[Page 8748]]

    c. Revising paragraph (b)(2) to read as follows:


Sec. 968.320  HUD review and approval of comprehensive plan (including 
five-year action plan).

* * * * *
    (b) * * *
    (2) HUD shall approve the Comprehensive Plan except where it makes 
a determination in accordance with one or more of the following:
    (i) Comprehensive Plan is incomplete in significant matters;
    (ii) Identified needs are plainly inconsistent with facts and data;
    (A) Identified physical improvements and replacements are 
inadequate;
    (B) Identified management improvements are inadequate;
    (C) Proposed physical and management improvements fail to address 
identified needs;
    (iii) Action plan is plainly inappropriate to meeting identified 
needs;
    (iv) Inadequate demonstration of long-term viability at reasonable 
cost; and
    (v) Contradiction of local government certification or PHA 
resolution.
* * * * *


Sec. 968.330  [Redesignated as Sec. 968.325]

    35. Section 968.330 is redesignated as Sec. 968.325; and newly 
redesignated Sec. 968.325 is amended by:
    a. Removing from paragraph (a) the reference to 
``Sec. 968.315(b)(1)'' and adding in its place a reference to 
``Sec. 968.310(b)(1)'' and by moving the phrase ``, as discussed in 
Sec. 968.320(d)(5)(i)'' from the end of the penultimate sentence in the 
paragraph to the end of the sentence before it, and revising the number 
``Sec. 968.320'' in that phrase to read ``Sec. 968.315'';
    b. Removing from paragraph (d) introductory text the reference to 
``Sec. 968.320'' and adding in its place a reference to 
``Sec. 968.315'';
    c. Removing from paragraph (e)(8) the reference to 
``Sec. 968.320(d)(7)'' and adding in its place a reference to 
``Sec. 968.315(e)(7)'';
    d. Removing from paragraph (f) references to ``Sec. 968.320(e)'' 
and ``Sec. 968.325'' and adding in their place references to 
``Sec. 968.315(f)'' and ``Sec. 968.320'';
    e. Removing from paragraph (g)(2)(ii) the reference to 
``Sec. 968.320(d)'' and adding in its place a reference to 
``Sec. 968.315(e)'';
    f. Removing from paragraph (h) the reference to ``Sec. 968.305'' 
and adding in its place a reference to ``Sec. 968.330'';
    g. Removing from paragraph (i)(1) references to ``Sec. 968.345'' 
and adding in their place references to ``Sec. 968.335'';
    h. Removing from paragraph (j) the words ``to obtain'' and adding 
in their place the words ``in order for the PHA to draw down''; and
    i. Revising the section heading and paragraph (e)(4), to read as 
follows:


Sec. 968.325  Annual submission of activities and expenditures.

* * * * *
    (e) * * *
    (4) For each development and for any management improvements not 
covered by a HUD-approved memorandum of agreement or management 
improvement plan, a schedule for the use of current year funds, 
including target dates for the obligation and expenditure of the funds 
(see Sec. 968.125);
* * * * *


Sec. 968.335  [Removed]

    36. Section 968.335 is removed.


Sec. 968.340  [Redesignated as Sec. 968.330]

    37. Section 968.340 is redesignated as Sec. 968.330, and newly 
redesignated Sec. 968.330 is amended by removing the paragraph 
designation and heading from paragraph (a), and by removing paragraph 
(b).


Sec. 968.345  [Redesignated as Sec. 968.335]

    38. Section 968.345 is redesignated as Sec. 968.335; and newly 
redesignated Sec. 968.335 is amended by:
    a. Removing paragraphs (a)(1)(i) and (a)(1)(ii), paragraphs 
(a)(2)(i) and (a)(2)(ii), and paragraphs (a)(3)(i) through (a)(3)(iii);
    b. Removing from paragraph (d) the reference to ``Sec. 905.684'' 
and adding in its place a reference to ``Sec. 968.330'';
    c. Removing from paragraph (e)(7) the words ``(see 
Sec. 968.315(d))'';
    d. Removing from paragraph (g) references to ``Sec. 905.135'' and 
``Sec. 905.601'' and adding in their place references to 
``Sec. 950.135'' and ``Sec. 968.103(e) and (f)'', respectively;
    e. Removing from paragraph (j) references to ``Sec. 978.345(h)'' 
and ``Sec. 968.345(g)'' and adding in their place references to 
``paragraph (h) of this section'' and ``paragraph (g) of this 
section'', respectively; and
    f. Removing the reference in paragraph (k) to ``Sec. 968.312(c)'' 
and adding in its place a reference to ``Sec. 968.310(c)''.

Subpart D--Vacancy Reduction Program


Secs. 968.401, 968.403, 968.405, 968.407, 968.410, and 
968.413  [Removed]

    39. Sections 968.401, 968.403, 968.405, 968.407, 968.410, and 
968.413 are removed.

    Dated: February 8, 1996.
Michael B. Janis,
General Deputy Assistant Secretary for Distressed and Troubled Housing 
Recovery.
[FR Doc. 96-4814 Filed 3-4-96; 8:45 am]
BILLING CODE 4210-33-P