[Federal Register Volume 61, Number 148 (Wednesday, July 31, 1996)]
[Rules and Regulations]
[Pages 40084-40113]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19350]



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Part II





Department of Housing and Urban Development





_______________________________________________________________________



Office of the Secretary



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24 CFR Part 953



Community Development Block Grants for Indian Tribes and Alaska Native 
Villages; Final Rule

  Federal Register / Vol. 61, No. 148 / Wednesday, July 31, 1996 / 
Rules and Regulations  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Secretary

24 CFR Part 953

[Docket No. FR-2880-F-11]
RIN 2577-AB31


Community Development Block Grants for Indian Tribes and Alaska 
Native Villages

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule.

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

SUMMARY: This rule makes final the requirements for the Community 
Development Block Grant Program for Indian tribes and Alaska native 
villages. Several revisions have been made to the previously published 
interim rule by this final rule. These revisions have been made in 
response to public comments, to correct errors and unintentional 
omissions in the interim rule, and to include in this part those 
applicable sections of subparts C, J, and K of part 570 which were 
included by reference in the interim rule.

EFFECTIVE DATE: August 30, 1996.

FOR FURTHER INFORMATION CONTACT: Robert Barth, Office of Native 
American Programs, Room 6728, Department of Housing and Urban 
Development, 450 Golden Gate Avenue, San Francisco, CA 94102. (415) 
436-8121. TTY (415) 436-6594. (These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The information collection requirements contained in this rule have 
been approved by the Office of Management and Budget (OMB) in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520), and assigned OMB control number 2577-0191. 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.

Background

    This final rule represents the culmination of a process which 
commenced with the publication of a proposed rule on June 21, 1991 (56 
FR 28666). This was followed by the first interim rule on April 7, 1992 
and the second and last interim rule which was published in the Federal 
Register of July 27, 1994 (59 FR 38326). The last interim rule became 
effective on October 1, 1994, and invited public comments for a five 
month period ending December 27, 1994. The principal impetus for this 
rule making process was the need to implement various statutory 
mandates included in Section 105 of the Department of Housing and Urban 
Development Reform Act (Pub. L. 101-235) as amended by the National 
Affordable Housing Act of 1990. In addition, the transfer of the 
authority for the Community Development Block Grant Program for Indian 
Tribes and Alaska Native Villages to the Office of Public and Indian 
Housing, and specifically the Office of Native American Programs within 
that office, occasioned a re-evaluation of various policy 
determinations reflected or embodied in previously issued program 
regulations.

Public Comments

    The Department of Housing and Urban Development (HUD) received 18 
individual comments from 5 sources on the interim rule published on 
July 27, 1994. HUD received 3 letters from tribes and 2 from 
representative associations. General comments are discussed below and 
are followed by specific comments. The specific comments and the 
Department's responses are discussed under ``Specific Comments,'' 
according to the section where they appear in the interim rule.

General Comments

    Comment: One comment was received which stated that the 1994 
revision of the 1992 rule is a ``long step in the wrong direction'' in 
that the entire thrust of this rule is the centralization of decision 
making in the HUD Central Office to the ultimate detriment of the 
Indian tribes. This perception is apparently based upon the removal of 
specific application procedures and detailed selection criteria from 
the rule. As stated in the rule, this information would be included in 
the Notices of Funding Availability (NOFAs) published for specific 
funding cycles. The commenter is of the opinion that this change would 
significantly, if not completely, remove the opportunity for public 
comment on these items. The commenter also states that the application 
kits provided by HUD for the last two funding rounds (presumably FY 
1993 and FY 1994) contained requirements which went beyond NOFA 
requirements. This statement is apparently provided as additional 
support for the commenter's opinion that the centralization of decision 
making with little or no opportunity for public comment is the intent 
of this rule.
    Response: It is the position of the Department that centralizing 
decision making and restricting opportunity for public comment on this 
process certainly is not the intent nor the result of this rule. The 
inclusion of the specifics of application procedures and the detailed 
selection criteria in the NOFA rather than in the rule does not 
increase the centralization of decision making; application review and 
funding decisions will continue to be made at the Area ONAPs. With 
respect to the effect of these changes on the opportunity for public 
comment, at best such opportunity would be increased by moving in this 
direction and in no conceivable circumstance would such opportunity be 
diminished as compared to that afforded under the previous interim 
rule. The implementing regulations (24 CFR part 4) for section 103 of 
the HUD Reform Act provide a significant window of opportunity for 
public comment on the content of a NOFA. The Department encourages 
tribes and other interested parties to take advantage of the 
opportunity to impact the process during this period. It is 
considerably easier to change the content of a NOFA from one funding 
cycle to the next as compared with the process required to amend 
program regulations.
    Regarding the relationship between the NOFA and the application kit 
issued by the Department, the purpose of the kit is to assist the 
applicant in understanding NOFA and regulatory requirements and, if 
necessary, to supplement NOFA instructions regarding form use and 
completion. The purpose of the kit is not to impose additional 
requirements on the applicant. The application kit issued for the FY 
1995 ICDBG funding cycle was very closely reviewed to ensure that none 
of the information provided established requirements beyond the NOFA or 
Program Regulations.
    Comment: One comment was received which stated that renaming the 
Phoenix Office of Native American Programs as the Southwest Office of 
Native American Programs works to the detriment of the tribes in the 
jurisdiction of that office. The commenter also questions the source of 
the funds necessary to raise the base allocation to each Area ONAP from 
Sec. 500,000 to Sec. 1,000,000.
    Response: The Department does not believe that changing the name of 
the Area ONAP located in Phoenix will work to the detriment of any 
tribes; the name change does not signify anything other than a change 
in the name so that it better reflects the jurisdiction of this office; 
the names of all other Area ONAPs have also been changed for the same 
reason. With respect to the source of funds necessary to increase the 
base

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allocation to each Area ONAP, it is to be noted that the change from 
$500,000 to $1,000,000 in the base allocation represents the second 
such change since the inception of the ICDBG program in 1978; the 
original base allocation was $250,000. In making these changes it has 
been the intent of the Department to increase the nation-wide equitable 
availability of ICDBG funds.
    Comment: One commenter raised an objection to moving the imminent 
threat program from the Area ONAPs to Headquarters. It is the 
observation of the commenter that Headquarters staff could not be as 
knowledgeable about imminent threats in a specific area of the country 
as the Area ONAP staff would be for that area.
    Response: The Department agrees with the observation of the 
commenter. However, the objection appears to be based on a misreading 
of the changes made to subpart E--Imminent Threat Grants. These changes 
were not intended to move the decision making process for such grants 
from the Area ONAP to the Headquarters level nor is there such a 
resultant effect. A clarifying memorandum was issued by ONAP on 
February 9, 1995, to all Area ONAPs to make certain that this is 
understood by all ONAP staff involved in this program. The changes were 
to ensure that any eligible applicant would have potential access to 
imminent threat funds. Before these changes, the establishment of an 
Imminent Threat Set Aside was left to the determination of each Area 
ONAP; some offices established such set asides and others did not. 
Under this rule, all eligible applicants have the same potential access 
to funds.
    Comment: One commenter raised a strong objection to the elimination 
of the provisions for correcting procedural errors. This commenter is 
also of the opinion that HUD should have a uniform appeal procedure for 
all competitive programs which would allow the redress of errors by the 
raters in mathematical calculations or in the interpretation of program 
requirements.
    Response: Although the provisions for correcting procedural errors 
have been removed from the rule, it was not the intent of the 
Department to eliminate such a process; language identical to that in 
the previous rule was published as part of the FY 1995 ICDBG NOFA. 
Unless changed through a subsequent process of consultation, it will be 
published as part of all subsequent NOFAs.
    The argument made by the commenter for a uniform appeals process is 
not related to the need to change the subject rule; it will, however, 
be taken under advisement. It should however be noted that the 
interpretation of program requirements is within the purview and 
responsibility of the Department and, therefore, any appeals process 
would be limited, as it always has been limited, to perceived errors of 
compliance with procedural requirements.
    Comment: One commenter (representing an association of housing 
authorities) supports the resolution passed at the National American 
Indian Housing Council's 1994 annual meeting that 1.5 percent of the 
national appropriation for CDBG be reserved for the ICDBG.
    Response: Increasing the percentage of the national CDBG 
appropriation that is provided for the ICDBG program to 1.5 percent 
from the current 1 percent would require a statutory change and it is, 
therefore, outside the scope of rule making.
    Comment: One commenter (representing an association of housing 
authorities) strongly urges the allowance of comprehensive planning as 
an eligible activity under the ICDBG program.
    Response: Comprehensive planning is an eligible activity under the 
ICDBG program (Sec. 953.205(a)). Funding for such activities could 
however be affected by the statutory limitation (reiterated at 
Secs. 953.205(c) and 953.206) which provides that no more than 20 
percent of the funds of any ICDBG program may be used for planning and 
administrative activities.

Specific Comments

Section 953.6--Technical Assistance

    Comment: One commenter recommends that expanded technical 
assistance should be made available to tribes/villages and that the 
Department should provide in-depth regulations regarding the technical 
assistance role of the field staff.
    Response: On January 5, 1994, HUD's General Counsel issued a 
memorandum to all HUD staff in which he clearly describes the type and 
form of technical assistance which may be provided by HUD staff to 
potential applicants for assistance under the restrictions imposed by 
Section 102 of the HUD Reform Act. As it is described in this 
memorandum, permissible technical assistance activities include 
explaining and responding to questions concerning program regulations, 
defining terms in an application package, and providing other forms of 
technical guidance that may be described in the NOFA. In addition, 
before the deadline for the submission of applications, HUD employees 
may assist applicants by reviewing draft applications and identifying 
those parts of the applications that need substantive improvement. HUD 
employees may not, however, advise applicants on how to make the 
improvements. The provision of technical assistance of a type and in a 
manner inconsistent with that described by the General Counsel would 
not be allowed by the Reform Act and, therefore, would require a 
statutory change to be possible.
    The Department encourages potential applicants to take advantage of 
the extensive technical assistance available from the staff of the 
various Area ONAPs. One of the principal reasons behind the recent 
reorganization of the Area ONAPs was to improve the ability of the 
organization to meet the technical assistance needs of its customers 
within the parameters established by the HUD Reform Act.

Section 953.100(b)(1)--Ceilings

    Comment: Two comments were made regarding the establishment of 
grant ceilings. One commenter stated that the method of setting grant 
ceilings is inequitable because in certain Area ONAP jurisdictions, 
smaller tribes are allowed to compete for the same amount as larger 
tribes. The other commenter stated that there should not be a policy of 
allowing Area ONAPs to establish different ceilings for different size 
tribes/villages as is done by certain of these offices.
    Response: Each Area ONAP has the ability to recommend the ceiling 
or ceilings for its jurisdiction. The Assistant Secretary for Public 
and Indian Housing has the final authority to determine these ceilings. 
The Department has determined that the present procedure for 
establishing ceilings is the most appropriate method and, therefore, 
has made no change to this section other than to eliminate a sentence 
which was merely descriptive of one option available to Area ONAPs.

Section 953.101--Allocation of Funds

    Comment: One commenter supports the increase in the base amount 
allocation to each Area ONAP but strongly disagrees with the formula 
for allocating the remaining funds and contends that it is unfair and 
detrimental to the Alaska native villages. It is the position of the 
commenter that using the total eligible Native American population in 
an Area ONAP's jurisdiction as a factor in this allocation process is 
not equitable. The commenter provides three suggestions for changing 
the formula, all of which are based upon using the number of eligible 
applicants in an Area ONAP's

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jurisdiction rather than the eligible Native American population in 
each jurisdiction.
    Response: It is the position of the Department that the present 
procedure used to allocate funds to each Area ONAP after the base 
amount is allocated is the most appropriate method to use to ensure 
that the allocations reflect the relative community development needs 
of eligible applicants in each area. The number of eligible applicants 
in each area is not an accurate measure of the relative community 
development needs of the eligible applicants in that area compared to 
another area.
    Comment: One commenter states that the U.S. Census population data 
is not a true and accurate count of Native populations and that HUD 
should therefore allow each Area ONAP to request and use more accurate 
data from the tribes/villages in its area.
    Response: The Department recognizes that census data on Indian and 
Alaska Native populations may be incomplete or inaccurate. Census data 
is, however, the only such information which is consistently available 
and which is reasonably accurate when aggregated by Area ONAP 
jurisdiction. It has been the experience of the Department that census 
data inaccuracies tend to affect each area equally and, therefore, do 
not impact the relative distribution of Native American population 
characteristics such as poverty and substandard housing conditions. 
Based on these considerations, the Department will continue to use U.S. 
census data in the formula for allocating funds to the Area ONAPs.
    In order to eliminate any possible confusion or misunderstanding 
regarding the source of data used to allocate funds to the Area ONAPs, 
paragraph (a)(2) of this section has been revised to include explicit 
reference to the U.S. Bureau of the Census. A corresponding clarifying 
revision has been made to the definition of eligible Indian population 
in Sec. 953.4.
    These revisions are not substantial changes to the rule since data 
provided by the U. S. Bureau of the Census has been used to allocate 
funds to field offices since the inception of the ICDBG program in 
1978.
    Please be advised, however, that the Department intends to schedule 
a series of consultation sessions throughout the country. During these 
sessions, the type and source of data used by the Department for funds 
allocation and other purposes will be agenda items. The hope is that an 
identification and discussion of the availability and applicability of 
other sources of data which could more accurately reflect the relative 
and absolute community development needs in Native American communities 
will occur.

Section 953.300--Application Requirements

    Comment: One commenter states that this section is agreeable in 
that it does not allow multiple project applications.
    Response: The commenter has misread this section since it does not 
address the issue of multiple project applications. However, it is to 
be noted that an applicant could include as many projects as it wishes 
in an application as long as the total ICDBG cost for all projects does 
not exceed the applicable grant ceiling. Given the apparent 
misunderstanding of this policy, it will be clearly stated in the NOFA 
published for this program.
    Comment: One comment was received which indicates that paragraphs 
(b) and (c) of this section (953.300) are in direct contradiction.
    Response: These two paragraphs do not contradict each other. 
Paragraph (b) addresses the recognition and reimbursement of costs 
incurred by an applicant before the submission of an application. 
Paragraph (c) addresses the recognition and reimbursement of costs 
incurred by an applicant after the submission of an application but 
before HUD approval. To eliminate any possible misunderstanding, these 
two paragraphs have been rewritten.

Section 953.302--Selection Process

    Comment: One commenter expresses concerns over the meaning of the 
language in Sec. 953.302(b) (Application rating system) and 
Sec. 953.302(c) (Periodic NOFAs) and asks for clarification of the 
phrases ``rated competitively within each field office's jurisdiction'' 
and ``will rate applications on the basis of their responsiveness.'' 
The commenter supports allowing each Area ONAP to establish its own 
rating system for the NOFAs based upon the responses of the tribes in 
its jurisdiction, but does not support the establishment of a generic 
rating system for all tribes.
    Response: The first phrase for which clarification is requested 
should be construed to mean that all applications submitted for funding 
consideration by applicants in the jurisdiction of a specific Area ONAP 
are in competition for the ICDBG funds allocated to that Area ONAP. The 
second phrase means that the Area ONAPs will rate applications on the 
basis of their responsiveness to the criteria identified in the Program 
Regulations and further detailed in the NOFA. In all of the ICDBG 
funding cycles that have taken place since the implementation of the 
HUD Reform Act, a NOFA has been published which contains the detailed 
rating criteria and the specifics of the application procedures to be 
used; the interim rule does not change this process. Each of these 
NOFAs has contained items which vary from one Area ONAP jurisdiction to 
another, e.g., rehabilitation grant limits, tie breaking 
considerations, etc. These variations were included to reflect real 
differences between the circumstances found in the various 
jurisdictions. It is important that eligible applicants provide 
specific feedback to their Area ONAPs so that the need for additional 
jurisdictional variations can be analyzed and, if supported, 
incorporated into the NOFA.
    Comment: Another commenter believes that Sec. 953.302(b) is too 
wide open in that each Area ONAP is afforded too much judgmental 
discretion, i.e., one office could determine a project to have 
unreasonable costs and be inappropriate for the intended use and reject 
it from further consideration. Another office could determine that a 
similar project does not fail these threshold requirements and proceed 
to rate and rank the project. The commenter recommends that the 
selection process be made consistent nationally so that each applicant 
has an equal chance of funding.
    Response: It is expected and required of each Area ONAP that 
reasonable and responsible judgement be exercised in implementing all 
aspects of the selection system. The specific aspects of the selection 
process referenced by commenter are two of the community development 
appropriateness thresholds which have been in the Program Regulations 
since the March 18, 1983 interim rule was published for effect. 
Guidance has been provided and will continue to be provided to the Area 
ONAPs by the Headquarters ONAP to ensure equitable and consistent 
implementation of these threshold requirements. It is the position of 
the Department that no change is necessary in this section.

Section 953.303--Housing Rating Category

    Comment: It is the position of one commenter that the threshold 
requirement that an applicant shall assure that it will use project 
funds to rehabilitate units only when the homeowner's payments are 
current may raise issues of confidentiality.
    Response: It is necessary to note that this specific threshold 
applies to homeownership and not rental situations. As such, this 
specific requirement for a homeowner who

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wishes to participate in an ICDBG funded rehabilitation project should 
be viewed as a reasonable condition for participation. It is also to be 
noted that in all single family housing rehabilitation funded with 
ICDBG funds, the households to be assisted must be of low or moderate 
income status. The requirement that the household document this status 
could also be viewed by some as raising issues of confidentiality, but 
it is the position of the Department that it is also a reasonable 
prerequisite for assistance.

Section 953.304--Community Facilities Rating Category

    Comment: One commenter notes that the definition of the ``neediest 
segment of the population'' has been removed from the interim rule and 
asks what replaces it.
    Response: Included among the details of the rating criterion of 
project need which are now found in the NOFA is the definition of 
``neediest segment of the population''.

Section 953.400--Criteria for Funding (Imminent Threat Grants)

    Comment: One commenter states that the requirement that these funds 
may only be used for imminent threats which impact an entire service 
area is too restrictive.
    Response: The ICDBG program was enacted by Congress to address 
community development needs and was not enacted to provide assistance 
grants to individuals. Therefore, it is the position of the Department 
that the requirement that a threat to health or safety must impact an 
entire service area and not just an individual or household is 
consistent with congressional mandate and intent. The rule has not been 
changed. It is to be noted, however, that the specific language of the 
comment indicates that the commenter may be defining ``service area'' 
in a manner which is more restrictive than the definition provided in 
Sec. 953.4 and the commenter is urged to review that definition.

Subpart F--Grant Administration

    Comment: One commenter requests that income generated by economic 
development activities funded with ICDBG funds should be able to be 
retained and used at the grantee's discretion. It is the opinion of the 
commenter that the requirements in the previous interim rule at 
Sec. 571.505 (c) were more flexible in this regard.
    Response: When the current interim rule was developed, the language 
of Sec. 953.505 was written to incorporate the language of 24 CFR 
570.504 which had previously only been referenced in the previous 
interim rule in Sec. 571.504. However, the current and previous interim 
rules were both in error. Section 913 of the National Affordable 
Housing Act of 1990 included a number of technical corrections and 
clarifications regarding the applicability of various sections of Title 
I of the Act of 1974, as amended, to the CDBG program for Indian 
tribes. Among the clarifications listed in this section was a statement 
regarding the applicability of the various subsections of Section 104 
of Title I of the 1974 Act. It is stated that only subsections (f), 
(g), and (k) of that section apply to the ICDBG program. The 
significance of this statement is that the statutory basis in the 1974 
Act for the regulatory program income requirements and restrictions 
specified in Sec. 570.504 is subsection (j) of Section 104. Given the 
inapplicability of this subsection to the ICDBG program, the Department 
has determined that 24 CFR 85.25--Program income (with the 
modifications stated in a revised Sec. 953.503), will apply to the 
ICDBG program. Specifically with respect to the commenter's concerns, 
it is to be noted that as defined in Sec. 85.25 (b), program income 
does not include income generated by the grant supported activity after 
grant close-out. Given the nature of economic development activities 
funded with ICDBG funds, it is most likely that any income generated by 
these types of projects would occur after the grant period and 
therefore its use would not be subject to regulatory restrictions.

Other Changes Made by This Rule

Subpart A--General Provisions

    Section 953.1--Applicability and scope. The term ``Indian tribes 
and Alaska native villages'' has been changed to ``applicants'' since, 
as defined in Sec. 953.5, eligible applicants include entities, i.e., 
certain tribal organizations, other than Indian tribes and Alaska 
native villages.
    Section 953.4--Definitions. Six new definitions have been added--a 
definition of Area ONAP, Assistant Secretary, Buildings for the General 
Conduct of Government, Imminent treat, Microenterprise, and Small 
Business. Please note that the definition of Area ONAP replaces that of 
Field office.
    The definition of Tribal government, Tribal governing body or 
Tribal council has been modified to clarify that the Federal entity 
providing recognition is the Bureau of Indian Affairs.
    The definition of Subrecipient has been included in this section 
rather than in subpart F--Grant Administration. In the interim rule 
this definition was included in that subpart by virtue of the inclusion 
(by reference) of subpart J of 24 CFR part 570 in that subpart.
    Section 953.6--Technical assistance. This section has been deleted 
since it did not address a matter or issue of program regulation; it 
was a statement of Departmental policy. The deletion of this section in 
no way diminishes the commitment of the Department to the provision of 
technical assistance to eligible applicants. The response to the 
comment submitted on this section reflects Departmental policy on this 
matter.
    Section 953.6--Waivers. This section (formerly Sec. 953.7) has been 
revised to better state the policy of the Department regarding a waiver 
of a regulatory requirement. The revised language also describes 
procedural requirements for such waivers.

Subpart B--Allocation of Funds

    Section 953.101--Field Office allocation of funds. This section has 
been re-titled Area ONAP allocation of funds and has been changed to 
clearly state that any amount retained by Headquarters to fund imminent 
threat grants pursuant to Sec. 953.402 of this part will not be 
available for allocation to the Area ONAPs.
    Section 953.102--Use of recaptured and unawarded funds. The title 
of this section has been changed so that it more accurately reflects 
its content. The language of the section has also been revised so that 
it more clearly states the requirements for the use of funds recaptured 
or those which may remain unawarded after the completion of a funding 
competition by an Area ONAP. The term ``unawarded'' replaces the term 
``undistributed'' which was used in the interim rule; the term 
``undistributed'' is not a term which satisfactorily describes 
allocated funds which may remain with an Area ONAP after the completion 
of a funding competition.

Subpart C--Eligible Activities

    To improve the ease of use of the ICDBG rule for program applicants 
and grantees, subpart C of part 570 has been incorporated in this 
subpart with the exception of those provisions which apply only to the 
Entitlement Cities or HUD-administered Small Cities programs and with 
the additional exceptions or modifications discussed below. In the 
interim rule, subpart C of part 570 was incorporated by reference.
    Those sections of subpart C in the interim rule which were listed 
as modifications to subpart C of part 570 (Sec. 953.201 through 
Sec. 953.203) have been

[[Page 40088]]

incorporated in the appropriate sections of the revised subpart C.
    In the process of reviewing the various sections of subpart C of 
part 570 prior to their incorporation into subpart C of part 953, it 
was determined that certain of these sections either included language 
which was duplicative of language contained in other sections of the 
rule or which was excessively descriptive or, that certain sections 
included paragraphs which should be relocated to other sections or 
subparts to facilitate ease of use and understanding of the rule.
    Based on these determinations, the following modifications or 
revisions have been made:
    Section 570.200--General policies. 1. The language contained in 
paragraph (a)(3)--Compliance with the primary objective (as modified to 
meet the requirements of the ICDBG program) has been incorporated in 
Sec. 953.208.
    2. Paragraph (a)(4) Compliance with environmental review procedures 
has not been incorporated since it duplicated the requirements included 
in Sec. 953.605--Environment.
    3. The language of paragraph (a)(5)--Cost principles was made part 
of Sec. 953.501 which has been titled Applicability of uniform 
administrative requirements and cost principles.
    4. The language of paragraphs (b)--Special policies governing 
facilities and paragraph (c)--Special assessments under the CDBG 
program has been incorporated in Sec. 953.201(c)--Public facilities.
    5. The introductory language of paragraph (d)--Consultant 
activities has been eliminated since it was determined to be 
superfluous.
    6. The language of paragraph (d)(1) regarding the limitation on the 
rate of compensation in employer-employee relationships has been 
incorporated in the revised Sec. 953.501 as paragraph (c)(2) of that 
section.
    7. Both paragraph (e)--Recipient determinations required as a 
condition of eligibility and (f)--Means of carrying out eligible 
activities have not been included in the rule since it was determined 
that the language in these paragraphs was either duplicated in other 
sections of the rule or it was exemplary and not expository and did not 
address a matter or issue of program regulation.
    8. The language of paragraph (g)--Limitation on planning and 
administrative costs has been incorporated in Sec. 953.206--Program 
administration costs.
    9. The language in paragraph (h)--Constitutional prohibition was 
incorporated into subpart G--Other Program Requirements as 
Sec. 953.600-- Constitutional prohibition.
    Section 570.205--Eligible planning, urban environmental design and 
policy-planning-management capacity building activities. The review of 
subpart C of part 570 discussed above revealed that much of the 
language included in this section was more exemplary or descriptive of 
the types of activities possibly eligible under this section and did 
not address a matter or issue of program regulation. The resultant 
Sec. 953.205 is, therefore, more concise than Sec. 570.205, but it 
affords the same degree of flexibility in the use of ICDBG funds for 
planning and management capacity improvement types of activities 
authorized by section 105(a)(12) of the 1974 Act, as amended.

Subpart D--Single Purpose Grant Application and Selection Process

    Section 953.301--Screening and review of applications. This section 
has been removed from the rule since it was determined to be 
superfluous. All subsequent sections in this subpart have been re-
numbered.
    Section 953.301--Selection process.
    This section (formerly numbered 953.302) has been re-formatted to 
clarify threshold requirements and the role of the NOFA with respect to 
this process. No substantive changes have been made in the 
requirements.
    Section 953.303--Housing rating category, section 953.304--
Community. facilities rating category, and section 953.305--Economic 
development rating category. These three sections have been 
consolidated into two new sections Sec. 953.303-- Project specific 
threshold requirements and Sec. 953.304--Project rating categories. 
This consolidation process did not involve or include any substantial 
changes in requirements. It however is to be noted that independent of 
this consolidation, changes were made which affect project specific 
threshold requirements for economic development projects. The threshold 
requirement that ``an applicant shall demonstrate the need for grant 
assistance by providing documentation to support a determination that 
the assistance is appropriate to implement an economic development 
project'' has been deleted. This requirement has proven to be an 
unnecessary complication for potential applicants for assistance.
    One of the two remaining threshold requirements for economic 
development projects, i.e., that an analysis demonstrates that public 
benefit commensurate with the assistance requested can reasonably be 
expected, has been expanded in scope and revised. The expansion/
revision of this threshold was done to state this requirement in a 
manner consistent with the objectives for the evaluation and selection 
of economic development projects which were set forth in Section 806 of 
the Housing and Community Development Act of 1992. As was indicated in 
the Supplementary Information section of the January 5, 1995 Final Rule 
and guidelines (24 CFR part 570), that rule would not apply to the 
ICDBG Program; necessary compliance with the requirements of the 1992 
Act would be established as part of a future rule. The Department has 
reviewed the need to establish such compliance as part of a future rule 
and has determined that the rating criteria for economic development 
projects set forth in this rule, as explained and reified in all future 
NOFAs, will be adequate to achieve general compliance with the 
guidelines set forth in the 1992 Act.
    The rating requirements for economic development projects have also 
been changed to include a rating criterion ``additional 
considerations'' which was inadvertently left out of the interim rule.
    Section 953.304--Funding process. The language of 
Sec. 953.304(b)(2) [formerly Sec. 953.307(b)(2)] has been changed to 
delete an incorrect reference to 24 CFR part 58 made in the interim 
rule and to more concisely state the applicable requirements of part 
58.
    Section 953.305--Program amendments. The language of this section 
(formerly Sec. 953.308) has been changed since paragraph (b) of this 
section in the interim rule referenced application component 
requirements which were no longer specified anywhere in the rule. This 
paragraph now references application component requirements now 
specified in the NOFA. In addition, this paragraph has been revised to 
raise the dollar amount of a program amendment request which must be 
rated from $25,000 to $100,000. This change is consistent with the 
Departmental policy of increasing program flexibility for clients and 
customers while ensuring compliance with statutory requirements and 
congressional intent.
    Section 953.306--Public services. This section has been deleted 
since it duplicates the language in Sec. 953.201(e) --Public services.

Subpart E--Imminent Threat Grants

    Section 953.401--Application process. Paragraph (b) of this section 
has been changed since the interim rule referenced application 
requirements which were no longer specified anywhere in the rule. This 
paragraph

[[Page 40089]]

now indicates that the form and content requirements for imminent 
threat grant applications will be specified in the NOFA.
    Section 953.402--Environmental review. This section has been 
eliminated and the language of the section has been relocated to 
Sec. 953.605 (b).
    Section 953.402--Availability of Funds. This section (formerly 
Sec. 953.403) has been changed to indicate that the amount which may be 
retained by HUD for imminent threat grants will be determined by the 
Assistant Secretary. It is the determination of the Department that 
this discretion will provide for necessary flexibility. The amount to 
be retained will be published in the NOFA and will be based upon an 
anticipated level of demand which will take into consideration historic 
funding levels and other relevant factors.

Subpart F--Grant Administration

    To improve the ease of use of the ICDBG rule by program applicants 
and grantees, those applicable sections of subpart J of part 570--
Program Administration--have been incorporated into subpart F of the 
ICDBG rule; the interim rule incorporated these sections by reference. 
Section 570.508--Public access to program records and Section 570.509--
Grant closeout procedures have been incorporated without substantial 
modification as Sec. 953.507 and Sec. 953.508, respectively.
    The following sections or provisions were either not incorporated 
or they were incorporated but modified as discussed below.
    Section 570.500--Definitions. This section has not been 
incorporated. The definition of program income applicable to the ICDBG 
program is set forth in Sec. 953.503. As discussed above, the 
definition of subrecipient is set forth in Sec. 953.4.
    Section 570.501--Responsibility for grant administration. This 
section, with appropriate modifications to meet the requirements of the 
ICDBG program, has been incorporated as Sec. 953.500.
    Section 570.502--Applicability of uniform administrative 
requirements. This section, with the following modifications, has been 
incorporated into Sec. 953.501.
    1. Reference to the program income requirements of 24 CFR 85.25 (as 
modified by Sec. 953.503) is included in Sec. 953.501 as paragraph (7). 
Reference to this section of part 85 is not included in Sec. 570.501 
since there are different statutory program income requirements for the 
CDBG program, as discussed above in the response to the comment 
submitted regarding these requirements. Given the inclusion of a 
paragraph referencing Sec. 85.25, the number of paragraphs in 
Sec. 953.501 is 21 as compared to 20 in Sec. 570.502.
    2. The language of paragraph (a)(12) has been incorporated in 
Sec. 953.501(a)(13) and additional language has been added so that the 
alternatives to the payment and performance bonding requirements of 
Sec. 85.36(b) which are acceptable to HUD for the ICDBG program are 
stated. These acceptable alternatives will allow grantees increased 
flexibility to adequately ensure performance and payment by a 
contractor while at the same time allowing the grantee to more easily 
meet its other obligations and responsibilities under the rule.
    3. The language of paragraph (a)(16) has been incorporated in 
Sec. 953.501(a)(17) and has been added to by stating the starting date 
for record retention requirements.
    Section 570.504--Program income. This section has not been 
incorporated in Sec. 953.501.
    Section 570.505--Records to be maintained. This section has been 
incorporated, in a highly modified form, in Sec. 953.505. Section 
953.505 merely states that each grantee shall establish and maintain 
sufficient records to enable HUD to determine whether or not it has met 
the requirements of this part. A grantee guidance document which will 
recommend specific records to be maintained will be issued by HUD in 
the near future.
    Section 570.507--Reports. This section has been incorporated, in a 
modified form, as Sec. 953.506. The modifications include the deletion 
of inapplicable performance reporting requirements and the relocation 
to this section of the requirements of Sec. 953.700--Reports to be 
submitted of the interim rule. In addition to this relocation, specific 
timing requirements for the submission of the status and evaluation 
reports has been added.
    Section 570.510--Transferring projects from urban counties to 
metropolitan cities. Section 570.513--Lump sum drawdown for financing 
of property rehabilitation. These two sections have not been 
incorporated. It is to be noted that lump sum drawdowns are authorized 
under subsection (h) of section 104 of Title I of the 1974 Act. This 
subsection was not stated in section 913 of the National Affordable 
Housing Act of 1990 as being applicable to the CDBG Program for Indian 
tribes.
    The provisions of the following sections of subpart F of the 
interim rule (with modifications discussed below) have been 
incorporated into the final rule as follows.

------------------------------------------------------------------------
                        Interim rule                          Final rule
------------------------------------------------------------------------
Sec.  953.502--Force account construction..................  Sec.  953.5
                                                                      09
Sec.  953.503--Indian preference...........................  Sec.  953.5
                                                                      10
Sec.  953.505--Program income..............................  Sec.  953.5
                                                                      03
------------------------------------------------------------------------

    The following modifications have been made to these sections.
    Force account construction--The last sentence in paragraph (e) 
regarding the approval of alternative requirements in lieu of bonding 
has been deleted. As discussed above, acceptable alternatives to 
performance and payment bonding are set forth in Sec. 953.501(a)(13).
    Indian preference--This section has been revised in the following 
ways.
    1. Inaccuracies in certain referenced definitions in the interim 
rule have been corrected.
    2. A definition of ``Indian'' as this word is defined in the Indian 
Self-Determination and Education Assistance Act (25 U.S.C. 450 b) has 
been included.
    3. Paragraph (e), Additional Indian preference requirements is 
being deleted since its provisions have never been used and, upon 
analysis, it did not appear to be meaningful or necessary.
    4. A new paragraph (e) Complaint procedures in which the specific 
process to be followed is clarified and in which the grantee is 
identified as the final arbiter has been added.
    Program income--The basis for the changes to this section and the 
changes themselves are addressed above in the section Specific 
Comments. 

Subpart G--Other Program Requirements

    In Sec. 953.600 of the interim rule it is stated that the following 
requirements of 24 CFR Part 570, subpart K apply to grants under the 
ICDBG Program:

Sec. 570.605--National Flood Insurance Program
Sec. 570.608--Lead-based paint
Sec. 570.609--Use of debarred, suspended or ineligible contractors 
or subrecipients
Sec. 570.610--Uniform administrative cost principles

    A review of these requirements with the intent of incorporating 
them in their entirety into the ICDBG rule resulted in the following 
determinations.
    Section 570.605--National flood insurance program. This section was 
not incorporated into the final rule since it duplicates the 
requirements of 24 CFR 58.6(a) in which grantee responsibilities under 
the Flood Disaster Protection Act of 1973 (42 U.S.C. 4001--4128) are 
set forth.

[[Page 40090]]

    Section 570.608--Lead-based paint. The language of this section was 
modified prior to incorporation to reflect the current policies of the 
Department. The modifications were based on recommendations from HUD's 
Office of Lead-Based Paint Abatement and Poisoning Prevention. These 
requirements are set forth in Sec. 953.607. The Department, however, 
has published a proposed regulation to implement the Residential Lead-
Based Paint Hazard Reduction Act of 1992, Title X of the Housing and 
Community Development Act of 1992 (Pub. L. 102-550). The June 7, 1996 
regulation will substantially alter the lead-based paint requirements 
for all HUD programs including the CDBG Program for Indian Tribes and 
Alaska Native Villages.
    Section 570.609--Use of debarred, suspended or ineligible 
contractors or subrecipients. It was determined that the incorporation 
of this section would not be completely appropriate without significant 
modifications. Instead of modifying this section so that its provisions 
better fit the ICDBG Program, the provisions and requirements from the 
Indian HOME Program regulations which address these responsibilities 
will be incorporated into the final rule since the requirements for 
both programs are the same. Therefore, the requirements which govern 
the use of debarred, suspended or ineligible contractors or 
subrecipients in the final rule (now Sec. 953.608) are the same as 
those for the Indian HOME Program.
    Section 570.610--Uniform administrative cost principles. This 
section was not incorporated into the final rule. It was determined 
that it duplicated the requirements set forth in Sec. 953.501--
Applicability of uniform administrative requirements and cost 
principles.
    Section 953.602--Relocation and real property acquisition. The 
language of this section was revised to reflect current policies and 
terminology used by the Department with respect to relocation and real 
property acquisition activities related to or funded by programs under 
the Act.
    Section 953.605--Environment. This section was revised to 
explicitly reference the flood insurance, coastal barrier resource and 
airport clear zone requirements found at 24 CFR 58.6 and to correctly 
identify the title of 24 CFR part 58.
    Section 953.606--Conflict of interest. The references in subsection 
(a) to the applicability of OMB Circular A-110 have been deleted and 
replaced with a reference to 24 CFR 84.42; part 84 has superseded OMB 
Circular A-110.

Subpart H--Program Performance

    Section 953.700--Reports to be submitted by grantee. As stated 
above, reporting requirements for ICDBG grantees have been consolidated 
under Sec. 953.507. With the deletion of this section, all subsequent 
sections in this subpart have been re-numbered.
    Section 953.701--Corrective and remedial actions. Paragraph (b)(3) 
of this section (formerly Sec. 953.702) has been deleted since 
certifications of compliance are no longer used in the ICDBG program.

Other Matters

Executive Order 12866

    This final rule was reviewed by the Office of Management and Budget 
(OMB) under Executive Order 12866 on Regulatory Planning and Review, 
issued by the President on September 30, 1993. Any changes made in this 
final rule as a result of that review are clearly identified in the 
docket file, which is available for public inspection in the office of 
the Department's Rules Docket Clerk, Room 10276, 451 Seventh Street 
SW., Washington, DC.

National Environmental Policy Act

    A Finding of No Significant Impact with respect to the environment 
was 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, when the July 27, 1994 interim rule was issued. Because no 
significant changes have been made that would pertain to the 
environment, that finding applies to this final rule. The Finding of No 
Significant Impact is available for public inspection between 7:30 a.m. 
and 5:30 p.m. weekdays in the Office of the Rules Docket Clerk at the 
above address.

Regulatory Flexibility

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this rule before publication and by 
approving it certifies that this rule does not have a significant 
economic impact on a substantial number of small entities. The rule 
establishes criteria for funding eligible grantees among Indian Tribes/
Villages and has no impact on small entities.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under Section 6(a) 
of Executive Order 12612, Federalism, has determined that the policies 
contained in this rule would not have substantial direct effects on 
States or their political subdivisions, or the relationship between the 
federal government and the States, or on the distribution of power and 
responsibilities among the various levels of government. As a result, 
the rule is not subject to review under the Order. While the rule has 
some direct effects on States and political subdivisions, those effects 
are limited to direct implementation of instructions contained in 
statutes governing the grant program. Given the lack of discretion in 
the Department to refrain from implementing these statutory 
instructions, further analysis of federalism concerns would serve no 
useful purpose.

Executive Order 12606, The Family

    The General Counsel, as the Designated Official under Executive 
Order 12606, The Family, has determined that this rule would not have 
potential for significant impact on family formation, maintenance, and 
general well-being, and, thus, is not subject to review under the 
Order.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance program number is 
14.862.

List of Subjects in 24 CFR Part 953

    Alaska, Community development block grants, Grant programs--housing 
and community development, Indians, Reporting and recordkeeping 
requirements.

    Accordingly, 24 CFR Part 953 is revised to read as follows:

PART 953--COMMUNITY DEVELOPMENT BLOCK GRANTS FOR INDIAN TRIBES AND 
ALASKA NATIVE VILLAGES

Subpart A--General Provisions

Sec.
953.1  Applicability and scope.
953.2  Program objective.
953.3  Nature of program.
953.4  Definitions.
953.5  Eligible applicants.
953.6  Waivers.

Subpart B--Allocation of Funds

953.100  General.
953.101  Area ONAP allocation of funds.
953.102  Use of recaptured and unawarded funds.

Subpart C--Eligible Activities

953.200  General policies.
953.201  Basic eligible activities.
953.202  Eligible rehabilitation and preservation activities.
953.203  Special economic development activities.
953.204  Special activities by Community-Based Development 
Organizations (CBDOs).

[[Page 40091]]

953.205  Eligible planning, urban environmental design and policy-
planning-management-capacity building activities.
953.206  Program administration costs.
953.207  Ineligible activities.
953.208  Criteria for compliance with the primary objective.

Subpart D--Single Purpose Grant Application and Selection Process

953.300  Application requirements.
953.301  Selection process.
953.302  Project specific threshold requirements.
953.303  Project rating categories.
953.304  Funding process.
953.305  Program amendments.

Subpart E--Imminent Threat Grants

953.400  Criteria for funding.
953.401  Application process.
953.402  Availability of funds.

Subpart F--Grant Administration

953.500  Responsibility for grant administration.
953.501  Applicability of uniform administrative requirements and 
cost principles.
953.502  Agreements with subrecipients.
953.503  Program income.
953.504  Use of real property.
953.505  Records to be maintained.
953.506  Reports.
953.507  Public access to program records.
953.508  Grant closeout procedures.
953.509  Force account construction.
953.510  Indian preference requirements.
953.511  Use of escrow accounts for rehabilitation of privately 
owned residential property.

Subpart G--Other Program Requirements

953.600  Constitutional prohibition.
953.601  Nondiscrimination.
953.602  Relocation and real property acquisition.
953.603  Labor standards.
953.604  Citizen participation.
953.605  Environment.
953.606  Conflict of interest.
953.607  Lead-based paint.
953.608  Debarment and suspension.

Subpart H--Program Performance

953.700  Review of grantee's performance.
953.701  Corrective and remedial actions.
953.702  Reduction or withdrawal of grant.
953.703  Other remedies for noncompliance.

    Authority: 42 U.S.C. 3535(d) and 5301 et seq.

Subpart A--General Provisions


Sec. 953.1  Applicability and scope.

    The policies and procedures described in this part apply to grants 
to eligible applicants under the Community Development Block Grant 
(CDBG) program for Indian tribes and Alaska native villages.


Sec. 953.2  Program objective.

    The primary objective of the Indian CDBG (ICDBG) Program and of the 
community development program of each grantee covered under the Act is 
the development of viable Indian and Alaska native communities, 
including decent housing, a suitable living environment, and economic 
opportunities, principally for persons of low and moderate income. The 
Federal assistance provided in this part is not to be used to reduce 
substantially the amount of tribal financial support for community 
development activities below the level of such support before the 
availability of this assistance.


Sec. 953.3  Nature of program.

    The selection of single purpose grantees under subpart B of this 
part is competitive in nature. Therefore, selection of grantees for 
funds will reflect consideration of the relative adequacy of 
applications in addressing tribally determined need. The selection of 
grantees of imminent threat grants under the provisions of subpart B of 
this part is not competitive in nature. However, applicants for funding 
under either subpart must have the administrative capacity to undertake 
the community development activities proposed, including the systems of 
internal control necessary to administer these activities effectively 
without fraud, waste, or mismanagement.


Sec. 953.4  Definitions.

    Act means Title I of the Housing and Community Development Act of 
1974, as amended (42 U.S.C. 5301 et seq.)
    Area ONAPs mean the HUD Offices of Native American Programs having 
field office responsibility for the ICDBG Program.
    Assistant Secretary means the Assistant Secretary for Public and 
Indian Housing.
    Buildings for the general conduct of government mean office 
buildings and other facilities in which the legislative, judicial or 
general administrative affairs of the government are conducted. This 
term does not include such facilities as neighborhood service centers 
or special purpose buildings located in low and moderate income areas 
that house various non-legislative functions or services provided by 
the government at decentralized locations.
    Chief executive officer means the elected official or legally 
designated official who has the prime responsibility for the conduct of 
the affairs of an Indian tribe or Alaska native village.
    Eligible Indian population means the most accurate and uniform 
population data available from data compiled and published by the 
United States Bureau of the Census available from the latest census 
referable to the same point or period of time for Indian tribes and 
Alaska native villages eligible under this part.
    Extent of overcrowded housing means the number of housing units 
with 1.01 or more persons per room, based on data compiled and 
published by the United States Bureau of the Census available from the 
latest census referable to the same point or period of time.
    Extent of poverty means the number of persons whose incomes are 
below the poverty level, based on data compiled and published by the 
United States Bureau of the Census referable to the same point or 
period in time and the latest reports from the Office of Management and 
Budget.
    HUD means the Department of Housing and Urban Development.
    ICDBG Program means the Indian Community Development Block Grant 
Program.
    Identified service area means:
    (1) A geographic location within the jurisdiction of a tribe (but 
not the entire jurisdiction) designated in comprehensive plans, 
ordinances, or other tribal documents as a service area;
    (2) The Bureau of Indian Affairs (BIA) service area, including 
residents of areas outside the geographic jurisdiction of the tribe; or
    (3) The entire area under the jurisdiction of a tribe which has a 
population of members of under 10,000.
    Imminent threat means a problem which if unresolved or not 
addressed will have an immediate negative impact on public health or 
safety.
    Low and moderate income beneficiary means a family, household, or 
individual whose income does not exceed 80 percent of the median income 
for the area, as determined by HUD, with adjustments for smaller and 
larger households or families. However, HUD may establish income 
ceilings higher or lower than 80 percent of the median for the area on 
the basis of HUD's findings that such variations are necessary because 
of unusually high or low household or family incomes. In reporting 
income levels to HUD, the applicant must include and identify the 
distributions of tribal or village income to families, households, or 
individuals.
    Microenterprise means a business that has five or fewer employees, 
one or more of whom owns the enterprise.
    Secretary means the Secretary of HUD.
    Small business means a business that meets the criteria set forth 
in section 3(a) of the Small Business Act (15 U.S.C. 631, 636, and 
637).
    Subrecipient means a public or private nonprofit agency, authority 
or organization, or a for-profit entity

[[Page 40092]]

described in Sec. 953.201(o), receiving ICDBG funds from the grantee or 
another subrecipient to undertake activities eligible for assistance 
under subpart C of this part. The term excludes a CBDO receiving ICDBG 
funds from the grantee under the authority of Sec. 953.204, unless the 
grantee explicitly designates it as a subrecipient. The term does not 
include contractors providing supplies, equipment, construction or 
services subject to the procurement requirements in 24 CFR 85.36 or in 
24 CFR Part 84, as applicable.
    Tribal government, Tribal governing body or Tribal council means 
the governing body of an Indian tribe or Alaska native village as 
recognized by the Bureau of Indian Affairs.
    Tribal resolution means the formal manner in which the tribal 
government expresses its legislative will in accordance with its 
organic documents. In the absence of such organic documents, a written 
expression adopted pursuant to tribal practices will be acceptable.
    URA means the Uniform Relocation and Real Property Acquisition 
Policies Act of 1970, as amended (42 U.S.C. 4601 et. seq.).


Sec. 953.5  Eligible applicants.

    (a) Eligible applicants are any Indian tribe, band, group, or 
nation, including Alaska Indians, Aleuts, and Eskimos, and any Alaska 
native village of the United States which is considered an eligible 
recipient under Title I of the Indian Self-Determination and Education 
Assistance Act (25 U.S.C. 450) or which had been an eligible recipient 
under the State and Local Fiscal Assistance Act of 1972 (31 U.S.C. 
1221). Eligible recipients under the Indian Self-Determination and 
Education Assistance Act will be determined by the Bureau of Indian 
Affairs and eligible recipients under the State and Local Fiscal 
Assistance Act of 1972 are those that have been determined eligible by 
the Department of Treasury, Office of Revenue Sharing.
    (b) Tribal organizations which are eligible under Title I of the 
Indian Self-Determination and Education Assistance Act may apply on 
behalf of any Indian tribe, band, group, nation, or Alaska native 
village eligible under that act for funds under this part when one or 
more of these entities have authorized the tribal organization to do so 
through concurring resolutions. Such resolutions must accompany the 
application for funding. Eligible tribal organizations under Title I of 
the Indian Self-Determination and Education Assistance Act will be 
determined by the Bureau of Indian Affairs or the Indian Health 
Service, as appropriate.
    (c) To apply for funding in a given fiscal year, an applicant must 
be eligible as an Indian tribe or Alaska native village, as provided in 
paragraph (a) of this section, or as a Tribal organization, as provided 
in paragraph (b) of this section, by the application submission date.

(Approved by the Office of Management and Budget under control 
number 2577-0191)


Sec. 953.6  Waivers.

    Upon determination of good cause, HUD may waive any provision of 
this part not required by statute. Each waiver must be in writing and 
must be supported by documentation of the pertinent facts and grounds.

Subpart B--Allocation of Funds


Sec. 953.100  General.

    (a) Types of grants. Two types of grants are available under the 
Indian CDBG Program.
    (1) Single purpose grants provide funds for one or more single 
purpose projects consisting of an activity or set of activities 
designed to meet a specific community development need. This type of 
grant is awarded through competition with other single purpose 
projects.
    (2) Imminent threat grants alleviate an imminent threat to public 
health or safety that requires immediate resolution. This type of grant 
is awarded only after an Area ONAP determines that such conditions 
exist and if funds are available for such grants.
    (b) Size of grants.--(1) Ceilings. Each Area ONAP may recommend 
grant ceilings for single purpose grant applications. Single purpose 
grant ceilings for each Area ONAP shall be established in the NOFA 
(Notice of Funding Availability).
    (2) Individual grant amounts. An Area ONAP may approve a grant 
amount less than the amount requested. In doing so, the Area ONAP may 
take into account the size of the applicant, the level of demand, the 
scale of the activity proposed relative to need and operational 
capacity, the number of persons to be served, the amount of funds 
required to achieve project objectives and the administrative capacity 
of the applicant to complete the activities in a timely manner.


Sec. 953.101  Area ONAP allocation of funds.

    (a) Except as provided in paragraph (b) of this section, funds will 
be allocated to the Area ONAPs responsible for the program on the 
following basis:
    (1) Each Area ONAP will be allocated $1,000,000 as a base amount, 
to which will be added a formula share of the balance of the ICDBG 
Program funds, as provided in paragraph (a)(2) of this section.
    (2) The amount remaining after the base amount is allocated and any 
amount retained by the Headquarters ONAP to fund imminent threat grants 
pursuant to the provisions of Sec. 953.402 is subtracted, will be 
allocated to each Area ONAP based on the most recent data complied and 
published by the United States Bureau of the Census referable to the 
same point or period in time, as follows:
    (i) Forty percent (40%) of the funds will be allocated based upon 
each Area ONAP's share of the total eligible Indian population;
    (ii) Forty percent (40%) of the funds will be allocated based upon 
each Area ONAP's share of the total extent of poverty among the 
eligible Indian population; and
    (iii) Twenty percent (20%) of the funds will be allocated based 
upon each Area ONAP's share of the total extent of overcrowded housing 
among the eligible Indian population.
    (b) HUD will use other criteria to determine an allocation formula 
for distributing funds to the Area ONAPs if funds are set aside by 
statute for a specific purpose in any fiscal year if it is determined 
that the formula in paragraph (a) of this section is inappropriate to 
accomplish the purpose. HUD will use other criteria if it is determined 
that, based on a limited appropriation of funds, the use of the formula 
in paragraph (a) of this section is inappropriate to obtain an 
equitable allocation of funds.
    (c) Data used for the allocation of funds will be based upon the 
Indian population of those tribes and villages that are determined to 
be eligible ninety (90) days before the beginning of each fiscal year.


Sec. 953.102  Use of recaptured and unawarded funds.

    (a) The Assistant Secretary will determine on a case-by-case basis 
the use of grant funds which are:
    (1) Recaptured by HUD under the provisions of Sec. 953.703 or 
Sec. 953.704;
    (2) Recaptured by HUD at the time of the closeout of a program; or
    (3) Unawarded after the completion by an Area ONAP of a funding 
competition.
    (b) The recaptured or unawarded funds will remain with the Area 
ONAP to which they were originally allocated unless the Assistant 
Secretary determines that there is an overriding

[[Page 40093]]

reason to redistribute these funds outside of the Area ONAP's 
jurisdiction. The recaptured funds may be used to fund the highest 
ranking unfunded project from the most recent funding competition, an 
imminent threat, or other uses. Unawarded funds may be used to fund an 
imminent threat or other uses.

Subpart C--Eligible Activities


Sec. 953.200  General policies.

    An activity may be assisted in whole or in part with ICDBG funds 
only if the activity meets the eligibility requirements of section 105 
of the Act as further defined in this subpart and if the criteria for 
compliance with the primary objective of the Act set forth under 
Sec. 953.208 have been met. The requirements for compliance with the 
primary objective of the Act do not apply to imminent threat grants 
funded under subpart E of this part.


Sec. 953.201  Basic eligible activities.

    ICDBG funds may be used for the following activities:
    (a) Acquisition. Acquisition in whole or in part by the grantee, or 
other public or private nonprofit entity, by purchase, long-term lease, 
donation, or otherwise, of real property (including air rights, water 
rights, rights-of-way, easements, and other interests therein) for any 
public purpose, subject to the limitations of Sec. 953.207.
    (b) Disposition. Disposition, through sale, lease, donation, or 
otherwise, of any real property acquired with ICDBG funds or its 
retention for public purposes, including reasonable costs of 
temporarily managing such property or property acquired under urban 
renewal, provided that the proceeds from any such disposition shall be 
program income subject to the requirements set forth in Sec. 953.503.
    (c) Public facilities and improvements. Acquisition, construction, 
reconstruction, rehabilitation or installation of public facilities and 
improvements, except as provided in Sec. 953.207(a), carried out by the 
grantee or other public or private nonprofit entities. In undertaking 
such activities, design features and improvements which promote energy 
efficiency may be included. [However, activities under this paragraph 
may be directed to the removal of material and architectural barriers 
that restrict the mobility and accessibility of elderly or severely 
disabled persons to publicly owned and privately owned buildings, 
facilities, and improvements including those provided for in 
Sec. 953.207(a)(1).] Such activities may also include the execution of 
architectural design features, and similar treatments intended to 
enhance the aesthetic quality of facilities and improvements receiving 
ICDBG assistance. Facilities designed for use in providing shelter for 
persons having special needs are considered public facilities and not 
subject to the prohibition of new housing construction described in 
Sec. 953.207(b)(3). Such facilities include shelters for the homeless; 
convalescent homes; hospitals, nursing homes; battered spouse shelters; 
halfway houses for run-away children, drug offenders or parolees; group 
homes for mentally retarded persons and temporary housing for disaster 
victims. In certain cases, nonprofit entities and subrecipients 
including those specified in Sec. 953.204 may acquire title to public 
facilities. When such facilities are owned by nonprofit entities or 
subrecipients, they shall be operated so as to be open for use by the 
general public during all normal hours of operation. Public facilities 
and improvements eligible for assistance under this paragraph (c) are 
subject to the following policies in paragraphs (c)(1) through (c)(3) 
of this section:
    (1) Special policies governing facilities. The following special 
policies apply to:
    (i) Facilities containing both eligible and ineligible uses. A 
public facility otherwise eligible for assistance under the ICDBG 
program may be provided with ICDBG funds even if it is part of a 
multiple use building containing ineligible uses, if:
    (A) The facility which is otherwise eligible and proposed for 
assistance will occupy a designated and discrete area within the larger 
facility; and
    (B) The grantee can determine the costs attributable to the 
facility proposed for assistance as separate and distinct from the 
overall costs of the multiple-use building and/or facility. Allowable 
costs are limited to those attributable to the eligible portion of the 
building or facility.
    (ii) Equipment purchase. As stated in Sec. 953.207(b)(1), the 
purchase of equipment with ICDBG funds is generally ineligible. 
However, the purchase of construction equipment for use as part of a 
solid waste facility is eligible. In addition, the purchase of fire 
protection equipment is considered to be an integral part of a public 
facility, and, therefore, the purchase of such equipment is also 
eligible.
    (2) Fees for use of facilities. Reasonable fees may be charged for 
the use of the facilities assisted with ICDBG funds, but charges such 
as excessive membership fees, which will have the effect of precluding 
low and moderate income persons from using the facilities, are not 
permitted.
    (3) Special assessments under the ICDBG program. The following 
policies relate to special assessments under the ICDBG program:
    (i) Definition of special assessment. The term special assessment 
means the recovery of the capital costs of a public improvement, such 
as streets, water or sewer lines, curbs, and gutters, through a fee or 
charge levied or filed as a lien against a parcel of real estate as a 
direct result of benefit derived from the installation of a public 
improvement, or a one-time charge made as a condition of access to a 
public improvement. This term does not relate to taxes, or the 
establishment of the value of real estate for the purpose of levying 
real estate, property, or ad valorem taxes, and does not include 
periodic charges based on the use of a public improvement, such as 
water or sewer user charges, even if such charges include the recovery 
of all or some portion of the capital costs of the public improvement.
    (ii) Special assessments to recover capital costs. Where ICDBG 
funds are used to pay all or part of the cost of a public improvement, 
special assessments may be imposed as follows:
    (A) Special assessments to recover the ICDBG funds may be made only 
against properties owned and occupied by persons not of low and 
moderate income. Such assessments constitute program income.
    (B) Special assessments to recover the non-ICDBG portion may be 
made provided that ICDBG funds are used to pay the special assessment 
on behalf of all properties owned and occupied by low and moderate 
income persons; except that ICDBG funds need not be used to pay the 
special assessments on behalf of properties owned and occupied by 
moderate income persons if the grantee certifies that it does not have 
sufficient ICDBG funds to pay the assessments in behalf of all of the 
low and moderate income owner-occupant persons. Funds collected through 
such special assessments are not program income.
    (iii) Public improvements not initially assisted with ICDBG funds. 
The payment of special assessments with ICDBG funds constitutes ICDBG 
assistance to the public improvement. Therefore, ICDBG funds may be 
used to pay special assessments provided:
    (A) The installation of the public improvements was carried out in 
compliance with requirements applicable to activities assisted under 
this part including environmental and citizen participation 
requirements; and

[[Page 40094]]

    (B) The installation of the public improvement meets a criterion 
for the primary objective in Sec. 953.208; and,
    (C) The requirements of Sec. 953.201(c)(3)(ii))(B) are met.
    (d) Clearance activities. Clearance, demolition, and removal of 
buildings and improvements, including movement of structures to other 
sites. Demolition of HUD-assisted housing units may be undertaken only 
with the prior approval of HUD.
    (e) Public services. Provision of public services (including labor, 
supplies, materials, and the purchase of personal property and 
furnishings) which are directed toward improving the community's public 
services and facilities, including but not limited to those concerned 
with employment, crime prevention, child care, health, drug abuse, 
education, fair housing counseling, energy conservation, welfare (but 
excluding the provision of income payments identified under 
Sec. 953.207(b)(4)), homebuyer downpayment assistance or recreational 
needs. To be eligible for ICDBG assistance, a public service must be 
either a new service, or a quantifiable increase in the level of an 
existing service above that which has been provided by or on behalf of 
the grantee through funds raised by the grantee, or received by the 
grantee from the Federal government in the twelve calendar months 
before the submission of the application for ICDBG assistance. (An 
exception to this requirement may be made if HUD determines that any 
decrease in the level of a service was the result of events not within 
the control of the grantee.) The amount of ICDBG funds used for public 
services shall not exceed 15 percent of the grant. Such projects must 
therefore be submitted with one or more other projects, which must 
comprise at least 85 percent of the total requested ICDBG grant amount.
    (f) Interim assistance. (1) The following activities may be 
undertaken on an interim basis in areas exhibiting objectively 
determinable signs of physical deterioration where the grantee has 
determined that immediate action is necessary to arrest the 
deterioration and that permanent improvements will be carried out as 
soon as practicable:
    (i) The repairing of streets, sidewalks, parks, playgrounds, 
publicly owned utilities, and public buildings; and
    (ii) The execution of special garbage, trash, and debris removal, 
including neighborhood cleanup campaigns, but not the regular curbside 
collection of garbage or trash in an area.
    (2) In order to alleviate emergency conditions threatening the 
public health and safety in areas where the chief executive officer of 
the grantee determines that such an emergency condition exists and 
requires immediate resolution, ICDBG funds may be used for:
    (i) The activities specified in paragraph (f)(1) of this section, 
except for the repair of parks and playgrounds;
    (ii) The clearance of streets, including snow removal and similar 
activities; and
    (iii) The improvement of private properties.
    (3) All activities authorized under paragraph (f)(2) of this 
section are limited to the extent necessary to alleviate emergency 
conditions.
    (g) Payment of non-Federal share. Payment of the non-Federal share 
required in connection with a Federal grant-in-aid program undertaken 
as part of ICDBG activities, provided, that such payment shall be 
limited to activities otherwise eligible and in compliance with 
applicable requirements under this subpart.
    (h) Relocation. Relocation payments and other assistance for 
permanently and temporarily relocated individuals families, businesses, 
nonprofit organizations, and farm operations where the assistance is:
    (1) Required under the provisions of Sec. 953.602 (b) or (c); or
    (2) Determined by the grantee to be appropriate under the 
provisions of Sec. 953.602(d).
    (i) Loss of rental income. Payments to housing owners for losses of 
rental income incurred in holding, for temporary periods, housing units 
to be used for the relocation of individuals and families displaced by 
program activities assisted under this part.
    (j) Housing services. Housing services, as provided in section 
105(a)(21) of the Housing and Community Development Act of 1974 [42 
U.S.C. 5305(a)(21)].
    (k) Privately owned utilities. ICDBG funds may be used to acquire, 
construct, reconstruct, rehabilitate, or install the distribution lines 
and facilities of privately owned utilities, including the placing 
underground of new or existing distribution facilities and lines.
    (l) The provision of assistance to facilitate economic development. 
(1) The provision of assistance either through the grantee directly or 
through public and private organizations, agencies, and other 
subrecipients (including nonprofit and for-profit subrecipients) to 
facilitate economic development by:
    (i) Providing credit, including, but not limited to, grants, loans, 
loan guarantees, and other forms of financial support, for the 
establishment, stabilization, and expansion of microenterprises;
    (ii) Providing technical assistance, advice, and business support 
services to owners of microenterprises and persons developing 
microenterprises; and
    (iii) Providing general support, including, but not limited to, 
peer support programs, counseling, child care, transportation, and 
other similar services, to owners of microenterprises and persons 
developing microenterprises.
    (2) Services provided under paragraph (l)(1) of this section shall 
not be subject to the restrictions on public services contained in 
Sec. 953.201(e).
    (3) For purposes of this paragraph (l), persons developing 
microenterprises means such persons who have expressed interest and who 
are, or after an initial screening process are expected to be, actively 
working toward developing businesses, each of which is expected to be a 
microenterprise at the time it is formed.
    (m) Technical assistance. Provision of technical assistance to 
public or nonprofit entities to increase the capacity of such entities 
to carry out eligible neighborhood revitalization or economic 
development activities. Capacity building for private or public 
entities (including grantees) for other purposes may be eligible as a 
planning cost under Sec. 953.205.
    (n) Assistance to institutions of higher education. Provision of 
assistance by the grantee to institutions of higher education where the 
grantee determines that such an institution has demonstrated a capacity 
to carry out eligible activities under this subpart.
    (o) Homeownership assistance. ICDBG funds may be used to provide 
direct homeownership assistance to low- and moderate-income households 
to:
    (1) Subsidize interest rates and mortgage principal amounts for 
low-and moderate-income homebuyers;
    (2) Finance the acquisition by low-and moderate-income homebuyers 
of housing that is occupied by the homebuyers;
    (3) Acquire guarantees for mortgage financing obtained by low-and 
moderate-income homebuyers form private lenders (except that ICDBG 
funds may not be used to guarantee such mortgage financing directly, 
and grantees may not provide such guarantees directly);
    (4) Provide up to 50 percent of any downpayment required from a 
low-and moderate-income homebuyer; or
    (5) Pay reasonable closing costs (normally associated with the 
purchase of a home) incurred by a low-or moderate-income homebuyer.

[[Page 40095]]

Sec. 953.202  Eligible rehabilitation and preservation activities.

    (a) Types of buildings and improvements eligible for rehabilitation 
or reconstruction assistance. ICDBG funds may be used to finance the 
rehabilitation of:
    (1) Privately owned buildings and improvements for residential 
purposes; improvements to a single-family residential property which is 
also used as a place of business, which are required in order to 
operate the business, need not be considered to be rehabilitation of a 
commercial or industrial building, if the improvements also provide 
general benefit to the residential occupants of the building;
    (2) Low-income public housing and other publicly owned residential 
buildings and improvements;
    (3) Publicly or privately owned commercial or industrial buildings, 
except that the rehabilitation of such buildings owned by a private 
for-profit business is limited to improvements to the exterior of the 
building and the correction of code violations (further improvements to 
such buildings may be undertaken pursuant to Sec. 953.203(b)); and
    (4) Nonprofit-owned nonresidential buildings and improvements not 
eligible under Sec. 953.201(c);
    (5) Manufactured housing when such housing constitutes part of the 
community's permanent housing stock.
    (b) Types of assistance. ICDBG funds may be used to finance the 
following types of rehabilitation or reconstruction activities, and 
related costs, either singly, or in combination, through the use of 
grants, loans, loan guarantees, interest supplements, or other means 
for buildings and improvements described in paragraph (a) of this 
section, except that rehabilitation of commercial or industrial 
buildings is limited as described in paragraph (a)(3) of this section.
    (1) Assistance to private individuals and entities, including 
profit making and nonprofit organizations, to acquire for the purpose 
of rehabilitation, and to rehabilitate properties, for use or resale 
for residential purposes;
    (2) Labor, materials, and other costs of rehabilitation of 
properties, including repair directed toward an accumulation of 
deferred maintenance, replacement of principal fixtures and components 
of existing structures, installation of security devices, including 
smoke detectors and dead bolt locks, and renovation through 
alterations, additions to, or enhancement of existing structures, which 
may be undertaken singly, or in combination;
    (3) Loans for refinancing existing indebtedness secured by a 
property being rehabilitated with ICDBG funds if such financing is 
determined by the grantee to be necessary or appropriate to achieve the 
grantee's community development objectives;
    (4) Improvements to increase the efficient use of energy in 
structures through such means as installation of storm windows and 
doors, siding, wall and attic insulation, and conversion, modification, 
or replacement of heating and cooling equipment, including the use of 
solar energy equipment;
    (5) Improvements to increase the efficient use of water through 
such means as water saving faucets and shower heads and repair of water 
leaks;
    (6) Connection of residential structures to water distribution 
lines or local sewer collection lines;
    (7) For rehabilitation carried out with ICDBG funds, costs of:
    (i) Initial homeowner warranty premiums;
    (ii) Hazard insurance premiums, except where assistance is provided 
in the form of a grant; and
    (iii) Flood insurance premiums for properties covered by the Flood 
Disaster Protection Act of 1973, pursuant to 24 CFR 58.6(a).
    (iv) Procedures concerning inspection and testing for and treatment 
and abatement of defective paint surfaces and lead-based paint, 
pursuant to Sec. 953.607.
    (8) Costs of acquiring tools to be lent to owners, tenants, and 
others who will use such tools to carry out rehabilitation;
    (9) Rehabilitation services, such as rehabilitation counseling, 
energy auditing, preparation of work specifications, loan processing, 
inspections, and other services related to assisting owners, tenants, 
contractors, and other entities, participating or seeking to 
participate in rehabilitation activities authorized under this section;
    (10) Improvements designed to remove material and architectural 
barriers that restrict the mobility and accessibility of elderly or 
severely disabled persons to buildings and improvements eligible for 
assistance under paragraph (a) of this section.
    (c) Code enforcement. Code enforcement in deteriorating or 
deteriorated areas where such enforcement together with public or 
private improvements, rehabilitation, or services to be provided, may 
be expected to arrest the decline of the area.
    (d) Historic preservation. ICDBG funds may be used for the 
rehabilitation, preservation or restoration of historic properties, 
whether publicly or privately owned. Historic properties are those 
sites or structures that are either listed in or eligible to be listed 
in the National Register of Historic Places, listed in a State or local 
inventory of historic places, or designated as a State or local 
landmark or historic district by appropriate law or ordinance. Historic 
preservation, however, is not authorized for buildings for the general 
conduct of government.
    (e) Renovation of closed buildings. ICDBG funds may be used to 
renovate closed buildings, such as closed school buildings, for use as 
an eligible public facility or to rehabilitate such buildings for 
housing.


Sec. 953.203  Special economic development activities.

    A grantee may use ICDBG funds for special economic development 
activities in addition to other activities authorized in this subpart 
which may be carried out as part of an economic development project. 
Special activities authorized under this section do not include 
assistance for the construction of new housing. Special economic 
development activities include:
    (a) The acquisition, construction, reconstruction, rehabilitation 
or installation of commercial or industrial buildings, structures, and 
other real property equipment and improvements, including railroad 
spurs or similar extensions. Such activities may be carried out by the 
grantee or public or private nonprofit subrecipients.
    (b) The provision of assistance to a private for-profit business, 
including, but not limited to, grants, loans, loan guarantees, interest 
supplements, technical assistance, and other forms of support, for any 
activity where the assistance is necessary or appropriate to carry out 
an economic development project, excluding those described as 
ineligible in Sec. 953.207(a). In order to ensure that any such 
assistance does not unduly enrich the for-profit business, the grantee 
shall conduct an analysis to determine that the amount of any financial 
assistance to be provided is not excessive, taking into account the 
actual needs of the business in making the project financially feasible 
and the extent of public benefit expected to be derived from the 
economic development project. The grantee shall document the analysis 
as well as any factors it considered in making its determination that 
the assistance is necessary or appropriate to carry out the project. 
The requirement for making such a determination applies whether the 
business is to receive assistance from the grantee or through a 
subrecipient.


[[Page 40096]]


(Approved by the Office of Management and Budget under control 
number 2577-0191)


Sec. 953.204  Special activities by Community-Based Development 
Organizations (CBDOs).

    (a) Eligible activities. The grantee may provide ICDBG funds as 
grants or loans to any CBDO qualified under this section to carry out a 
neighborhood revitalization, community economic development, or energy 
conservation project. The funded project activities may include those 
listed as eligible under this subpart, and, except as described in 
paragraph (b) of this section, activities not otherwise listed as 
eligible under this subpart. For purposes of qualifying as a project 
under paragraphs (a)(1), (a)(2), and (a)(3) of this section, the funded 
activity or activities may be considered either alone or in concert 
with other project activities either being carried out or for which 
funding has been committed. For purposes of this section:
    (1) Neighborhood revitalization project includes activities of 
sufficient size and scope to have an impact on the decline of a 
geographic location within the jurisdiction of a grantee (but not the 
entire jurisdiction) designated in comprehensive plans, ordinances, or 
other local documents as a neighborhood, village, or similar 
geographical designation; or the entire jurisdiction of a grantee which 
is under 25,000 population;
    (2) Community economic development project includes activities that 
increase economic opportunity, principally for persons of low- and 
moderate-income, or that stimulate or retain businesses or permanent 
jobs, including projects that include one or more such activities that 
are clearly needed to address a lack of affordable housing accessible 
to existing or planned jobs;
    (3) Energy conservation project includes activities that address 
energy conservation, principally for the benefit of the residents of 
the grantee's jurisdiction; and
    (4) To carry out a project means that the CBDO undertakes the 
funded activities directly or through contract with an entity other 
than the grantee, or through the provision of financial assistance for 
activities in which it retains a direct and controlling involvement and 
responsibilities.
    (b) Ineligible activities. Notwithstanding that CBDOs may carry out 
activities that are not otherwise eligible under this subpart, this 
section does not authorize:
    (1) Carrying out an activity described as ineligible in 
Sec. 953.207(a);
    (2) Carrying out public services that do not meet the requirements 
of Sec. 953.201(e), except services carried out under this section that 
are specifically designed to increase economic opportunities through 
job training and placement and other employment support services, 
including, but not limited to, peer support programs, counseling, child 
care, transportation, and other similar services;
    (3) Carrying out an activity that would otherwise be eligible under 
Sec. 953.205 or Sec. 953.206, but that would result in the grantee's 
exceeding the spending limitation in Sec. 953.206.
    (c) Eligible CBDOs. (1) A CBDO qualifying under this section is an 
organization which has the following characteristics:
    (i) Is an association or corporation organized under State or local 
law to engage in community development activities (which may include 
housing and economic development activities) primarily within an 
identified geographic area of operation within the jurisdiction of the 
grantee; and
    (ii) Has as its primary purpose the improvement of the physical, 
economic or social environment of its geographic area of operation by 
addressing one or more critical problems of the area, with particular 
attention to the needs of persons of low and moderate income; and
    (iii) May be either non-profit or for-profit, provided any monetary 
profits to its shareholders or members must be only incidental to its 
operations; and
    (iv) Maintains at least 51 percent of its governing body's 
membership for low- and moderate-income residents of its geographic 
area of operation, owners or senior officers of private establishments 
and other institutions located in and serving its geographic area of 
operation, or representatives of low- and moderate-income neighborhood 
organizations located in its geographic area of operation; and
    (v) Is not an agency or instrumentality of the grantee and does not 
permit more than one-third of the membership of its governing body to 
be appointed by, or to consist of, elected or other public officials or 
employees or officials of an ineligible entity (even though such 
persons may be otherwise qualified under paragraph (c)(1)(iv) of this 
section); and
    (vi) Except as otherwise authorized in paragraph (c)(1)(v) of this 
section, requires the members of its governing body to be nominated and 
approved by the general membership of the organization, or by its 
permanent governing body; and
    (vii) Is not subject to requirements under which its assets revert 
to the grantee upon dissolution; and
    (viii) Is free to contract for goods and services from vendors of 
its own choosing.
    (2) A CBDO that does not meet the criteria in paragraph (c)(1) of 
this section may also qualify as an eligible entity under this section 
if it meets one of the following requirements:
    (i) Is an entity organized pursuant to section 301(d) of the Small 
Business Investment Act of 1958 (15 U.S.C. 681(d)), including those 
which are profit making; or
    (ii) Is an SBA-approved Section 501 State Development Company or 
Section 502 Local Development Company, or an SBA Certified Section 503 
Company under the Small Business Investment Act of 1958, as amended; or
    (iii) Is a Community Housing Development Organization (CHDO) under 
24 CFR 92.2, designated as a CHDO by the HOME Investment Partnerships 
program participating jurisdiction, with a geographic area of operation 
of no more than one neighborhood, and has received HOME funds under 24 
CFR 92.300 or is expected to receive HOME funds as described in and 
documented in accordance with 24 CFR 92.300(e); or
    (iv) Is a tribal-based nonprofit organization. Such organizations 
are associations or corporations duly organized to promote and 
undertake community development activities on a not-for-profit basis 
within an identified service area.
    (3) A CBDO that does not qualify under paragraphs (c)(1) or (2) of 
this section may also be determined to qualify as an eligible entity 
under this section if the grantee demonstrates to the satisfaction of 
HUD, through the provision of information regarding the organization's 
charter and by-laws, that the organization is sufficiently similar in 
purpose, function, and scope to those entities qualifying under 
paragraphs (c)(1) or (2) of this section.


Sec. 953.205   Eligible planning, urban environmental design and 
policy-planning-management capacity building activities.

    (a) Planning activities which consist of all costs of data 
gathering, studies, analysis, and preparation of plans and the 
identification of actions that will implement such plans, including, 
but not limited to comprehensive plans, community development plans and 
functional plans in areas such as housing and economic development. In 
addition, other plans and studies such as capital improvements 
programs, individual project plans, general

[[Page 40097]]

environmental studies, and strategies and action programs to implement 
plans, including the development of codes and ordinances are also 
eligible activities. With respect to the costs of individual project 
plans, engineering and design costs related to a specific activity are 
eligible as part of the cost of such activity under Secs. 953.201 
through 953.204 and are not considered planning costs. Also, costs 
necessary to comply with the requirements of 24 CFR part 58, including 
project specific environmental assessments and clearances for 
activities eligible under this part are eligible as part of the cost of 
such activities under Secs. 953.201 through 953.204.
    (b) Policy--planning--management--capacity building activities 
including those which will enable the grantee to determine its needs, 
set long term goals and short term objectives, devise programs to meet 
these goals and objectives, evaluate the progress being made in 
accomplishing the goals and objectives. In addition, actions necessary 
to carry out management, coordination and monitoring of activities 
necessary for effective planning implementation are eligible planning 
activities, however the costs necessary to implement the plans are not.


Sec. 953.206   Program administration costs.

    ICDBG funds may be used for the payment of reasonable 
administrative costs and carrying charges related to the planning and 
execution of community development activities assisted in whole or in 
part with funds provided under this part. No more than 20 percent of 
the sum of any grant plus program income received shall be expended for 
activities described in this section and in Sec. 953.205--Eligible 
planning, urban environmental design and policy-planning-management 
capacity building activities. This does not include staff and overhead 
costs directly related to carrying out activities eligible under 
Secs. 953.201 through 953.204, since those costs are eligible as part 
of such activities. In addition, technical assistance costs associated 
with developing the capacity to undertake a specific funded activity 
are also not considered program administration costs. These costs must 
not, however, exceed 10% of the total grant award.
    (a) General management, oversight and coordination. Reasonable 
costs of overall program management, coordination, monitoring, and 
evaluation. Such costs include, but are not necessarily limited to, 
necessary expenditures for the following:
    (1) Salaries, wages, and related costs of the grantee's staff, the 
staff of local public agencies, or other staff engaged in program 
administration. In charging costs to this category the grantee may 
either include the entire salary, wages, and related costs allocable to 
the program of each person whose primary responsibilities with regard 
to the program involve program administration assignments, or the pro 
rata share of the salary, wages, and related costs of each person whose 
job includes any program administration assignments. The grantee may 
use only one of these methods during the grant period. Program 
administration includes the following types of assignments:
    (i) Providing tribal officials and citizens with information about 
the program;
    (ii) Preparing program budgets and schedules, and amendments 
thereto;
    (iii) Developing systems for assuring compliance with program 
requirements;
    (iv) Developing interagency agreements and agreements with 
subrecipients and contractors to carry out program activities;
    (v) Monitoring program activities for progress and compliance with 
program requirements;
    (vi) Preparing reports and other documents related to the program 
for submission to HUD;
    (vii) Coordinating the resolution of audit and monitoring findings;
    (viii) Evaluating program results against stated objectives; and
    (ix) Managing or supervising persons whose primary responsibilities 
with regard to the program include such assignments as those described 
in paragraph (a)(1) (i) through (viii) of this section.
    (2) Travel costs incurred for official business in carrying out the 
program;
    (3) Administrative services performed under third party contracts 
or agreements, including such services as general legal services, 
accounting services, and audit services; and
    (4) Other costs for goods and services required for administration 
of the program, including such goods and services as rental or purchase 
of equipment, furnishings, or other personal property (or the payment 
of depreciation or use allowances for such items in accordance with OMB 
Circulars A-21, A-87 or A-122, as applicable), insurance, utilities, 
office supplies, and rental and maintenance (but not purchase) of 
office space. (OMB Circulars are available from the Executive Office of 
the President, Publication Service, 725 17th Street, N.W., Suite G-
2200, Washington, DC 20503, Telephone, 202-395-7332.)
    (b) Public information. The provisions of information and other 
resources to residents and citizen organizations participating in the 
planning, implementation, or assessment of activities being assisted 
with ICDBG funds.
    (c) Indirect costs. Indirect costs may be charged to the ICDBG 
program under a cost allocation plan prepared in accordance with OMB 
Circular A-21, A-87, or A-122 as applicable.
    (d) Submission of applications for Federal programs. Preparation of 
documents required for submission to HUD to receive funds under the 
ICDBG program. In addition, ICDBG funds may be used to prepare 
applications for other Federal programs where the grantee determines 
that such activities are necessary or appropriate to achieve its 
community development objectives.


Sec. 953.207  Ineligible activities.

    The general rule is that any activity that is not authorized under 
the provisions of Secs. 953.201 through 953.206 is ineligible to be 
assisted with ICDBG funds. This section identifies specific activities 
that are ineligible and provides guidance in determining the 
eligibility of other activities frequently associated with housing and 
community development.
    (a) The following activities may not be assisted with ICDBG funds:
    (1) Buildings or portions thereof used for the general conduct of 
government as defined at Sec. 953.4 cannot be assisted with ICDBG 
funds. This does not include, however, the removal of architectural 
barriers under Sec. 953.201(c) involving any such building. Also, where 
acquisition of real property includes an existing improvement which is 
to be used in the provision of a building for the general conduct of 
government, the portion of the acquisition cost attributable to the 
land is eligible, provided such acquisition meets the primary objective 
described in Sec. 953.208.
    (2) General government expenses. Except as otherwise specifically 
authorized in this subpart or under OMB Circular A-87, expenses 
required to carry out the regular responsibilities of the grantee are 
not eligible for assistance under this part.
    (3) Political activities. ICDBG funds shall not be used to finance 
the use of facilities or equipment for political purposes or to engage 
in other partisan political activities, such as candidate forums, voter 
transportation, or voter registration. However, a facility originally 
assisted with ICDBG funds may be used on an incidental basis to hold 
political meetings, candidate

[[Page 40098]]

forums, or voter registration campaigns, provided that all parties and 
organizations have access to the facility on an equal basis, and are 
assessed equal rent or use charges, if any.
    (b) The following activities may not be assisted with ICDBG funds 
unless authorized under provisions of Sec. 953.203 or as otherwise 
specifically noted herein, or when carried out by a CBDO under the 
provisions of Sec. 953.204.
    (1) Purchase of equipment. The purchase of equipment with ICDBG 
funds is generally ineligible.
    (i) Construction equipment. The purchase of construction equipment 
is ineligible, but compensation for the use of such equipment through 
leasing, depreciation, or use allowances pursuant to OMB Circular A-21, 
A-87 or A-122 as applicable for an otherwise eligible activity is an 
eligible use of ICDBG funds.
    (ii) Furnishings and personal property. The purchase of equipment, 
fixtures, motor vehicles, furnishings, or other personal property not 
an integral structural fixture is generally ineligible. Exceptions to 
this general prohibition are set forth in Sec. 953.201(o).
    (2) Operating and maintenance expenses. The general rule is that 
any expense associated with repairing, operating or maintaining public 
facilities, improvements and services is ineligible. Specific 
exceptions to this general rule are operating and maintenance expenses 
associated with public service activities, interim assistance, and 
office space for program staff employed in carrying out the ICDBG 
program. For example, the use of ICDBG funds to pay the allocable costs 
of operating and maintaining a facility used in providing a public 
service would be eligible under Sec. 953.201(e), even if no other costs 
of providing such a service are assisted with such funds. Examples of 
ineligible operating and maintenance expenses are:
    (i) Maintenance and repair of streets, parks, playgrounds, water 
and sewer facilities, neighborhood facilities, senior centers, centers 
for persons with a disability, parking and similar public facilities; 
and
    (ii) Payment of salaries for staff, utility costs and similar 
expenses necessary for the operation of public works and facilities.
    (3) New housing construction. ICDBG funds may not be used for the 
construction of new permanent residential structures or for any program 
to subsidize or assist such new construction, except:
    (i) As provided under the last resort housing provisions set forth 
in 24 CFR part 42; or
    (ii) When carried out by a CBDO pursuant to Sec. 953.204(a);
    (4) Income payments. The general rule is that ICDBG funds may not 
be used for income payments. For purposes of the ICDBG program, income 
payments means a series of subsistence-type grant payments made to an 
individual or family for items such as food, clothing, housing (rent or 
mortgage) or utilities, but excludes emergency payments made over a 
period of up to three months to the provider of such items or services 
on behalf of an individual or family.


Sec. 953.208  Criteria for compliance with the primary objective.

    The Act establishes as its primary objective the development of 
viable communities by providing decent housing and a suitable living 
environment and expanding economic opportunities, principally for 
persons of low and moderate income. Consistent with this objective, not 
less than 70 percent of the expenditures of each single purpose grant 
shall be for activities which meet the criteria set forth in paragraphs 
(a), (b), (c) and (d) of this section. Activities meeting these 
criteria as applicable will be considered to benefit low and moderate 
income persons unless there is substantial evidence to the contrary. In 
assessing any such evidence, the full range of direct effects of the 
assisted activity will be considered. (The grantee shall appropriately 
ensure that activities that meet these criteria do not benefit moderate 
income persons to the exclusion of low income persons.)
    (a) Area benefit activities. (1) An activity, the benefits of which 
are available to all the residents in a particular area, where at least 
51 percent of the residents are low and moderate income persons. Such 
an area need not be coterminous with census tracts or other officially 
recognized boundaries but must be the entire area served by the 
activity. An activity that serves an area that is not primarily 
residential in character shall not qualify under this criterion.
    (2) For purposes of determining qualification under this criterion, 
activities of the same type that serve different areas will be 
considered separately on the basis of their individual service area.
    (3) In determining whether there is a sufficiently large percentage 
of low and moderate income persons residing in the area served by an 
activity to qualify under paragraph (a) (1) or (2) of this section, the 
most recently available decennial census information shall be used to 
the fullest extent feasible, together with the Section 8 income limits 
that would have applied at the time the income information was 
collected by the Census Bureau. Grantees that believe that the census 
data does not reflect current relative income levels in an area, or 
where census boundaries do not coincide sufficiently well with the 
service area of an activity, may conduct (or have conducted) a current 
survey of the residents of the area to determine the percent of such 
persons that are low and moderate income. HUD will accept information 
obtained through such surveys, to be used in lieu of the decennial 
census data, where it determines that the survey was conducted in such 
a manner that the results meet standards of statistical reliability 
that are comparable to that of the decennial census data for areas of 
similar size. Where there is substantial evidence that provides a clear 
basis to believe that the use of the decennial census data would 
substantially overstate the proportion of persons residing there that 
are low and moderate income, HUD may require that the grantee rebut 
such evidence in order to demonstrate compliance with section 105(c)(2) 
of the Act.
    (b) Limited clientele activities. (1) An activity which benefits a 
limited clientele, at least 51 percent of whom are low or moderate 
income persons. (The following kinds of activities may not qualify 
under paragraph (b) of this section: Activities, the benefits of which 
are available to all the residents of an area; activities involving the 
acquisition, construction or rehabilitation of property for housing; or 
activities where the benefit to low and moderate income persons to be 
considered is the creation or retention of jobs except as provided in 
paragraph (b)(4) of this section.) To qualify under paragraph (b) of 
this section, the activity must meet one of the following tests:
    (i) Benefit a clientele who are generally presumed to be 
principally low and moderate income persons. Activities that 
exclusively serve a group of persons in any one of the following 
categories may be presumed to benefit persons, 51 percent of whom are 
low-and moderate-income: abused children, battered spouses, elderly 
persons, adults meeting the Bureau of the Census' current Population 
Reports definition of ``severely disabled'', homeless persons, 
illiterate adults, persons living with AIDS, and migrant workers; or
    (ii) Require information on family size and income so that it is 
evident that at least 51 percent of the clientele are

[[Page 40099]]

persons whose family income does not exceed the low and moderate income 
limit; or
    (iii) Have income eligibility requirements which limit the activity 
exclusively to low and moderate income persons; or
    (iv) Be of such nature and be in such location that it may be 
concluded that the activity's clientele will primarily be low and 
moderate income persons.
    (2) An activity that serves to remove material or architectural 
barriers to the mobility or accessibility of elderly persons or adults 
meeting the Bureau of the Census' Current Population Reports definition 
of ``severely disabled'' will be presumed to qualify under this 
criterion if it is restricted, to the extent practicable, to the 
removal of such barriers by assisting:
    (i) The reconstruction of a public facility or improvement, or 
portion thereof, that does not qualify under Sec. 953.208(a); or
    (ii) The rehabilitation of a privately-owned nonresidential 
building or improvement that does not qualify under Sec. 953.208 (a) or 
(d); or
    (iii) The rehabilitation of the common areas of a residential 
structure that contains more than one dwelling unit.
    (3) A microenterprise assistance activity carried out in accordance 
with the provisions of Sec. 953.201(l) with respect to those owners of 
microenterprises and persons developing microenterprises assisted under 
the activity during the grant period who are low and moderate income 
persons. For purposes of this paragraph, persons determined to be low 
and moderate income may be presumed to continue to qualify for up to a 
three year period.
    (4) An activity designed to provide job training and placement and/
or other employment support services, including but not limited to, 
peer support programs, counseling, child care, transportation, and 
other similar services, in which the percentage of low and moderate 
income persons assisted is less than 51 percent may qualify under this 
paragraph in the following limited circumstance:
    (i) In such cases where such training or provision of supportive 
services assists business(es), the only use of ICDBG assistance for the 
project is to provide the job training and/or supportive services; and
    (ii) The proportion of the total cost of the project borne by ICDBG 
funds is no greater than the proportion of the total number of persons 
assisted who are low or moderate income.
    (c) Housing activities. An eligible activity carried out for the 
purpose of providing or improving permanent residential structures 
which, upon completion, will be occupied by low and moderate income 
households. This would include, but not necessarily be limited to, the 
acquisition or rehabilitation of property, conversion of non-
residential structures, and new housing construction. Funds expended 
for activities which qualify under the provisions of this paragraph 
shall be counted as benefiting low and moderate income persons but 
shall be limited to an amount determined by multiplying the total cost 
(including ICDBG and non-ICDBG costs) of the acquisition, construction 
or rehabilitation by the percent of units in such housing to be 
occupied by low and moderate income persons. If the structure assisted 
contains two dwelling units, at least one must be occupied by low and 
moderate income households, and if the structure contains more than two 
dwelling units, at least 51 percent of the units must be so occupied. 
Where two or more rental buildings being assisted are or will be 
located on the same or contiguous properties, and the buildings will be 
under common ownership and management, the grouped buildings may be 
considered for this purpose as a single structure. For rental housing, 
occupancy by low and moderate income households must be at affordable 
rents to qualify under this criterion. The grantee shall adopt and make 
public its standards for determining ``affordable rents'' for this 
purpose. The following shall also qualify under this criterion:
    (1) When less than 51 percent of the units in a structure will be 
occupied by low and moderate income households, ICDBG assistance may be 
provided in the following limited circumstances:
    (i) The assistance is for an eligible activity to reduce the 
development cost of the new construction of a multifamily, non-elderly 
rental housing project;
    (ii) Not less than 20 percent of the units will be occupied by low 
and moderate income households at affordable rents; and
    (iii) The proportion of the total cost of developing the project to 
be borne by ICDBG funds is no greater than the proportion of units in 
the project that will be occupied by low and moderate income 
households.
    (2) When ICDBG funds are used for housing services eligible under 
Sec. 953.201(j), such funds shall be considered to benefit low-and 
moderate-income persons if the housing for which the services are 
provided is to be occupied by low-and moderate-income households.
    (d) Job creation or retention activities. An activity designed to 
create or retain permanent jobs where at least 51 percent of the jobs, 
computed on a full time equivalent basis, involve the employment of low 
and moderate persons. For purposes of determining whether a job is held 
by or made available to a low or moderate income person, the person may 
be presumed to be a low or moderate income person if: he/she resides 
within a census tract (or block numbering area) where not less than 70 
percent of the residents have incomes at or below 80 percent of the 
area median; or, if he/she resides in a census tract (or block 
numbering area) which meets the Federal Empowerment Zone or Enterprise 
Community eligibility criteria; or, if the assisted business is located 
in and the job under consideration is to be located in such a tract or 
area. As a general rule, each assisted business shall be considered to 
be a separate activity for purposes of determining whether the activity 
qualifies under this paragraph. However, in certain cases such as where 
ICDBG funds are used to acquire, develop or improve a real property 
(e.g., a business incubator or an industrial park) the requirement may 
be met by measuring jobs in the aggregate for all the businesses which 
locate on the property, provided such businesses are not otherwise 
assisted by ICDBG funds. Where ICDBG funds are used to pay for the 
staff and overhead costs of a CBDO under the provisions of Sec. 953.204 
making loans to businesses from non-ICDBG funds, this requirement may 
be met by aggregating the jobs created by all of the businesses 
receiving loans during any one year period. For an activity that 
creates jobs, the grantee must document that at least 51 percent of the 
jobs will be held by, or will be available to, low and moderate income 
persons. For an activity that retains jobs, the grantee must document 
that the jobs would actually be lost without the ICDBG assistance and 
that either or both of the following conditions apply with respect to 
at least 51 percent of the jobs at the time the ICDBG assistance is 
provided: The job is known to be held by a low or moderate income 
person; or the job can reasonably be expected to turn over within the 
following two years and that steps will be taken to ensure that it will 
be filled by, or made available to, a low or moderate income person 
upon turnover. Jobs will be considered to be available to low and 
moderate income persons for these purposes only if:
    (1) Special skills that can only be acquired with substantial 
training or

[[Page 40100]]

work experience or education beyond high school are not a prerequisite 
to fill such jobs, or the business agrees to hire unqualified persons 
and provide training; and
    (2) The grantee and the assisted business take actions to ensure 
that low and moderate income persons receive first consideration for 
filling such jobs.
    (e) Additional criteria. (1) Where the assisted activity is 
acquisition of real property, a preliminary determination of whether 
the activity addresses the primary objective may be based on the 
planned use of the property after acquisition. A final determination 
shall be based on the actual use of the property, excluding any short-
term, temporary use.
    (2) Where the assisted activity is relocation assistance that the 
grantee is required to provide, such relocation assistance shall be 
considered to address the primary objective as addressed by the 
displacing activity.
    (3) In any case where the activity undertaken for the purpose of 
creating or retaining jobs is a public improvement and the area served 
is primarily residential, the activity must meet the requirements of 
paragraph (a) of this section as well as those of paragraph (d) of this 
section in order to qualify as benefiting low and moderate income 
persons.
    (4) Expenditures for activities meeting the criteria for benefiting 
low and moderate income persons shall be used in determining the extent 
to which the grantee's overall program benefits such persons. In 
determining the percentage of funds expended for such activities:
    (i) Costs of administration and planning, eligible under 
Sec. 953.205 and Sec. 953.206 respectively, will be assumed to benefit 
low and moderate income persons in the same proportion as the remainder 
of the ICDBG funds and, accordingly, shall be excluded from the 
calculation.
    (ii) Funds expended for the acquisition, new construction or 
rehabilitation of property for housing those qualified under 
Sec. 953.208(c) shall be counted for this purpose, but shall be limited 
to an amount determined by multiplying the total cost (including ICDBG 
and non-ICDBG costs) of the acquisition, construction, or 
rehabilitation by the percent of units in such housing occupied by low 
and moderate income persons.
    (iii) Funds expended for any other activity which qualifies under 
Sec. 953.208 shall be counted for this purpose in their entirety.

Subpart D--Single Purpose Grant Application and Selection Process


Sec. 953.300  Application requirements.

    (a) Application information. A Notice of Funding Availability 
(NOFA) shall be published in the Federal Register not less than 30 days 
before the deadline for application submission. The NOFA will provide 
information relating to the date and time for application submission, 
the form and content requirements of the application, specific 
information regarding the rating and ranking criteria to be used, and 
any other information pertinent to the application process.
    (b) Costs incurred by applicant. Costs incurred by an applicant 
prior to the submission of the single purpose grant application to HUD 
will not be recognized by HUD as eligible ICDBG expenses.
    (c) HUD will not normally reimburse or recognize costs incurred 
before HUD approval of the application for funding. However, under 
unusual circumstances, the Area ONAP may consider and approve written 
requests to recognize and reimburse costs incurred after submission of 
the application where failure to do so would impose undue hardship on 
the applicant. Such written authorization will be made only before the 
costs are incurred and where the requirements for reimbursement have 
been met in accordance with 24 CFR 58.22 and with the understanding 
that HUD has no obligation whatsoever to approve the application or to 
reimburse the applicant should the application be disapproved.

(Approved by the Office of Management and Budget under control 
number 2577-0191)


Sec. 953.301  Selection process.

    (a) Threshold requirements. In order for applications that have 
passed the initial screening tests listed in the NOFA to be rated and 
ranked, Area ONAPs must determine that the following requirements have 
been met:
    (1) Community development appropriateness. (i) The project costs 
are reasonable;
    (ii) The project is appropriate for the intended use; and
    (iii) The project is usable or achievable (generally within a two-
year period).
    If in the judgment of the Area ONAP, available data indicate that 
the proposed project does not meet these requirements, the Area ONAP 
shall reject the project from further consideration.
    (2) Capacity. The applicant possesses, or will acquire, the 
managerial, technical, or administrative staff necessary to carry out 
the proposed program. If the Area ONAP determines that the applicant 
does not have or cannot obtain the capacity to undertake the proposed 
program, the application will be rejected from further consideration.
    (3) Performance.--(i) Community development. Performance 
determinations are made through the Area ONAP's assessment process. 
Applicants that have been advised in writing of negative findings on 
previous grants, for which a schedule of corrective actions has been 
established, will not be considered for funding if they are behind 
schedule as of the deadline date for filing applications.
    (ii) Housing assistance. The applicant must not have been found 
taking actions to impede the provision or operation of assisted housing 
for the low- and moderate-income members of the tribe or village. If 
inadequate performance is found, and the applicant has been notified in 
writing, they may be rejected from further consideration. Performance 
determinations are made through the Area ONAP's assessment process.
    (iii) Audits. An applicant that has an outstanding ICDBG obligation 
to HUD that is in arrears, or one that has not agreed to a repayment 
schedule, will be disqualified from the current and subsequent 
competitions until the obligations are current. An applicant whose 
response to an audit finding is overdue or unsatisfactory will be 
disqualified from the current and subsequent competitions until the 
applicant has taken final action necessary to close the audit 
finding(s). The Area ONAP administrator may provide exceptions to this 
disqualification requirement in cases where the applicant has made a 
good faith effort to clear non-monetary audit findings. In no instance, 
however, shall an exception be provided when funds are due HUD, unless 
a satisfactory arrangement for repayment of the debt has been made, and 
payments are current.
    (b) Application rating system. Applications that meet the threshold 
requirements established in paragraph (a) of this section will be rated 
competitively within each Area ONAP's jurisdiction.
    (c) NOFAs will define and establish weights for the selection 
criteria for each rating category contained in this subpart, will 
specify the maximum points available, and will describe how point 
awards will be made. Each Area ONAP will rate applications on the basis 
of their responsiveness to the criteria contained in this subpart as 
defined in the periodic NOFAs.

[[Page 40101]]

    (d) Set-aside selection of projects. If funds have been set aside 
by statute for a specific purpose in any fiscal year, other criteria 
pertinent to the set-aside may be used to select projects for funding 
from the set-aside.


Sec. 953.302  Project specific threshold requirements.

    (a) Housing rehabilitation projects. All applicants for housing 
rehabilitation projects shall adopt rehabilitation standards and 
rehabilitation policies before submitting an application. The applicant 
shall assure that it will use project funds to rehabilitate units only 
when the homeowner's payments are current or the homeowner is current 
in a repayment agreement that is subject to approval by the Area ONAP. 
The Area ONAP administrator may grant exceptions to this requirement on 
a case-by-case basis.
    (b) New housing construction projects. New housing construction can 
only be implemented through a nonprofit organization that is eligible 
under Sec. 953.204 or is otherwise eligible under Sec. 953.207(b)(3). 
All applicants for new housing construction projects shall adopt, by 
current tribal resolution, construction standards before submitting an 
application. All applications which include new housing construction 
projects must document that:
    (1) No other housing is available in the immediate reservation area 
that is suitable for the household(s) to be assisted; and
    (2) No other sources can meet the needs of the household(s) to be 
assisted; and
    (3) Rehabilitation of the unit occupied by the household(s) to be 
assisted is not economically feasible; or
    (4) The household(s) to be housed currently is in an overcrowded 
housing unit (sharing with another household); or
    (5) The household(s) to be assisted has no current residence.
    (c) Economic development projects. All applicants for economic 
development projects must provide an analysis which shows public 
benefit commensurate with the ICDBG assistance requested will result 
from the assisted project. This analysis should also establish that to 
the extent practicable: reasonable financial support will be committed 
from non-Federal sources prior to disbursement of Federal funds; any 
grant amount provided will not substantially reduce the amount of non-
Federal financial support for the activity; not more than a reasonable 
rate of return on investment is provided to the owner; and, that grant 
funds used for the project will be disbursed on a pro rata basis with 
amounts from other sources. In addition, it must be established that 
the project is financially feasible and that it has a reasonable chance 
of success.


Sec. 953.303  Project rating categories.

    (a) There are three project rating categories: housing, community 
facilities, and economic development. The housing rating category 
consists of three components: Housing rehabilitation, land to support 
new housing, and new housing construction. The community facility 
category consists of two components: Infrastructure and buildings. The 
economic development category has only one component. With the 
exceptions indicated in paragraph (b) of this section, the following 
criteria will be used to rate projects.
    (1) Project need and design.
    (2) Planning and implementation.
    (3) Leverage.
    (b) Exceptions. (1) Projects for the acquisition of land to support 
new housing will not be rated under the leverage criterion.
    (2) Economic development projects will be not be rated under the 
project need and design and planning and implementation criteria. These 
projects will be rated under the leverage criterion and the following 
additional criteria.
    (i) Organization.
    (ii) Project success.
    (iii) Jobs.
    (iv) Additional considerations consisting of the following:
    (A) Use, improvement, or expansion of tribal members' special 
skills.
    (B) Provision of spin-off benefits.
    (C) Provision of special opportunities for residents of Indian 
housing.
    (D) Provision of benefits to other businesses owned by Indians or 
Alaska natives.
    (E) Commitment to loan repayment or reuse of ICDBG funds.


Sec. 953.304  Funding process.

    (a) Notification. Area ONAPs will notify applicants of the approval 
or disapproval of their applications. Grant amounts offered may reflect 
adjustments made by the Area ONAPs in accordance with Sec. 953.100

(b)(2).
    (b) Grant award. (1) As soon as the Area ONAP determines that the 
applicant has complied with any pre-award requirements and absent 
information which would alter the threshold determinations under 
Sec. 953.302, the grant will be awarded. The regulations become part of 
the grant agreement.
    (2) All grants shall be conditioned upon the completion of all 
environmental obligations and approval of release of funds by HUD in 
accordance with the requirements of part 58 of this title and, in 
particular, subpart J of part 58 of this title, except as otherwise 
provided in part 58 of this title.
    (3) HUD may impose other grant conditions where additional actions 
or approvals are required before the use of funds.

(Approved by the Office of Management and Budget under OMB Control 
No. 2577-0191.)


Sec. 953.305  Program amendments.

    (a) Grantees shall request prior HUD approval for program 
amendments which will significantly change the scope, location, 
objective, or class of beneficiaries of the approved activities, as 
originally described in the application.
    (b) Amendment requests of $100,000 or more shall include all 
application components required by the NOFA published for the last 
application cycle; those requests of less than $100,000 do not have to 
include the components which address the selection criteria.
    (c) Approval of an amendment request is subject to the following:
    (1) A rating equal to or greater than the lowest rating received by 
a funded project during the most recent funding competition must be 
attained by the amended project if the request is for $100,000 or more;
    (2) Demonstration by the grantee of the capacity to promptly 
complete the modified or new activities;
    (3) Demonstration by the grantee of compliance with the 
requirements of Sec. 953.604 for citizen participation; and
    (4) The preparation of an amended or new environmental review in 
accordance with part 58 of this title, if there is a significant change 
in the scope or location of approved activities.
    (d) Amendments which address imminent threats to health and safety 
shall be reviewed and approved in accordance with the requirements of 
subpart E of this part.
    (e) If a program amendment fails to be approved and the original 
project is no longer feasible, the grant funds proposed for amendment 
shall be recaptured by HUD.

Subpart E--Imminent Threat Grants


Sec. 953.400  Criteria for funding.

    The following criteria apply to requests for assistance under this 
subpart:
    (a) In response to requests for assistance, HUD may make funds

[[Page 40102]]

available under this subpart to applicants to alleviate or remove 
imminent threats to health or safety. The urgency and immediacy of the 
threat shall be independently verified before the approval of an 
application. Funds may only be used to deal with imminent threats that 
are not of a recurring nature and which represent a unique and unusual 
circumstance, and which impact on an entire service area.
    (b) Funds to alleviate imminent threats may be granted only if the 
applicant can demonstrate to the satisfaction of HUD that other tribal 
or Federal funding sources cannot be made available to alleviate the 
threat.
    (c) HUD will establish grant ceilings for imminent threat 
applications.


Sec. 953.401  Application process.

    (a) Letter to proceed. The Area ONAP may issue the applicant a 
letter to proceed to incur costs to alleviate imminent threats to 
health and safety only if the assisted activities do not alter 
environmental conditions and are for temporary or permanent 
improvements limited to protection, repair, or restoration actions 
necessary only to control or arrest the effects of imminent threats or 
physical deterioration. Reimbursement of such costs is dependent upon 
HUD approval of the application.
    (b) Applications. Applications shall include the information 
specified in the Notice of Funding Availability (NOFA).
    (c) Application approval. Applications which meet the requirement 
of this section may be approved by the Area ONAP without competition in 
accordance with the applicable requirements of Sec. 953.304.

(Approved by the Office of Management and Budget under control 
number 2577-0191)


Sec. 953.402  Availability of funds.

    Of the funds made available by the NOFA for the ICDBG program, an 
amount to be determined by the Assistant Secretary may be reserved by 
HUD for grants under this subpart. The amount of funds reserved for 
imminent threat funding during each funding cycle will be stated in the 
NOFA. If any of the reserved funds are not used to fund imminent threat 
grants during a fiscal year, they will be added to the allocation of 
ICDBG funds for the subsequent fiscal year and will be used as if they 
were a part of the new allocation.

Subpart F--Grant Administration


Sec. 953.500  Responsibility for grant administration.

    (a) One or more tribal departments or authorities, including 
existing tribal public agencies, may be designated by the chief 
executive officer of the grantee to undertake activities assisted by 
this part. A public agency so designated shall be subject to the same 
requirements as are applicable to subrecipients.
    (b) The grantee is responsible for ensuring that ICDBG funds are 
used in accordance with all program requirements. The use of designated 
public agencies, subrecipients, or contractors does not relieve the 
grantee of this responsibility. The grantee is also responsible for 
determining the adequacy of performance under subrecipient agreements 
and procurement contracts, and for taking appropriate action when 
performance problems arise, such as the actions described in 
Sec. 953.701.


Sec. 953.501  Applicability of uniform administrative requirements and 
cost principles.

    (a) Grantees and subrecipients which are governmental entities 
(including public agencies) shall comply with the requirements and 
standards of OMB Circular No. A-87, ``Principles for Determining Costs 
Applicable to Grants and Contracts with State, Local and Federally 
recognized Indian Tribal Governments'', OMB Circular A-128, ``Audits of 
State and Local Governments'' (implemented at 24 CFR part 44) and with 
the following sections of 24 CFR part 85 ``Uniform Administrative 
Requirements for Grants and Cooperative Agreements to State and Local 
Governments''.
    (1) Section 85.3, ``Definitions''.
    (2) Section 85.6, ``Exceptions''.
    (3) Section 85.12, ``Special grant or subgrant conditions for 
`high-risk' grantees''.
    (4) Section 85.20, ``Standards for financial management systems,'' 
except paragraph (a).
    (5) Section 85.21, ``Payment''.
    (6) Section 85.22, ``Allowable costs''.
    (7) Section 85.25, ``Program income,'' except as modified by 
Sec. 953.503.
    (8) Section 85.26, ``Non-federal audits''.
    (9) Section 85.32, ``Equipment,'' except in all cases in which the 
equipment is sold, the proceeds shall be program income.
    (10) Section 85.33, ``Supplies''.
    (11) Section 85.34, ``Copyrights''.
    (12) Section 85.35, ``Subawards to debarred and suspended 
parties''.
    (13) Section 85.36, ``Procurement,'' except paragraphs (a) States, 
(i)(5) Compliance with the Davis Bacon Act (40 U.S.C. 276a to a-7) and 
(i)(6) Compliance with sections 103 and 107 of the Contract Work Hours 
and Safety Standards Act (40 U.S.C. 327-330). There may be 
circumstances under which the bonding requirements of Sec. 85.36(h) are 
inconsistent with other responsibilities and obligations of the 
grantee. In such circumstances, acceptable methods to provide 
performance and payment assurance may include:
    (i) Deposit with the grantee of a cash escrow of not less than 20 
percent of the total contract price, subject to reduction during the 
warranty period, commensurate with potential risk; or
    (ii) Letter of credit for 25 percent of the total contract price, 
unconditionally payable upon demand of the grantee, subject to 
reduction during the warranty period commensurate with potential risk.
    (14) Section 85.37, ``Subgrants''.
    (15) Section 85.40, ``Monitoring and reporting program 
performance,'' except paragraphs (b) through (d) and paragraph (f).
    (16) Section 85.41, ``Financial reporting,'' except paragraphs (a), 
(b), and (e).
    (17) Section 85.42, ``Retention and access requirements for 
records''. The retention period referenced in Sec. 85.42(b) pertaining 
to individual ICDBG activities starts from the date of the submission 
of the final status and evaluation report as prescribed in 
Sec. 953.506(a) in which the specific activity is reported.
    (18) Section 85.43, ``Enforcement''.
    (19) Section 85.44, ``Termination for convenience''.
    (20) Section 85.51 ``Later disallowances and adjustments''.
    (21) Section 85.52, ``Collection of amounts due''.
    (b) Subrecipients, except subrecipients that are governmental 
entities, shall comply with the requirements and standards of OMB 
Circular No. A-122, ``Cost Principles for Nonprofit Organizations,'' or 
OMB Circular No. A-21, ``Cost Principles for Educational 
Institutions,'' as applicable, and OMB Circular A-133, ``Audits of 
Institutions of Higher Education and Other Nonprofit Institutions'' 
(implemented at 24 CFR part 45). Audits shall be conducted annually. 
Such subrecipients shall also comply with the following provisions of 
24 CFR part 84 ``Uniform Administrative Requirements for Grants and 
Agreements With Institutions of Higher Education, Hospitals and Other 
Non-Profit Organizations'').
    (1) Subpart A--``General''.
    (2) Subpart B--``Pre-Award Requirements,'' except for Sec. 84.12, 
``Forms for Applying for Federal Assistance''.

[[Page 40103]]

    (3) Subpart C--``Post-Award Requirements,'' except for Sec. 84.22, 
``Payment Requirements,'' grantees shall follow the standards of 
Secs. 85.20(7) and 85.21 in making payments to subrecipients.
    (4) Section 84.23, ``Cost Sharing and Matching''.
    (5) Section 84.24, ``Program Income'', as modified by Sec. 953.503.
    (6) Section 84.25, ``Revision of Budget and Program Plans''.
    (7) Section 84.32, ``Real Property.'' In lieu of Sec. 84.32, ICDBG 
subrecipients shall follow Sec. 953.504 of the ICDBG regulations.
    (8) Section 84.34(g) ``Equipment,'' except that in lieu of the 
disposition provisions of this paragraph:
    (i) In all cases in which equipment is sold during the grant period 
as defined in 24 CFR 85.25, the proceeds shall be program income; and
    (ii) Equipment not needed by the subrecipient for ICDBG activities 
shall be transferred to the grantee for the ICDBG program or shall be 
retained after compensating the grantee.
    (9) Section 84.51, ``Monitoring and Reporting Program 
Performance.'' Only Sec. 84.51(a) applies to ICDBG subrecipients.
    (10) Section 84.52, ``Financial Reporting''.
    (11) Section 84.53(b), ``Retention and access requirements for 
records.'' The retention period referenced in Sec. 84.53(b) pertaining 
to individual ICDBG activities starts from the date of the submission 
of the final status and evaluation report as prescribed in 
Sec. 953.506(a), in which the specific activity is reported.
    (12) Section 84.61, ``Termination.'' In lieu of the provisions of 
this section, ICDBG subrecipients shall comply with Sec. 953.502 (b)(7) 
of the ICDBG regulations.
    (13) Subpart D--``After-the-Award Requirements,'' except for 
Sec. 84.71, ``Closeout Procedures''.
    (c) Cost principles. (1) All items of cost listed in Attachment B 
of OMB Circulars A-21, A-87, or A-123, as applicable, which require 
prior Federal agency approval are allowable without the prior approval 
of HUD to the extent that they comply with the general policies and 
principles stated in Attachment A of such circulars and are otherwise 
eligible under subpart C of this part, except for the following:
    (i) Depreciation methods for fixed assets shall not be changed 
without specific approval of HUD or, if charged through a cost 
allocation plan, the Federal cognizant agency.
    (ii) Fines and penalties are unallowable costs to the ICDBG 
program.
    (2) No person providing consultant services in an employer-employee 
type of relationship shall receive more than a reasonable rate of 
compensation for personal services paid with ICDBG funds. In no event, 
however, shall such compensation exceed the equivalent of the daily 
rate paid for Level IV of the Executive Schedule.

(Approved by the Office of Management and Budget under control 
number 2577-0191)


Sec. 953.502  Agreements with subrecipients.

    (a) Before disbursing any ICDBG funds to a subrecipient, the 
grantee shall sign a written agreement with the subrecipient. The 
agreement shall remain in effect during any period that the 
subrecipient has control over ICDBG funds, including program income.
    (b) At a minimum, the written agreement with the subrecipient shall 
include provisions concerning the following items:
    (1) Statement of work. The agreement shall include a description of 
the work to be performed, a schedule for completing the work, and a 
budget. These items shall be in sufficient detail to provide a sound 
basis for the grantee effectively to monitor performance under the 
agreement.
    (2) Records and reports. The grantee shall specify in the agreement 
the particular records the subrecipient must maintain and the 
particular reports the subrecipient must submit in order to assist the 
grantee in meeting its recordkeeping and reporting requirements.
    (3) Program income. The agreement shall include the program income 
requirements set forth in Sec. 85.25 as modified by Sec. 953.503.
    (4) Uniform administrative requirements. The agreement shall 
require the subrecipient to comply with applicable administrative 
requirements, as described in Sec. 953.501.
    (5) Other program requirements. The agreement shall require the 
subrecipient to carry out each activity in compliance with all Federal 
laws and regulations described in subpart G of this part, except that 
the subrecipient does not assume the grantee's environmental 
responsibilities described at Sec. 953.605.
    (6) Conditions for religious organizations. Where applicable, the 
conditions prescribed by HUD for the use of ICDBG funds by religious 
organizations shall be included in the agreement.
    (7) Suspension and termination. The agreement shall specify that, 
in accordance with 24 CFR 85.43, suspension or termination may occur if 
the subrecipient materially fails to comply with any term of the award, 
and that the award may be terminated for convenience in accordance with 
24 CFR 85.44.
    (8) Reversion of assets. The agreement shall specify that upon its 
expiration the subrecipient shall transfer to the grantee any ICDBG 
funds on hand at the time of expiration and any accounts receivable 
attributable to the use of ICDBG funds. It shall also include 
provisions designed to ensure that any real property under the 
subrecipient's control that was acquired or improved in whole or in 
part with ICDBG funds (including ICDBG funds provided to the 
subrecipient in the form of a loan) in excess of $25,000 is either:
    (i) Used to meet the primary objective as stated in Sec. 953.208 
until five years after expiration of the agreement, or for such longer 
period of time as determined to be appropriate by the grantee; or
    (ii) Not used in accordance with paragraph (b)(8)(i) of this 
section, in which event the subrecipient shall pay to the grantee an 
amount equal to the current market value of the property less any 
portion of the value attributable to expenditures of non-ICDBG funds 
for the acquisition of, or improvement to, the property. The payment is 
program income to the grantee if it is received during the grant 
period. (No payment is required after the period of time specified in 
paragraph (b)(8)(i) of this section.)

(Approved by the Office of Management and Budget under control 
number 2577-0191)


Sec. 953.503   Program income.

    (a) Program income requirements for ICDBG grantees are set forth in 
24 CFR 85.25, as modified by this section.
    (b) Program income means gross income received by the grantee or a 
subrecipient directly generated from the use of ICDBG funds during the 
grant period, except as provided in paragraph (b)(4) of this section. 
When program income is generated by an activity that is only partially 
assisted with ICDBG funds, the income shall be prorated to reflect the 
percentage of ICDBG funds used.
    (1) Program income includes, but is not limited to, the following:
    (i) Proceeds from the disposition by sale or long-term lease of 
real property purchased or improved with ICDBG funds;
    (ii) Proceeds from the disposition of equipment purchased with 
ICDBG funds;
    (iii) Gross income from the use or rental of real or personal 
property

[[Page 40104]]

acquired by the grantee or by a subrecipient with ICDBG funds, less 
costs incidental to generation of the income;
    (iv) Gross income from the use or rental of real property, owned by 
the grantee or by a subrecipient, that was constructed or improved with 
ICDBG funds, less costs incidental to generation of the income;
    (v) Payments of principal and interest on loans made using ICDBG 
funds, except as provided in paragraph (b)(3) of this section;
    (vi) Proceeds from the sale of loans made with ICDBG funds except 
as provided in paragraph (b)(4) of this section;
    (vii) Proceeds from sale of obligations secured by loans made with 
ICDBG funds;
    (viii) Interest earned on funds held in a revolving fund account;
    (ix) Interest earned on program income pending its disposition; and
    (x) Funds collected through special assessments made against 
properties owned and occupied by households not of low and moderate 
income, where the assessments are used to recover all or part of the 
ICDBG portion of a public improvement.
    (2) Program income does not include income earned on grant advances 
from the U.S. Treasury. The following items of income earned on grant 
advances must be remitted to HUD for transmittal to the U.S. Treasury 
and will not be reallocated:
    (i) Interest earned from the investment of the initial proceeds of 
a grant advance by the U.S. Treasury;
    (ii) Income (e.g., interest) earned on loans or other forms of 
assistance provided with ICDBG funds that are used for activities 
determined by HUD either to be ineligible or that fail substantially to 
meet any other requirement of this part.
    (3) The calculation of the amount of program income for the 
grantee's ICDBG program as a whole (i.e., comprising activities carried 
out by a grantee and its subrecipients) shall exclude payments made by 
subrecipients of principal and/or interest on loans received from 
grantees where such payments are made from program income received by 
the subrecipient. (By making such payments, the subrecipient shall be 
deemed to have transferred program income to the grantee.) The amount 
of program income derived from this calculation shall be used for 
reporting purposes and in determining limitations on planning and 
administration and public services activities to be paid for with ICDBG 
funds.
    (4) Program income does not include any income received in a single 
year by the grantee and all its subrecipients if the total amount of 
such income does not exceed $25,000.
    (5) Examples of other receipts that are not considered program 
income are proceeds from fundraising activities carried out by 
subrecipients receiving ICDBG assistance; funds collected through 
special assessments used to recover the non-ICDBG portion of a public 
improvement; and proceeds from the disposition of real property 
acquired or improved with ICDBG funds when the disposition occurs after 
the applicable time period specified in Sec. 953.502(b)(8) for 
subrecipient-controlled property, or in Sec. 953.504 for grantee-
controlled property.
    (6) For purposes of determining the applicability of the program 
income requirements included in this part and in 24 CFR 85.25, the 
grant period is the time between the effective date of the grant 
agreement and the close-out of the grant pursuant to the requirements 
of Sec. 953.508.
    (7) As provided for in 24 CFR 85.25(g)(2), program income received 
will be added to the funds committed to the grant agreement and shall 
be used for purposes and under the conditions of the grant agreement.
    (8) Recording program income. The receipt and expenditure of 
program income as defined in Sec. 953.503(b) shall be recorded as part 
of the financial transactions of the grant program.

(Approved by the Office of Management and Budget under control 
number 2577-0191)


Sec. 953.504   Use of real property.

    The standards described in this section apply to real property 
within the grantee's control which was acquired or improved in whole or 
in part using ICDBG funds in excess of $25,000. These standards shall 
apply from the date ICDBG funds are first spent for the property until 
five years after the closeout of the grant from which the assistance to 
the property was provided.
    (a) A grantee may not change the use or planned use of any such 
property (including the beneficiaries of such use) from that for which 
the acquisition or improvement was made unless the grantee provides 
affected citizens with reasonable notice of, and opportunity to comment 
on, any proposed change, and either:
    (1) The new use of such property qualifies as meeting the primary 
objective set forth in Sec. 953.208 and is not a building for the 
general conduct of government; or
    (2) The requirements in paragraph (b) of this section are met.
    (b) If the grantee determines, after consultation with affected 
citizens, that it is appropriate to change the use of the property to a 
use which does not qualify under paragraph (a)(1) of this section, it 
may retain or dispose of the property for the changed use if the 
grantee's ICDBG program is reimbursed in the amount of the current fair 
market value of the property, less any portion of the value 
attributable to expenditures of non-ICDBG funds for acquisition of, and 
improvements to, the property.
    (c) If the change of use occurs after program closeout, the 
proceeds from the disposition of the real property shall be used for 
activities which meet the eligibility requirements set forth in subpart 
C of this part and the primary objective set forth in Sec. 953.208.
    (d) Following the reimbursement of the ICDBG program in accordance 
with paragraph (b) of this section, the property no longer will be 
subject to any ICDBG requirements.


Sec. 953.505   Records to be maintained.

    Each grantee shall establish and maintain sufficient records to 
enable the Secretary to determine whether the grantee has met the 
requirements of this part.

(Approved by the Office of Management and Budget under control 
number 2577-0191)


Sec. 953.506   Reports.

    (a) Status and evaluation report. Grantees shall submit a status 
and evaluation report on previously funded open grants 45 days after 
the end of the Federal fiscal year and at the time of grant close-out. 
The report shall be in a narrative form addressing these areas.
    (1) Progress. The progress made in completing approved activities 
should be described. This description should include a listing of work 
remaining together with a revised implementation schedule, if 
necessary.
    (2) Expenditure of funds. A breakdown of funds spent on each major 
project activity or category should be provided.
    (3) Grantee assessment. If the project has been completed, an 
evaluation of the effectiveness of the project in meeting the community 
development needs of the grantee should be provided.

(Approved by the Office of Management and Budget under Control No. 
2577-0191.)

    (b) Minority business enterprise reports. Grantees shall submit to 
HUD, by April 10, a report on contract and subcontract activity during 
the first half of the fiscal year and by October 10 a report on such 
activity during the second half of the year.


[[Page 40105]]


(Approved by the Office of Management and Budget under control 
number 2577-0191)


Sec. 953.507   Public access to program records.

    Notwithstanding the provisions of 24 CFR 85.42(f), grantees shall 
provide citizens with reasonable access to records regarding the past 
use of ICDBG funds, consistent with applicable State and tribal laws 
regarding privacy and obligations of confidentiality.


Sec. 953.508   Grant closeout procedures.

    (a) Criteria for closeout. A grant will be closed out when the Area 
ONAP determines, in consultation with the grantee, that the following 
criteria have been met:
    (1) All costs to be paid with ICDBG funds have been incurred, with 
the exception of closeout costs (e.g., audit costs) and costs resulting 
from contingent liabilities described in the closeout agreement 
pursuant to paragraph (c) of this section. Contingent liabilities 
include, but are not limited to, third-party claims against the 
grantee, as well as related administrative costs.
    (2) With respect to activities which are financed by means of 
escrow accounts, loan guarantees, or similar mechanisms, the work to be 
assisted with ICDBG funds has actually been completed.
    (3) Other responsibilities of the grantee under the grant agreement 
and applicable laws and regulations appear to have been carried out 
satisfactorily or there is no further Federal interest in keeping the 
grant agreement open for the purpose of securing performance.
    (b) Closeout actions. (1) Within 90 days of the date it is 
determined that the criteria for closeout have been met, the grantee 
shall submit to the Area ONAP a copy of the final status and evaluation 
report described in Sec. 953.506(a) and a completed Financial Status 
Report (SF-269). If acceptable reports are not submitted, an audit of 
the grantee's program activities may be conducted by HUD.
    (2) Based on the information provided in the status report and 
other relevant information, the grantee, in consultation with the Area 
ONAP, will prepare a closeout agreement in accordance with paragraph 
(c) of this section.
    (3) The Area ONAP will cancel any unused portion of the awarded 
grant, as shown in the signed grant closeout agreement. Any unused 
grant funds disbursed from the U.S. Treasury which are in the 
possession of the grantee shall be refunded to HUD.
    (4) Any costs paid with ICDBG funds which were not audited 
previously shall be subject to coverage in the grantee's next single 
audit performed in accordance with 24 CFR part 44. The grantee may be 
required to repay HUD any disallowed costs based on the results of the 
audit, or on additional HUD reviews provided for in the closeout 
agreement.
    (c) Closeout agreement. Any obligations remaining as of the date of 
the closeout shall be covered by the terms of a closeout agreement. The 
agreement shall be prepared by the grantee in consultation with the 
Area ONAP. The agreement shall identify the grant being closed out, and 
include provisions with respect to the following:
    (1) Identification of any closeout costs or contingent liabilities 
subject to payment with ICDBG funds after the closeout agreement is 
signed;
    (2) Identification of any unused grant funds to be canceled by HUD;
    (3) Identification of any program income on deposit in financial 
institutions at the time the closeout agreement is signed;
    (4) Description of the grantee's responsibility after closeout for:
    (i) Compliance with all program requirements, certifications and 
assurances in using program income on deposit at the time the closeout 
agreement is signed and in using any other remaining ICDBG funds 
available for closeout costs and contingent liabilities;
    (ii) Use of real property assisted with ICDBG funds in accordance 
with the principles described in Sec. 953.504; and
    (iii) Ensuring that flood insurance coverage for affected property 
owners is maintained for the mandatory period;
    (5) Other provisions appropriate to any special circumstances of 
the grant closeout, in modification of or in addition to the 
obligations in paragraphs (c) (1) through (4) of this section. The 
agreement shall authorize monitoring by HUD, and shall provide that 
findings of noncompliance may be taken into account by HUD as 
unsatisfactory performance of the grantee in the consideration of any 
future grant award under this part.
    (d) Termination of grant for convenience. Grant assistance provided 
under this part may be terminated for convenience in whole or in part 
before the completion of the assisted activities, in accordance with 
the provisions of 24 CFR 85.44. The grantee shall not incur new 
obligations for the terminated portions after the effective date, and 
shall cancel as many outstanding obligations as possible. HUD shall 
allow full credit to the grantee for those portions of obligations 
which could not be canceled and which had been properly incurred by the 
grantee in carrying out the activities before the termination. The 
closeout policies contained in this section shall apply in such cases, 
except where the approved grant is terminated in its entirety. 
Responsibility for the environmental review to be performed under 24 
CFR part 50 or 24 CFR part 58, as applicable, shall be determined as 
part of the closeout process.
    (e) Termination for cause. In cases in which HUD terminates the 
grantee's grant under the authority of subpart H of this part, or under 
the terms of the grant agreement, the closeout policies contained in 
this section shall apply, except where the approved grant is canceled 
in its entirety. The provisions in 24 CFR 85.43(c) on the effects of 
termination shall also apply. HUD shall determine whether an 
environmental review is required, and if so, HUD shall perform it in 
accordance with 24 CFR part 50.


Sec. 953.509   Force account construction.

    (a) The use of tribal work forces for construction or renovation 
activities performed as part of the activities funded under this part 
shall be approved by the Area ONAP before the start of project 
implementation. In reviewing requests for an approval of force account 
construction or renovation, the area ONAP may require that the grantee 
provide the following:
    (1) Documentation to indicate that it has carried out or can carry 
out successfully a project of the size and scope of the proposal;
    (2) Documentation to indicate that it has obtained or can obtain 
adequate supervision for the workers to be used;
    (3) Information showing that the workers to be used are, or will 
be, listed on the tribal payroll and are employed directly by a unit, 
department or other governmental instrumentality of the tribe or 
village.
    (b) Any and all excess funds derived from the force account 
construction or renovation activities shall accrue to the grantee and 
shall be reprogrammed for other activities eligible under this part in 
accordance with Sec. 953.305 or returned to HUD promptly.
    (c) Insurance coverage for force account workers and activities 
shall, where applicable, include worker's compensation, public 
liability, property damage, builder's risk, and vehicular liability.
    (d) The grantee shall specify and apply reasonable labor 
performance, construction, or renovation standards to work performed 
under the force account.
    (e) The contracting and procurement standards set forth in 24 CFR 
85.36

[[Page 40106]]

apply to material, equipment, and supply procurement from outside 
vendors under this section.

(Approved by the Office of Management and Budget under control 
number 2577-0191)


Sec. 953.510   Indian preference requirements.

    (a) Applicability. HUD has determined that grants under this part 
are subject to Section 7(b) of the Indian Self-Determination and 
Education Assistance Act (25 U.S.C. 450b). Section 7(b) provides that 
any contract, subcontract, grant or subgrant pursuant to an act 
authorizing grants to Indian organizations or for the benefit of 
Indians shall require that, to the greatest extent feasible:
    (1) Preference and opportunities for training and employment shall 
be given to Indians; and
    (2) Preference in the award of contracts and subcontracts shall be 
given to Indian organizations and Indian-owned economic enterprises as 
defined in section 3 of the Indian Financing Act of 1974 (25 U.S.C. 
1452).
    (b) Definitions. (1) The Indian Self-Determination and Education 
Assistance Act [25 U.S.C. 450b] defines ``Indian'' to mean a person who 
is a member of an Indian tribe and defines ``Indian tribe'' to mean any 
Indian tribe, band, nation, or other organized group or community 
including any Alaska native village or regional or village corporation 
as defined or established pursuant to the Alaska Native Claims 
Settlement Act, which is recognized as eligible for the special 
programs and services provided by the United States to Indians because 
of their status as Indians.
    (2) In section 3 of the Indian Financing Act of 1974 (25 U.S.C. 
1452) economic enterprise is defined as any Indian--owned commercial, 
industrial, or business activity established or organized for the 
purpose of profit, except that Indian ownership must constitute not 
less than 51 percent of the enterprise. This act defines Indian 
organization to mean the governing body of any Indian tribe or entity 
established or recognized by such governing body.
    (c) Preference in administration of grant. To the greatest extent 
feasible, preference and opportunities for training and employment in 
connection with the administration of grants awarded under this part 
shall be given to Indians.
    (d) Preference in contracting. To the greatest extent feasible, 
grantees shall give preference in the award of contracts for projects 
funded under this part to Indian organizations and Indian-owned 
economic enterprises.
    (1) Each grantee shall:
    (i) Advertise for bids or proposals limited to qualified Indian 
organizations and Indian-owned enterprises; or
    (ii) Use a two-stage preference procedure, as follows:
    (A) Stage 1. Invite or otherwise solicit Indian-owned economic 
enterprises to submit a statement of intent to respond to a bid 
announcement or request for proposals limited to Indian-owned firms.
    (B) Stage 2. If responses are received from more than one Indian 
enterprise found to be qualified, advertise for bids or proposals 
limited to Indian organizations and Indian-owned economic enterprises; 
or
    (iii) Develop, subject to Area ONAP one-time approval, the 
grantee's own method of providing preference.
    (2) If the grantee selects a method of providing preference that 
results in fewer than two responsible qualified organizations or 
enterprises submitting a statement of intent, a bid or a proposal to 
perform the contract at a reasonable cost, then the grantee shall:
    (i) Re-advertise the contract, using any of the methods described 
in paragraph (d)(1) of this section; or
    (ii) Re-advertise the contract without limiting the advertisement 
for bids or proposals to Indian organizations and Indian-owned economic 
enterprises; or
    (iii) If one approvable bid or proposal is received, request Area 
ONAP review and approval of the proposed contract and related 
procurement documents, in accordance with 24 CFR 85.36, in order to 
award the contract to the single bidder or offeror.
    (3) Procurements that are within the dollar limitations established 
for small purchases under 24 CFR 85.36 need not follow the formal bid 
or proposal procedures of paragraph (d) of this section, since these 
procurements are governed by the small purchase procedures of 24 CFR 
85.36. However, a grantee's small purchase procurement shall, to the 
greatest extent feasible, provide Indian preference in the award of 
contracts.
    (4) All preferences shall be publicly announced in the 
advertisement and bidding or proposal solicitation documents and the 
bidding and proposal documents.
    (5) A grantee, at its discretion, may require information of 
prospective contractors seeking to qualify as Indian organizations or 
Indian-owned economic enterprises. Grantees may require prospective 
contractors to include the following information prior to submitting a 
bid or proposal, or at the time of submission:
    (i) Evidence showing fully the extent of Indian ownership and 
interest;
    (ii) Evidence of structure, management and financing affecting the 
Indian character of the enterprise, including major subcontracts and 
purchase agreements; materials or equipment supply arrangements; and 
management salary or profit-sharing arrangements; and evidence showing 
the effect of these on the extent of Indian ownership and interest; and
    (iii) Evidence sufficient to demonstrate to the satisfaction of the 
grantee that the prospective contractor has the technical, 
administrative, and financial capability to perform contract work of 
the size and type involved.
    (6) The grantee shall incorporate the following clause (referred to 
as the Section 7(b) clause) in each contract awarded in connection with 
a project funded under this part:
    (i) The work to be performed under this contract is on a project 
subject to Section 7(b) of the Indian Self-Determination and Education 
Assistance Act (25 U.S.C. 450b) (Indian Act). Section 7(b) requires 
that to the greatest extent feasible:
    (A) Preferences and opportunities for training and employment shall 
be given to Indians; and
    (B) Preferences in the award of contracts and subcontracts shall be 
given to Indian organizations and Indian-owned economic enterprises.
    (ii) The parties to this contract shall comply with the provisions 
of Section 7(b) of the Indian Act.
    (iii) In connection with this contract, the contractor shall, to 
the greatest extent feasible, give preference in the award of any 
subcontracts to Indian organizations and Indian-owned economic 
enterprises, and preferences and opportunities for training and 
employment to Indians.
    (iv) The contractor shall include this Section 7(b) clause in every 
subcontract in connection with the project, and shall, at the direction 
of the grantee, take appropriate action pursuant to the subcontract 
upon a finding by the grantee or HUD that the subcontractor has 
violated the Section 7(b) clause of the Indian Act.
    (e) Complaint procedures. The following complaint procedures are 
applicable to complaints arising out of any of the methods of providing 
for Indian preference contained in this part, including alternate 
methods enacted and approved in a manner described in this section:
    (1) Each complaint shall be in writing, signed, and filed with the 
grantee.
    (2) A complaint must be filed with the grantee no later than 20 
calendar days

[[Page 40107]]

from the date of the action (or omission) upon which the complaint is 
based.
    (3) Upon receipt of a complaint, the grantee shall promptly stamp 
the date and time of receipt upon the complaint, and immediately 
acknowledge its receipt.
    (4) Within 20 calendar days of receipt of a complaint, the grantee 
shall either meet, or communicate by mail or telephone, with the 
complainant in an effort to resolve the matter. The grantee shall make 
a determination on a complaint and notify the complainant, in writing, 
within 30 calendar days of the submittal of the complaint to the 
grantee. The decision of the grantee shall constitute final 
administrative action on the complaint.

(Approved by the Office of Management and Budget under control 
number 2577-0191)


Sec. 953.511  Use of escrow accounts for rehabilitation of privately 
owned residential property.

    (a) Limitations. A grantee may withdraw funds from its line of 
credit for immediate deposit into an escrow account for use in funding 
loans and grants for the rehabilitation of privately owned residential 
property under Sec. 953.202(a)(1). The following additional limitations 
apply to the use of escrow accounts for residential rehabilitation 
loans and grants closed after September 7, 1990:
    (1) The use of escrow accounts under this section is limited to 
loans and grants for the rehabilitation of primarily residential 
properties containing no more than four dwelling units (and accessory 
neighborhood-scale non-residential space within the same structure, if 
any, e.g., a store front below a dwelling unit).
    (2) An escrow account shall not be used unless the contract between 
the property owner and the contractor selected to do the rehabilitation 
work specifically provides that payment to the contractor shall be made 
through an escrow account maintained by the grantee, by a subrecipient 
as defined in Sec. 953.4, by a public agency designated under 
Sec. 953.500(a), or by an agent under a procurement contact governed by 
the requirements of 24 CFR 85.36. No deposit to the escrow account 
shall be made until after the contract has been executed between the 
property owner and the rehabilitation contractor.
    (3) All funds withdrawn under this section shall be deposited into 
one interest earning account with a financial institution. Separate 
bank accounts shall not be established for individual loans and grants.
    (4) The amount of funds deposited into an escrow account shall be 
limited to the amount expected to be disbursed within 10 working days 
from the date of deposit. If the escrow account, for whatever reason, 
at any time contains funds exceeding 10 days cash needs, the grantee 
immediately shall transfer the excess funds to its program account. In 
the program account, the excess funds shall be treated as funds 
erroneously drawn in accordance with the requirements of U.S. Treasury 
Financial Manual, paragraph 6-2075.30.
    (5) Funds deposited into an escrow account shall be used only to 
pay the actual costs of rehabilitation incurred by the owner under the 
contract with a private contractor. Other eligible costs related to the 
rehabilitation loan or grant, e.g., the grantee's administrative costs 
under Sec. 953.206 or rehabilitation services costs under 
Sec. 953.202(b)(9), are not permissible uses of escrowed funds. Such 
other eligible rehabilitation costs shall be paid under normal ICDBG 
payment procedures (e.g., from withdrawals of grant funds under the 
grantee's line of credit with the Treasury).
    (b) Interest. Interest earned on escrow accounts established in 
accordance with this section, less any service charges for the account, 
shall be remitted to HUD at least quarterly but not more frequently 
than monthly. Interest earned on escrow accounts is not required to be 
remitted to HUD to the extent the interest is attributable to the 
investment of program income.
    (c) Remedies for noncompliance. If HUD determines that a grantee 
has failed to use an escrow account in accordance with this section, 
HUD may, in addition to imposing any other sanctions provided for under 
this part, require the grantee to discontinue the use of escrow 
accounts, in whole or in part.

Subpart G--Other Program Requirements


Sec. 953.600  Constitutional prohibition.

    In accordance with First Amendment Church/State Principles, as a 
general rule, ICDBG assistance may not be used for religious activities 
or provided to primarily religious entities for any activities, 
including secular activities. The following restrictions and 
limitations therefore apply to the use of ICDBG funds.
    (a) ICDBG funds may not be used for the acquisition of property or 
the construction or rehabilitation (including historic preservation and 
removal of architectural barriers) of structures to be used for 
religious purposes or which will otherwise promote religious interests. 
This limitation includes the acquisition of property for ownership by 
primarily religious entities and the construction or rehabilitation 
(including historic preservation and removal of architectural barriers) 
of structures owned by such entities (except as permitted under 
paragraph (b) of this section with respect to rehabilitation and under 
paragraph (d) of this section with respect to repairs undertaken in 
connection with public services) regardless of the use to be made of 
the property or structure. Property owned by primarily religious 
entities may be acquired with ICDBG funds at no more than fair market 
value for a non-religious use.
    (b) ICDBG funds may be used to rehabilitate buildings owned by 
primarily religious entities to be used for a wholly secular purpose 
under the following conditions:
    (1) The building (or portion thereof) that is to be improved with 
the ICDBG assistance has been leased to an existing or newly 
established wholly secular entity (which may be an entity established 
by the religious entity);
    (2) The ICDBG assistance is provided to the lessee (and not the 
lessor) to make the improvements;
    (3) The leased premises will be used exclusively for secular 
purposes available to persons regardless of religion;
    (4) The lease payments do not exceed the fair market rent of the 
premises as they were before the improvements are made;
    (5) The portion of the cost of any improvements that also serve a 
non-leased part of the building will be allocated to and paid for by 
the lessor;
    (6) The lessor enters into a binding agreement that unless the 
lessee, or a qualified successor lessee, retains the use of the leased 
premises for a wholly secular purpose for at least the useful life of 
the improvements, the lessor will pay to the lessee an amount equal to 
the residual value of the improvements;
    (7) The lessee must remit the amount received from the lessor under 
paragraph (b)(6) of this section to the grantee or subrecipient from 
which the ICDBG funds were derived.
    (8) The lessee can also enter into a management contract 
authorizing the lessor religious entity to use the building for its 
intended secular purpose, e.g., homeless shelter, provision of public 
services. In such case, the religious entity must agree in the 
management contract to carry out the secular purpose in a manner free 
from religious influences in accordance with the principles set forth 
in paragraph (c) of this section.

[[Page 40108]]

    (c) As a general rule, ICDBG funds may be used for eligible public 
services to be provided through a primarily religious entity, where the 
religious entity enters into an agreement with the grantee or 
subrecipient from which the ICDBG funds are derived that, in connection 
with the provision of such services:
    (1) It will not discriminate against any employee or applicant for 
employment on the basis of religion and will not limit employment or 
give preference in employment to persons on the basis of religion;
    (2) It will not discriminate against any person applying for such 
public services on the basis of religion and will not limit such 
services or give preference to persons on the basis of religion;
    (3) It will provide no religious instruction or counseling, conduct 
no religious worship or services, engage in no religious proselytizing, 
and exert no other religious influence in the provision of such public 
services;
    (d) Where the public services provided under paragraph (c) of this 
section are carried out on property owned by the primarily religious 
entity, ICDBG funds may also be used for minor repairs to such property 
which are directly related to carrying out the public services where 
the cost constitutes in dollar terms only an incidental portion of the 
ICDBG expenditure for the public services.


Sec. 953.601  Nondiscrimination.

    (a) Under the authority of section 107(e)(2) of the Act, the 
Secretary waives the requirement that grantees comply with section 109 
of the Act except with respect to the prohibition of discrimination 
based on age, sex, religion, or against an otherwise qualified disabled 
individual.
    (b) A grantee shall comply with the provisions of title II of Pub. 
L. 90-284 (24 U.S.C. 1301--the Indian Civil Rights Act) in the 
administration of a program or activity funded in whole or in part with 
funds made available under this part. For purposes of this section, 
``program or activity'' is defined as any function conducted by an 
identifiable administrative unit of the grantee; and ``funded in whole 
or in part with funds made available under this part'' means that ICDBG 
funds in any amount have been transferred by the grantee to an 
identifiable administrative unit and disbursed in a program or 
activity.


Sec. 953.602  Relocation and real property acquisition.

    (a) Minimize displacement. Consistent with the other goals and 
objectives of this part, grantees shall assure that they have taken all 
reasonable steps to minimize the displacement of persons (households, 
businesses, nonprofit organizations, and farms) as a result of a 
project assisted under this part.
    (b) Temporary relocation. The following policies cover residential 
tenants who will not be required to move permanently but who must 
relocate temporarily for the project. Such tenants must be provided:
    (1) Reimbursement for all reasonable out-of-pocket expenses 
incurred in connection with the temporary relocation, including the 
cost of moving to and from the temporarily occupied housing and any 
increase in monthly housing costs (e.g., rent/utility costs).
    (2) Appropriate advisory services, including reasonable advance 
written notice of:
    (i) The date and approximate duration of the temporary relocation;
    (ii) The location of the suitable, decent, safe and sanitary 
dwelling to be made available for the temporary period;
    (iii) The terms and conditions under which the tenant may occupy a 
suitable, decent, safe, and sanitary dwelling in the building/complex 
following completion of the repairs; and
    (iv) The provisions of paragraph (b)(1) of this section.
    (c) Relocation assistance for displaced persons. A displaced person 
(defined in paragraph (g) of this section) must be provided relocation 
assistance at the levels described in, and in accordance with the 
requirements of, the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970, as amended (URA)(42 U.S.C. 4601-4655) 
and implementing regulations at 49 CFR part 24.
    (d) Optional relocation assistance. Under section 105(a)(11) of the 
Act, the grantee may provide relocation payments and other relocation 
assistance to persons displaced by a project that is not subject to 
paragraph (c) of this section. The grantee may also provide relocation 
assistance to persons receiving assistance under paragraph (c) of this 
section at levels in excess of those required. For assistance that is 
not required by State or tribal law, the grantee shall adopt a written 
policy available to the public that describes the relocation assistance 
that it has elected to furnish and provides for equal relocation 
assistance within each class of displaced persons.
    (e) Real Property acquisition requirements. The acquisition of real 
property for an assisted activity is subject to 49 CFR part 24, subpart 
B. Whenever the grantee does not have the authority to acquire the real 
property through condemnation, it shall:
    (1) Before discussing the purchase price, inform the owner:
    (i) Of the amount it believes to be the fair market value of the 
property. Such amount shall be based upon one or more appraisals 
prepared by a qualified appraiser. However, this provision does not 
prevent the grantee from accepting a donation or purchasing the real 
property at less than its fair market value.
    (ii) That it will be unable to acquire the property if negotiations 
fail to result in an amicable agreement.
    (2) Request HUD approval of the proposed acquisition price before 
executing a firm commitment to purchase the property. The grantee shall 
include with its request a copy of the appraisal(s) and, when 
applicable, a justification for any proposed acquisition payment that 
exceeds the fair market value of the property. HUD will promptly review 
the proposal and inform the grantee of its approval or disapproval.
    (f) Appeals. A person who disagrees with the grantee's 
determination concerning whether the person qualifies as a ``displaced 
person,'' or the amount of relocation assistance for which the person 
is eligible, may file a written appeal of that determination with the 
grantee. A person who is dissatisfied with the grantee's determination 
on his or her appeal may submit a written request for review of that 
determination to the HUD Area ONAP.
    (g) Responsibility of grantee. (1) The grantee shall certify that 
it will comply with the URA, the regulations at 49 CFR part 24, and the 
requirements of this section, i.e., provide assurance of compliance as 
required by 49 CFR part 24. The grantee shall ensure such compliance 
notwithstanding any third party's contractual obligation to the grantee 
to comply with these provisions.
    (2) The cost of required relocation assistance is an eligible 
project cost in the same manner and to the same extent as other project 
costs. However, such assistance may also be paid for with funds 
available to the grantee from any other source.
    (3) The grantee shall maintain records in sufficient detail to 
demonstrate compliance with this section.
    (h) Definition of displaced person. (1) For purposes of this 
section, the term displaced person means any person (household, 
business, nonprofit organization, or farm) that moves from real 
property, or moves his or her personal property from real property, 
permanently, as a direct result of rehabilitation, demolition, or

[[Page 40109]]

acquisition for a project assisted under this part. The term 
``displaced person'' includes, but is not limited to:
    (i) A tenant-occupant of a dwelling unit who moves from the 
building/complex permanently after the submission to HUD of an 
application for financial assistance that is later approved.
    (ii) Any person, including a person who moves before the date 
described in paragraph (h)(1)(i) of this section, that either HUD or 
the grantee determines was displaced as a direct result of acquisition, 
rehabilitation, or demolition for the assisted project.
    (iii) A tenant-occupant of a dwelling who moves from the building/
complex permanently, after the execution of the agreement between the 
grantee and HUD, if the move occurs before the tenant is provided 
written notice offering him or her the opportunity to lease and occupy 
a suitable, decent, safe and sanitary dwelling in the same building/
complex, under reasonable terms and conditions, upon completion of the 
project. Such reasonable terms and conditions include a monthly rent 
and estimated average monthly utility costs that do not exceed the 
greater of:
    (A) The tenant's monthly rent and estimated average monthly utility 
costs before the agreement; or
    (B) 30 percent of gross household income.
    (iv) A tenant-occupant of a dwelling who is required to relocate 
temporarily, but does not return to the building/complex, if either:
    (A) The tenant is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with the temporary relocation, 
including the cost of moving to and from the temporarily occupied unit, 
any increased housing costs and incidental expenses; or
    (B) Other conditions of the temporary relocation are not 
reasonable.
    (v) A tenant-occupant of a dwelling who moves from the building/
complex after he or she has been required to move to another dwelling 
unit in the same building/complex in order to carry out the project, if 
either:
    (A) The tenant is not offered reimbursement for all reasonable out-
of-pocket expenses incurred in connection with the move; or
    (B) Other conditions of the move are not reasonable.
    (2) Notwithstanding the provisions of paragraph (h)(1) of this 
section, a person does not qualify as a ``displaced person'' (and is 
not eligible for relocation assistance under the URA or this section), 
if:
    (i) The person moved into the property after the submission of the 
application for financial assistance to HUD, but, before signing a 
lease or commencing occupancy, was provided written notice of the 
project, its possible impact on the person (e.g., the person may be 
displaced, temporarily relocated or suffer a rent increase) and the 
fact that the person would not qualify as a ``displaced person'' or for 
any assistance provided under this section as a result of the project;
    (ii) The person is ineligible under 49 CFR 24.2(g)(2).
    (iii) The grantee determines the person is not displaced as a 
direct result of acquisition, rehabilitation, or demolition for an 
assisted project. To exclude a person on this basis, HUD must concur in 
that determination.
    (3) A grantee may at any time ask HUD to determine whether a 
specific displacement is or would be covered under this section.
    (i) Definition of initiation of negotiations. For purposes of 
determining the formula for computing the replacement housing 
assistance to be provided to a person displaced as a direct result of 
rehabilitation or demolition of the real property, the term 
``initiation of negotiations'' means the execution of the agreement 
covering the rehabilitation or demolition.

(Approved by the Office of Management and Budget under control 
number 2577-0191)


Sec. 953.603  Labor standards.

    In accordance with the authority under section 107(e)(2) of the 
Act, the Secretary waives the provisions of section 110 of the Act 
(Labor Standards) with respect to this part, including the requirement 
that laborers and mechanics employed by the contractor or subcontractor 
in the performance of construction work financed in whole or in part 
with assistance received under this part be paid wages at rates not 
less than those prevailing on similar construction in the locality, as 
determined by the Secretary of Labor in accordance with the Davis-Bacon 
Act (40 U.S.C. 276 a to a-7).


Sec. 953.604  Citizen participation.

    (a) In order to permit residents of Indian tribes and Alaska native 
villages to examine and appraise the applicant's application for funds 
under this part, the applicant shall follow traditional means of 
resident involvement which, at the least, include the following:
    (1) Furnishing residents with information concerning the amounts of 
funds available for proposed community development and housing 
activities and the range of activities that may be undertaken.
    (2) Holding one or more meetings to obtain the views of residents 
on community development and housing needs. Meetings shall be scheduled 
in ways and at times that will allow participation by residents.
    (3) Developing and publishing or posting a community development 
statement in such a manner as to afford affected residents an 
opportunity to examine its contents and to submit comments.
    (4) Affording residents an opportunity to review and comment on the 
applicant's performance under any active community development block 
grant.
    (b) Prior to submission of the application to HUD, the applicant 
shall certify by an official Tribal resolution that it has met the 
requirements of paragraph (a) of this section; and
    (1) Considered any comments and views expressed by residents and, 
if it deems it appropriate, modified the application accordingly; and
    (2) Made the modified application available to residents.
    (c) No part of the requirement under paragraph (a) of this section 
shall be construed to restrict the responsibility and authority of the 
applicant for the development of the application and the execution of 
the grant. Accordingly, the citizen participation requirements of this 
section do not include concurrence by any person or group in making 
final determinations on the contents of the application.

(Approved by the Office of Management and Budget under control 
number 2577-0191)


Sec. 953.605  Environment.

    (a) In order to assure that the policies of the National 
Environmental Policy Act of 1969 and other provisions of Federal law 
which further the purposes of that act (as specified in 24 CFR 58.5) 
are most effectively implemented in connection with the expenditure of 
ICDBG funds, the grantee shall comply with the Environment Review 
Procedures for Entities Assuming HUD Environmental Responsibilities (24 
CFR part 58). Upon completion of an environmental review, the grantee 
shall submit a certification and request for release of funds for 
particular projects in accordance with 24 CFR part 58. The grantee 
shall also be responsible for compliance with flood insurance, coastal 
barrier resource and airport clear zone requirements under 24 CFR 58.6.
    (b) In accordance with 24 CFR 58.34(a)(8), grants for imminent 
threats to health or safety approved under the provisions of subpart E 
of this part are

[[Page 40110]]

exempt from some or all of the environmental review requirements of 24 
CFR part 58, to the extent provided in that section.


Sec. 953.606  Conflict of interest.

    (a) Applicability. (1) In the procurement of supplies, equipment, 
construction, and services by grantees and subgrantees, the conflict of 
interest provisions in 24 CFR 85.36 and 24 CFR 84.42 shall apply.
    (2) In all cases not governed by 24 CFR 85.36 and 24 CFR 84.42, the 
provisions of this section shall apply. Such cases include the 
provision of assistance by the grantee or by its subrecipients to 
businesses, individuals, and other private entities under eligible 
activities that authorize such assistance (e.g., rehabilitation, 
preservation, and other improvements of private properties or 
facilities under Sec. 953.202; or grants, loans, and other assistance 
to businesses, individuals, and other private entities under 
Sec. 953.203 or Sec. 953.204.).
    (b) Conflicts prohibited. Except for the use of ICDBG funds to pay 
salaries and other related administrative or personnel costs, the 
general rule is that no persons described in paragraph (c) of this 
section who exercise or have exercised any functions or 
responsibilities with respect to ICDBG activities assisted under this 
part or who are in a position to participate in a decision-making 
process or gain inside information with regard to such activities, may 
obtain a personal or financial interest or benefit from an ICDBG 
assisted activity, or have an interest in any contract, subcontract or 
agreement with respect thereto, or the proceeds thereunder, either for 
themselves or those with whom they have family or business ties, during 
their tenure or for one year thereafter.
    (c) Persons covered. The conflict of interest provisions of 
paragraph (b) of this section apply to any person who is an employee, 
agent, consultant, officer, or elected or appointed official of the 
grantee, or of any designated public agencies, or CBDOs under 
Sec. 953.204, receiving funds under this part.
    (d) Exceptions requiring HUD approval.--(1) Threshold requirements. 
Upon the written request of a grantee, HUD may grant an exception to 
the provisions of paragraph (b) of this section on a case-by-case 
basis, when it determines that such an exception will serve to further 
the purposes of the Act and the effective and efficient administration 
of the grantee's program or project. An exception may be considered 
only after the grantee has provided the following:
    (i) A disclosure of the nature of the possible conflict, 
accompanied by an assurance that there has been public disclosure of 
the conflict and a description of how the public disclosure was made; 
and
    (ii) An opinion of the grantee's attorney that the interest for 
which the exception is sought would not violate Tribal laws on conflict 
of interest, or applicable State laws.
    (2) Factors to be considered for exceptions: In determining whether 
to grant a requested exception after the grantee has satisfactorily met 
the requirements of paragraph (d)(1) of this section, HUD shall 
consider the cumulative effect of the following factors, where 
applicable:
    (i) Whether the exception would provide a significant cost benefit 
or essential expert knowledge to the program or project which would 
otherwise not be available;
    (ii) Whether an opportunity was provided for open competitive 
bidding or negotiation;
    (iii) Whether the affected person has withdrawn from his or her 
functions or responsibilities, or from the decision-making process, 
with reference to the specific assisted activity in question;
    (iv) Whether the interest or benefit was present before the 
affected person was in a position as described in paragraph (b) of this 
section;
    (v) Whether undue hardship will result, either to the grantee or to 
the person affected, when weighed against the public interest served by 
avoiding the prohibited conflict;
    (vi) Any other relevant considerations.
    (e) Circumstances under which the conflict prohibition does not 
apply. (1) In instances where a person who might otherwise be deemed to 
be included under the conflict prohibition is a member of a group or 
class of beneficiaries of the assisted activity and receives generally 
the same interest or benefits as are being made available or provided 
to the group or class, the prohibition does not apply, except that if, 
by not applying the prohibition against conflict of interest, a 
violation of Tribal or State laws on conflict of interest would result, 
the prohibition does apply. However, if the assistance to be provided 
is housing rehabilitation (or repair) or new housing, a public 
disclosure of the nature of the assistance to be provided and the 
specific basis for the selection of the proposed beneficiaries must be 
made prior to the submission of an application to HUD. Evidence of this 
disclosure must be provided as a component of the application.
    (f) Record retention. All records pertaining to the grantee's 
decision under this section shall be maintained for HUD review upon 
request.

(Approved by the Office of Management and Budget under control 
number 2577-0191)


Sec. 953.607  Lead-based paint.

    (a) Prohibition against the use of lead-based paint. Section 401(b) 
of the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4831(b)) 
directs HUD to prohibit the use of lead-based paint in residential 
structures constructed or rehabilitated with Federal assistance. Such 
prohibitions are contained in 24 CFR part 35, subpart B, and are 
applicable to residential structures constructed or rehabilitated with 
assistance provided under this part.
    (b) Notification of hazards of lead-based paint poisoning. (1) The 
Secretary has promulgated requirements regarding notification to 
purchasers and tenants of HUD-associated housing constructed prior to 
1978 of the hazards of lead-based paint poisoning at 24 CFR part 35, 
subpart A. This paragraph is promulgated pursuant to the authorization 
granted in 24 CFR 35.5(c) and supersedes, with respect to all housing 
to which it applies, the notification requirements prescribed by 
subpart A of 24 CFR part 35.
    (2) For properties constructed prior to 1978, applicants for 
rehabilitation assistance provided under this part and tenants or 
purchasers of properties owned by the grantee or its subrecipient and 
acquired or rehabilitated with assistance under this part shall be 
notified:
    (i) That the property may contain lead-based paint;
    (ii) Of the hazards of lead-based paint;
    (iii) Of the symptoms and treatment of lead-based paint poisoning;
    (iv) Of the precautions to be taken to avoid lead-based paint 
poisoning (including maintenance and removal techniques for eliminating 
such hazards);
    (v) Of the advisability and availability of blood lead level 
screening for children under six years of age;
    (vi) That in the event lead-based paint is found on the property, 
appropriate treatment procedures may be undertaken.
    (c) Elimination of lead-based paint hazards. The purpose of this 
paragraph is to implement the provisions of section 302 of the Lead-
Based Paint Poisoning Prevention Act, 42 U.S.C. 4822, by establishing 
procedures to eliminate as far as practicable the hazards due to the 
presence of paint which may contain lead and to which children under 
six years of age may be

[[Page 40111]]

exposed in existing housing which is rehabilitated with assistance 
provided under this part. HUD has promulgated requirements regarding 
the elimination of lead-based paint hazards in HUD-associated housing 
at 24 CFR part 35, subpart C. This paragraph is promulgated pursuant to 
the authorization granted in 24 CFR 35.24(b)(4) and supersedes, with 
respect to all housing to which it applies, the requirements prescribed 
by subpart C of 24 CFR part 35.
    (1) Applicability. This paragraph applies to the rehabilitation of 
applicable surfaces in existing housing which is assisted under this 
part. The following activities assisted under the Indian Community 
Development Block Grant program are not covered by this paragraph (c):
    (i) Emergency repairs (not including lead-based paint-related 
emergency repairs);
    (ii) Weatherization;
    (iii) Water or sewer hook-ups;
    (iv) Installation of security devices;
    (v) Facilitation of tax exempt bond issuances which provide funds 
for rehabilitation;
    (vi) Other similar types of single-purpose programs that do not 
include physical repairs or remodeling of applicable surfaces (as 
defined in 24 CFR 35.22) of residential structures; and
    (vii) Any non-single purpose rehabilitation that does not involve 
applicable surfaces (as defined in 24 CFR 35.22) that does not exceed 
$3,000 per unit.
    (2) Definitions.
    Applicable surface. All intact and non-intact interior and exterior 
painted surfaces of a residential structure.
    Chewable surface. All protruding painted surfaces up to five feet 
from the floor or ground, that are readily accessible to children under 
six years of age, e.g., protruding corners, windowsills and frames, 
doors and frames, and other protruding woodwork.
    Defective paint surface. A surface on which the paint is cracking, 
scaling, chipping, peeling or loose.
    Elevated blood lead level or EBL. Excessive absorption of lead, 
that is, confirmed concentration of lead in whole blood of 20 ug/dl 
(micrograms of lead per deciliter) for a single test or of 15-19 ug/dl 
in two consecutive tests 3-4 months apart.
    HEPA. A high efficiency particle accumulator as used in lead 
abatement vacuum cleaners.
    Lead-based paint. A paint surface, whether or not defective, 
identified as having a lead content greater than or equal to 1 mg/cm2 
(milligram per square centimeter) or .5 percent by weight or 5000 parts 
per million (PPM).
    (3) Inspection and Testing.--(i) Defective paint surfaces. The 
grantee shall inspect for defective paint surfaces in all units 
constructed prior to 1978 which are occupied by families with children 
under six years of age and which are proposed for rehabilitation 
assistance. The inspection shall occur at the same time the property is 
being inspected for rehabilitation. Defective paint conditions will be 
included in the work write-up for the remainder of the rehabilitation 
work.
    (ii) Chewable surfaces. The grantee shall be required to test 
chewable surfaces for lead-based paint if the family residing in a 
unit, constructed prior to 1978 and receiving rehabilitation 
assistance, includes a child under six years of age with an identified 
EBL condition. Testing must be conducted by an inspector certified or 
regulated by a State or local health or housing agency or an 
organization recognized by HUD. Lead content shall be tested by using 
an X-ray fluorescence analyzer (XRF) or by laboratory analysis of paint 
samples.
    (iii) Abatement without testing. In lieu of the procedures set 
forth in paragraph (c)(3)(ii) of this section, in the case of a 
residential structure constructed prior to 1978, the grantee may forgo 
testing and treat all applicable surfaces in accordance with the 
methods set out in paragraph (c)(5) of this section.
    (4) Treatment Actions. (i) For inspections performed under 
Sec. 953.607(c)(3)(i) and where defective paint surfaces are found, 
treatment shall be provided to defective areas in accordance with 
paragraph (c)(5) of this section. Treatment shall be performed before 
final inspection and approval of the work.
    (ii) For testing performed under Sec. 953.607(c)(3)(ii) and where 
interior chewable surfaces are found to contain lead-based paint, all 
interior chewable surfaces in any affected room shall be treated. Where 
exterior chewable surfaces are found to contain lead-based paint, the 
entire exterior chewable surface shall be treated. Treatment in 
accordance with paragraph (c)(5) of this section shall be performed 
before final inspection and approval of the work.
    (iii) When weather prohibits repainting exterior surfaces before 
final inspection, the grantee may permit the owner to treat the 
defective paint or chewable lead-based paint as required by this 
section and agree to repaint by a specified date. A separate inspection 
is required.
    (5) Treatment methods. Treatment of defective paint surfaces and 
chewable surfaces must consist of covering or removal of the paint in 
accordance with the following requirements:
    (i) A defective paint surface shall be treated if the total area of 
defective paint on a component is:
    (A) More than 10 square feet on an exterior wall;
    (B) More than 2 square feet on an interior or exterior component 
with a large surface area, excluding exterior walls and including, but 
not limited to, ceilings, floors, doors, and interior walls; or
    (C) More than 10 percent of the total surface area on an interior 
or exterior component with a small surface area, including, but not 
limited to, window sills, baseboards and trim.
    (ii) Acceptable methods of treatment are: Removal by wet scraping, 
wet sanding, chemical stripping on or off site, replacing painted 
components, scraping with infra-red or coil type heat gun with 
temperatures below 1100 degrees, HEPA vacuum sanding, HEPA vacuum 
needle gun, contained hydroblasting or high pressure wash with HEPA 
vacuum, and abrasive sandblasting with HEPA vacuum. Surfaces must be 
covered with durable materials with joints and edges sealed and caulked 
as needed to prevent the escape of lead contaminated dust.
    (iii) Prohibited methods of removal are: Open flame burning or 
torching; machine sanding or grinding without a HEPA exhaust; 
uncontained hydroblasting or high pressure wash; and dry scraping 
except around electrical outlets or except when treating defective 
paint spots no more than two square feet in any one interior room or 
space (hallway, pantry, etc.) or totalling no more than twenty square 
feet on exterior surfaces.
    (iv) During exterior treatment, soil and playground equipment must 
be protected from contamination.
    (v) All treatment procedures must be concluded with a thorough 
cleaning of all surfaces in the room or area of treatment to remove 
fine dust particles. Cleanup must be accomplished by wet washing 
surfaces with a lead solubilizing detergent such as trisodium phosphate 
or an equivalent solution.
    (vi) Waste and debris must be disposed of in accordance with all 
applicable Federal, State and local laws.
    (6) Funding for inspection, testing and treatment. Program 
requirements and local program design will determine whether the cost 
of inspection, testing or treatment is to be borne by the owner/
developer, the grantee or a combination of the owner/developer and the 
grantee.

[[Page 40112]]

    (7) Tenant protection. The owner/developer shall take appropriate 
action to protect residents and their belongings from hazards 
associated with treatment procedures. Residents must not enter spaces 
undergoing treatment until cleanup is completed. Personal belongings 
that are in work areas must be relocated or otherwise protected from 
contamination. Where necessary, these actions may include the temporary 
relocation of tenants during the treatment process. The owner/developer 
shall notify the grantee of all such actions taken.
    (8) Records. The grantee shall keep a copy of each inspection and/
or test report for at least three years.
    (9) Monitoring and enforcement. Area ONAP monitoring of 
rehabilitation programs includes reviews for compliance with applicable 
program requirements for lead-based paint. In cases of noncompliance, 
HUD may impose conditions or sanctions on grantees to encourage prompt 
compliance.
    (10) Compliance with other program requirements, Federal, State and 
local laws.--(i) Other program requirements. To the extent that 
assistance from any of the programs covered by this section is used in 
conjunction with other HUD program assistance which have lead-based 
paint requirements which may have more or less stringent requirements, 
the more stringent requirements will prevail.
    (ii) HUD responsibility. If HUD determines that a State or local 
law, ordinance, code or regulation provides for lead-based paint 
testing or hazard treatment in a manner which provides a level of 
protection from the hazards of lead-based paint poisoning at least 
comparable to that provided by the requirements of this section and 
that adherence to the requirements of this subpart would be duplicative 
or otherwise cause inefficiencies, HUD may modify or waive the 
requirements of this section in such manner as may be appropriate to 
promote efficiency while ensuring such comparable level of protection.
    (iii) Grantee responsibility. Nothing in this section is intended 
to relieve any grantee in the programs covered by this section of any 
responsibility for compliance with applicable State or local laws, 
ordinances, codes or regulations governing the inspection, testing or 
treatment of lead-based paint hazards.

(Approved by the Office of Management and Budget under control 
number 2577-0191)


Sec. 953.608  Debarment and suspension.

    As required by 24 CFR part 24, each grantee must require 
participants in lower tier covered transactions (e.g., contractors and 
sub-contractors) to include the certification in appendix B of part 24 
(that neither it nor its principals is presently debarred, suspended, 
proposed for debarment, declared ineligible, or voluntarily excluded 
from participation from the covered transaction) in any proposal 
submitted in connection with the lower tier transactions. A grantee may 
rely on the certification , unless it knows the certification is 
erroneous.

Subpart H--Program Performance


Sec. 953.700  Review of grantee's performance.

    (a) Objective. HUD will review each grantee's performance to 
determine whether the grantee has:
    (1) Complied with the requirements of the Act, this part, the grant 
agreement and other applicable laws and regulations;
    (2) Carried out its activities substantially as described in its 
application;
    (3) Made substantial progress in carrying out its approved program;
    (4) A continuing capacity to carry out the approved activities in a 
timely manner; and
    (5) The capacity to undertake additional activities funded under 
this part.
    (b) Basis for review. In reviewing each grantee's performance, HUD 
will consider all available evidence which may include, but not be 
limited to, the following:
    (1) The approved application and any amendments thereto;
    (2) Reports prepared by the grantee;
    (3) Records maintained by the grantee;
    (4) Results of HUD's monitoring of the grantee's performance, 
including field evaluation of the quality of the work performed;
    (5) Audit reports;
    (6) Records of drawdowns on the line of credit;
    (7) Records of comments and complaints by citizens and 
organizations; and
    (8) Litigation.


Sec. 953.701   Corrective and remedial action.

    (a) General. One or more corrective or remedial actions will be 
taken by HUD when, on the basis of the performance review, HUD 
determines that the grantee has not:
    (1) Complied with the requirements of the Act, this part, and other 
applicable laws and regulations, including the environmental 
responsibilities assumed under section 104(g) of title I of the Act;
    (2) Carried out its activities substantially as described in its 
applications;
    (3) Made substantial progress in carrying out its approved program; 
or
    (4) Shown the continuing capacity to carry out its approved 
activities in a timely manner.
    (b) Action. The action taken by HUD will be designed, first, to 
prevent the continuance of the deficiency; second, to mitigate any 
adverse effects or consequences of the deficiency; and third, to 
prevent a recurrence of the same or similar deficiencies. The following 
actions may be taken singly or in combination, as appropriate for the 
circumstances:
    (1) Request the grantee to submit progress schedules for completing 
approved activities or for complying with the requirements of this 
part;
    (2) Issue a letter of warning advising the grantee of the 
deficiency (including environmental review deficiencies and housing 
assistance deficiencies), describing the corrective actions to be 
taken, establishing a date for corrective actions, and putting the 
grantee on notice that more serious actions will be taken if the 
deficiency is not corrected or is repeated;
    (3) Advise the grantee to suspend, discontinue, or not incur costs 
for the affected activity;
    (4) Advise the grantee to reprogram funds from affected activities 
to other eligible activities, provided that such action shall not be 
taken in connection with any substantial violation of part 58 and 
provided that such reprogramming is subjected to the environmental 
review procedures of part 58 of this title;
    (5) Advise the grantee to reimburse the grantee's program account 
or line of credit in any amount improperly expended;
    (6) Change the method of payment from a line of credit basis to a 
reimbursement basis; and/or
    (7) Suspend the line of credit until corrective actions are taken.


Sec. 953.702   Reduction or withdrawal of grant.

    (a) General. A reduction or withdrawal of a grant under paragraph 
(b) of this section will not be made until at least one of the 
corrective or remedial actions specified in Sec. 953.701(b) has been 
taken and only then if the grantee has not made an appropriate and 
timely response. Before making such a grant reduction or withdrawal, 
the grantee also shall be notified and given an opportunity within a 
prescribed time for an informal consultation regarding the proposed 
action.

[[Page 40113]]

    (b) Reduction or withdrawal. When the Area ONAP determines, on the 
basis of a review of the grantee's performance, that the objectives set 
forth in Sec. 953.700(a)(2) or (3) have not been met, the Area ONAP may 
reduce or withdraw the grant, except that funds already expended on 
eligible approved activities shall not be recaptured.


Sec. 953.703   Other remedies for noncompliance.

    (a) Secretarial actions. If the Secretary finds a grantee has 
failed to comply with any provision of this part even after corrective 
actions authorized under Sec. 953.701 have been applied, the following 
actions may be taken provided that reasonable notice and opportunity 
for hearing is made to the grantee. (The Administrative Procedure Act 
(5 U.S.C. 551 et seq.), where applicable, shall be a guide in any 
situation involving adjudications where the Secretary desires to take 
actions requiring reasonable notice and opportunity for a hearing):
    (1) Terminate the grant to the grantee;
    (2) Reduce the grant to the grantee by an amount equal to the 
amount which was not expended in accordance with this part; or
     (3) Limit the availability of funds to projects or activities not 
affected by such failure to comply; provided, however, that the 
Secretary may on due notice revoke the grantee's line of credit in 
whole or in part at any time if the Secretary determines that such 
action is necessary to preclude the further expenditure of funds for 
activities affected by such failure to comply.
    (b) Secretarial referral to the Attorney General. If there is 
reason to believe that a grantee has failed to comply substantially 
with any provision of the Act, the Secretary may refer the matter to 
the Attorney General of the United States with a recommendation that an 
appropriate civil action be instituted. Upon such a referral, the 
Attorney General may bring a civil action in any United States district 
court having venue thereof for such relief as may be appropriate, 
including an action to recover the amount of the assistance furnished 
under this part which was not expended in accordance with this part or 
for mandatory or injunctive relief.

    Dated: June 18, 1996.
Michael B. Janis,
General Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. 96-19350 Filed 7-30-96; 8:45 am]
BILLING CODE 4210-32-P