[Federal Register Volume 69, Number 118 (Monday, June 21, 2004)]
[Proposed Rules]
[Pages 34544-34548]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-13874]



[[Page 34543]]

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Part IV





Department of Housing and Urban Development





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24 CFR Parts 954 and 1003



Participation in HUD's Native American Programs by Religious 
Organizations; Providing for Equal Treatment of All Program 
Participants; Proposed Rule

  Federal Register / Vol. 69, No. 118 / Monday, June 21, 2004 / 
Proposed Rules  

[[Page 34544]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 954 and 1003

[Docket No. FR-4915-P-01]
RIN 2577-AC56


Participation in HUD's Native American Programs by Religious 
Organizations; Providing for Equal Treatment of All Program 
Participants

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would remove barriers to the participation 
of religious (also referred to as ``faith-based'') organizations in HUD 
regulations implementing the Indian HOME Program, the Indian Community 
Development Block Grant Program, the Indian Housing Block Grant 
Program, the Title VI Loan Guarantee Assistance Program, and the 
Section 184 Loan Guarantees for Indian Housing Program. These proposed 
changes are consistent with revisions of program regulations being 
undertaken on a department-wide basis. In general, no group of 
applicants competing for HUD funds or seeking to participate in HUD 
programs should be subject to greater or fewer requirements than other 
organizations solely because of their religious character or 
affiliation or absence of religious character or affiliation.

DATES: Comment Due Date: August 20, 2004.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Rules Docket Clerk, Office of General Counsel, Room 
10276, Department of Housing and Urban Development, 451 Seventh Street, 
SW., Washington, DC 20410-0500. Communications should refer to the 
above docket number and title. Facsimile (FAX) comments are not 
acceptable. A copy of each communication submitted will be available 
for public inspection and copying between 8 a.m. and 5 p.m. weekdays at 
the above address.

FOR FURTHER INFORMATION CONTACT: Ryan Streeter, Director, Center for 
Faith-Based and Community Initiatives, Department of Housing and Urban 
Development, Room 10184, 451 Seventh Street, SW., Washington, DC 20410-
0001, telephone: (202) 708-2404 (this is not a toll-free number). For 
program specific information, contact Deborah Lalancette, Director, 
Office of Grants Management, Office of Native American Programs, Office 
of Public and Indian Housing, Department of Housing and Urban 
Development, Suite 3390, 1919 Broadway, Denver, CO 80202, telephone 
(303) 675-1600, extension 3325 (this is not a toll-free number). 
Individuals with speech or hearing impairments may access these 
telephone numbers through TTY by calling the toll-free Federal 
Information Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    On January 6, 2003 (68 FR 648), HUD published a proposed rule to 
amend certain HUD regulations that imposed, or appeared to impose, 
unwarranted barriers to the participation of religious organizations in 
HUD programs. HUD recognizes that religious organizations are important 
contributors to HUD's mission of assisting low-income families obtain 
housing and revitalizing distressed communities. These organizations 
frequently have the experience needed to assist beneficiaries in HUD 
programs. Consistent with the President's Executive Order 13198, Agency 
Responsibilities with Respect to Faith-Based and Community Initiatives, 
issued January 31, 2001 (66 FR 8497), HUD undertook a comprehensive 
review of its program requirements and regulations, particularly those 
that would be expected to attract interest and participation by 
nonprofit organizations. Executive Order 13198 directed five agencies, 
including HUD, to undertake this review and to take steps to ensure 
that federal policy and programs are fully open to faith-based 
community groups in a manner that is consistent with the Constitution.
    As a result of that comprehensive review, HUD identified 
regulations that imposed (or appeared to impose) barriers to 
participation of faith-based organizations in eight programs 
administered by HUD's Office of Community Planning and Development. 
HUD's proposed rule of January 6, 2003, was designed to eliminate these 
barriers and to ensure that these HUD programs were open to all 
qualified organizations, regardless of their religious character. After 
a period of public comment, HUD finalized this rule on September 30, 
2003 (68 FR 56396).
    On December 12, 2002, President George W. Bush signed Executive 
Order 13279, Equal Protection of the Laws for Faith-Based and Community 
Organizations, published in the Federal Register on December 16, 2002, 
at 67 FR 77141. The executive order establishes fundamental principles 
and policymaking criteria to guide all executive branch agencies in 
formulating and developing policies that have implications for faith-
based and community organizations to ensure the equal protection of the 
laws for these organizations in programs receiving federal financial 
assistance.
    Executive Order 13279 is part of the Administration's broader 
faith-based and community initiative, directing the executive branch 
agencies, including HUD, to ensure that federal policy and programs are 
fully open to faith-based and community organizations in a manner 
consistent with the Constitution. The Administration believes that all 
eligible organizations, including faith-based organizations, should be 
able to participate in federal programs and activities and compete, 
where required, for federal financial assistance on an equal footing.
    HUD published a second proposed rule on March 3, 2004 (69 FR 
10126), which would amend the general HUD program requirements at 24 
CFR part 5 to extend the equal participation protections to HUD 
programs and activities not covered by the September 30, 2003, final 
rule. Neither the September 30, 2003, final rule, nor the March 3, 
2004, proposed rule applied to HUD's Native American programs. HUD's 
Native American programs were excluded from the September 30, 2003, and 
March 3, 2004, rules so that HUD could first consult with Indian tribal 
governments in accordance with Executive Order 13175, Consultation and 
Coordination With Indian Tribal Governments, issued on November 6, 
2000. HUD has now provided Indian tribes and Alaska Native Villages the 
opportunity to comment on the substance of these proposed regulatory 
changes that would extend the equal participation protections to the 
Indian HOME Program at 24 CFR part 954; the Indian Housing Block Grant 
Program (IHBG) at 24 CFR part 1000; the Title VI Loan Guarantee 
Assistance (Title VI Loan Guarantee) program at subpart E of 24 CFR 
part 1000; the Indian Community Development Block Grant Program (ICDBG) 
at 24 CFR part 1003; and the Section 184 Loan Guarantees for Indian 
Housing Program (Section 184) at 24 CFR part 1005.

II. Indian Home and ICDBG Programs

    Only the Indian HOME and ICDBG program regulations have sections 
that specifically address the participation of religious organizations. 
Although the Indian HOME Program was terminated by section 505 of the 
Native American Housing Assistance and Self-Determination Act of 1996 
(25 U.S.C. 4101 et seq.) (NAHASDA), the

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regulation at 24 CFR part 954 continues to govern outstanding funds 
remaining from that program and part 954 would, accordingly, be amended 
by this proposed rule. Specifically, the requirements concerning 
religious organization at Sec.  954.301 would be revised to parallel 
the revision made to Sec.  92.257 of the HOME program regulation by the 
September 30, 2003, final rule. Similarly, Sec.  1003.600 of the ICDBG 
regulation would be amended to parallel the revision made to Sec.  
570.200(j) of the Community Development Block Grant (CDBG) program 
regulation by the September 30, 2003, final rule.

III. IHBG, Title VI Loan Guarantee, and Section 184 Programs

    The regulations for the IHBG, Title VI Loan Guarantee, and Section 
184 programs do not have sections that specifically address the 
participation of religious organizations. Such organizations could 
participate in those programs as subrecipients or contractors, as 
appropriate. This rule does not propose any amendments to those program 
regulations. Rather, this preamble provides notice that, following the 
appropriate tribal consultation, the proposed rule amending the general 
HUD program requirements at 24 CFR part 5 and published on March 3, 
2004, would, upon being issued as a final rule, extend the equal 
participation protections to these Native American programs, as well as 
to the other HUD programs and activities not covered by the September 
30, 2003, final rule.

IV. Policies and Requirements

    The specific policies and requirements that would be codified by 
this proposed rule, consistent with the September 30, 2003, final rule 
and the March 3, 2004, proposed rule, are as follows:
    1. Equal participation of faith-based organizations in HUD programs 
and activities. This proposed rule would clarify that faith-based 
organizations are eligible, on the same basis as any other eligible 
organization, to participate in HUD's programs and activities. The 
phrase ``participate in HUD's programs and activities'' and its 
variants are used in this rule to mean participate in the full range of 
HUD programs and activities, including programs that make funds 
available through contracts, grants, cooperative agreements or other 
instruments for eligible goods, services, and activities, and programs 
that do not make funds available but involve other forms of benefit or 
resources. For example, the Title VI Loan Guarantee program does not 
provide funds, but guarantees the notes or other obligations issued by 
Indian tribes to finance affordable housing activities. Neither the 
federal government, nor a state, local, or tribal government, nor any 
other entity that administers any HUD program or activity shall 
discriminate against an organization on the basis of the organization's 
religious character or affiliation. Nothing in the rule would preclude 
those administering Department-funded programs from accommodating 
religious organizations in a manner consistent with the Establishment 
Clause.
    2. Inherently religious activities. Organizations that receive 
direct HUD funds \1\ under a HUD program or activity may not engage in 
inherently religious activities, such as worship, religious 
instruction, or proselytization, as part of the programs or services 
funded under the HUD program or activity. If an organization conducts 
such activities, the activities must be offered separately, in time or 
location, from the programs, activities, or services supported by 
direct HUD funds, and participation must be voluntary for the 
beneficiaries of these programs, activities, or services.
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    \1\ As used in this proposed rule, the term ``direct HUD funds'' 
refers to direct funding within the meaning of the Establishment 
Clause of the First Amendment. For example, direct HUD funding may 
mean that the government or an intermediate organization with 
similar duties as a governmental entity under a particular HUD 
program selects an organization and purchases the needed services 
straight from the organization (e.g., via a contract or cooperative 
agreement). In contrast, indirect funding scenarios may place the 
choice of service provider in the hands of a beneficiary, and then 
pay for the cost of that service through a voucher, certificate, or 
other similar means of payment.
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    3. Independence of faith-based organizations. A faith-based 
organization that participates in a HUD program or activity will retain 
its independence from federal, state, local and tribal governments, and 
may continue to carry out its mission, including the definition, 
practice, and expression of its religious beliefs, provided that it 
does not engage in any inherently religious activities, such as 
worship, religious instruction, or proselytization, as part of the 
programs or services supported by direct HUD funds. Among other things, 
faith-based organizations may use space in their facilities to provide 
services under a HUD program, without removing religious art, icons, 
scriptures, or other religious symbols. In addition, a faith-based 
organization participating in a HUD program retains its authority over 
its internal governance, and it may retain religious terms in its 
organization's name, select its board members and otherwise govern 
itself on a religious basis, and include religious references in its 
organization's mission statements and other governing documents.
    4. Exemption from Title VII employment discrimination requirements. 
A faith-based organization's exemption from the federal prohibition on 
employment discrimination on the basis of religion, set forth in 
section 702(a) of the Civil Rights Act of 1964 (42 U.S.C. 2000e-1), is 
not forfeited when the organization participates in a HUD program. Some 
HUD programs, however, contain independent statutory provisions that 
impose certain nondiscrimination requirements on all grantees. 
Accordingly, grantees should consult with the appropriate Department 
program office to determine the scope of applicable requirements.
    5. Nondiscrimination requirements. This proposed rule clarifies 
that an organization that receives direct HUD funds shall not, in 
providing program assistance, discriminate against a program 
beneficiary or prospective program beneficiary on the basis of religion 
or religious belief. Organizations participating in HUD programs and 
activities must also comply with any other applicable fair housing and 
nondiscrimination requirements.
    6. Acquisition, construction, and rehabilitation of structures. HUD 
funds may not be used for the acquisition, construction, or 
rehabilitation of structures to the extent that those structures are 
used for inherently religious activities. HUD funds may be used for the 
acquisition, construction, or rehabilitation of structures only to the 
extent that those structures are used for conducting eligible 
activities under a HUD program or activity. Where a structure is used 
for both eligible and inherently religious activities, HUD funds may 
not exceed the cost of those portions of the acquisition, construction, 
or rehabilitation that are attributable to eligible activities in 
accordance with the cost accounting requirements applicable to the HUD 
program or activity. Sanctuaries, chapels, and other rooms that a HUD-
funded religious congregation uses as its principal place of worship, 
however, are ineligible for HUD-funded improvements. Disposition of 
real property after use for the authorized purpose, or any change in 
use of the property from the authorized purpose, is subject to 
government-wide regulations governing real property disposition (see, 
e.g., 24 CFR parts 84 and 85).
    7. Commingling of federal and state, local, or tribal funds. If a 
state, local, or

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tribal government voluntarily contributes its own funds to supplement 
federally funded activities, the state, local, or tribal government may 
segregate the federal funds or commingle them. However, if the funds 
are commingled, the policies and requirements of this rule would apply 
to all of the commingled funds. If a state, local or tribal government 
is required to contribute matching funds to supplement a federally 
funded activity, the matching funds are considered commingled with the 
federal assistance and subject to the requirements of this proposed 
rule. Some HUD program requirements govern any project or activity 
assisted under that program. Accordingly, grantees should consult with 
the appropriate HUD program office to determine the scope of applicable 
requirements.

V. Findings and Certifications

Consultation With Indian Tribal Governments

    In accordance with Executive Order 13175, Consultation and 
Coordination With Indian Tribal Governments, issued on November 6, 
2000, HUD has consulted with representatives of tribal governments 
concerning the subject of this rule. HUD, through a letter dated 
February 23, 2004, provided Indian tribes and Alaska Native Villages 
the opportunity to comment on the substance of the proposed regulatory 
changes during the development of this proposed rule. The comments 
received by HUD have been considered by HUD in the preparation of this 
proposed rule for publication. Additionally, this proposed rule 
provides Indian tribes with an additional opportunity to comment on the 
proposed regulatory changes.

Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866, Regulatory Planning and Review. OMB determined 
that this rule is a ``significant regulatory action'' as defined in 
section 3(f) of the Order (although not an economically significant 
regulatory action under the Order). Any change made to the rule as a 
result of that review are identified in the docket file, which is 
available for public inspection in the Regulations Division, Room 
10276, 451 Seventh Street, SW., Washington, DC 20410-0500.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) establishes requirements for federal agencies to assess the 
effects of their regulatory actions on state, local, and tribal 
governments and the private sector. This rule does not impose any 
federal mandate on any state, local, or tribal governments or the 
private sector within the meaning of Unfunded Mandates Reform Act of 
1995.

Environmental Impact

    This proposed rule sets forth nondiscrimination standards. 
Accordingly, under 24 CFR 50.19(c)(3), this proposed rule is 
categorically excluded from environmental review under the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332).

Impact on Small Entities

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)) has reviewed and approved this proposed rule and in so 
doing certifies that this rule will not have a significant economic 
impact on a substantial number of small entities. The proposed rule 
would not impose new costs, or modify existing costs, applicable to HUD 
grantees. Rather, the purpose of the proposed rule is to ensure the 
equal participation of faith-based organizations (irrespective of size) 
in HUD's programs. Notwithstanding HUD's determination that this rule 
will not have a significant economic effect on a substantial number of 
small entities, HUD specifically invites comments regarding any less 
burdensome alternatives to this rule that will meet HUD's objectives as 
described in this preamble.

Catalog of Federal Domestic Assistance Numbers

    The Catalog of Federal Domestic Assistance numbers for the programs 
affected by this rule are: Indian Home Program--14.239; ICDBG--14.862; 
Section 184--14.865; IHBG--14.867; Title VI Loan Guarantee--14.869.

List of Subjects

24 CFR Part 954

    Administrative practice and procedure, Grant programs--housing and 
community development, Grant programs--Indians, Indians, Low and 
moderate income housing, Manufactured homes, Rent subsidies, Reporting 
and recordkeeping requirements.

24 CFR Part 1003

    Alaska, Community development block grants, Grant programs--housing 
and community development, Indians, Reporting and recordkeeping 
requirements.
    For the reasons stated in the preamble, HUD proposes to amend title 
24 of the Code of Federal Regulations as follows:

PART 954--INDIAN HOME PROGRAM

    1. The authority citation for 24 CFR part 954 continues to read as 
follows:

    Authority: 42 U.S.C. 3535(d) and 12701-12839.

    2. Revise Sec.  954.301 to read as follows:


Sec.  954.301  Faith-based activities.

    (a) Religious organizations are eligible, on the same basis as any 
other organization, to participate in the Indian HOME program. Neither 
the federal government nor a tribal government nor any other entity 
that administers any program or activity under this part shall 
discriminate against an organization on the basis of the organization's 
religious character or affiliation.
    (b) Organizations that receive direct HUD funds under the Indian 
HOME program may not engage in inherently religious activities, such as 
worship, religious instruction, or proselytization, as part of the 
program or services funded under this part. If an organization conducts 
such inherently religious activities, the inherently religious 
activities must be offered separately, in time or location, from the 
programs, activities, or services supported by direct HUD funds under 
this part, and participation must be voluntary for the beneficiaries of 
the programs, activities, or services provided.
    (c) A religious organization that participates in the Indian HOME 
program will retain its independence from federal, state, local, and 
tribal governments, and may continue to carry out its mission, 
including the definition, practice, and expression of its religious 
beliefs, provided that it does not engage in any inherently religious 
activities, such as worship, religious instruction, or proselytization, 
as part of the programs or services funded under a program or activity 
pursuant to this part. Among other things, religious organizations may 
use space in their facilities to provide services under the Indian Home 
program without removing religious art, icons, scriptures, or other 
religious symbols. In addition, a religious organization participating 
in the Indian HOME program retains its authority over its internal 
governance, and it may retain religious terms in its organization's 
name, select its board members on a religious basis, and include 
religious references in its organization's mission statements and other 
governing documents.

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    (d) Exemption from Title VII employment discrimination 
requirements. A religious organization's exemption from the federal 
prohibition on employment discrimination on the basis of religion, set 
forth in section 702(a) of the Civil Rights Act of 1964 (42 U.S.C. 
2000e-1), is not forfeited when the organization participates in a HUD 
program. Some HUD programs, however, contain independent statutory 
provisions that impose certain nondiscrimination requirements on all 
grantees. Accordingly, grantees should consult with the appropriate HUD 
program office to determine the scope of applicable requirements.
    (e) An organization that receives direct funds under the Indian 
HOME program shall not, in providing program assistance, discriminate 
against a program beneficiary or prospective program beneficiary on the 
basis of religion or religious belief.
    (f) Indian HOME funds may not be used for the acquisition, 
construction, or rehabilitation of structures to the extent that those 
structures are used for inherently religious activities. Indian HOME 
funds may be used for the acquisition, construction, or rehabilitation 
of structures only to the extent that those structures are used for 
conducting eligible activities under this part. Where a structure is 
used for both eligible and inherently religious activities, Indian HOME 
funds may not exceed the cost of those portions of the acquisition, 
construction, or rehabilitation that are attributable to eligible 
activities in accordance with the cost accounting requirements 
applicable to Indian HOME funds in this part. Sanctuaries, chapels, or 
other rooms that an Indian HOME-funded religious congregation uses as 
its principal place of worship, however, are ineligible for Indian 
HOME-funded improvements. Disposition of real property after the term 
of the grant, or any change in use of the property during the term of 
the grant, is subject to government-wide regulations governing real 
property disposition (see 24 CFR parts 84 and 85).
    (g) If a tribal government voluntarily contributes its own funds to 
supplement federally funded activities, the tribal government has the 
option to segregate the federal funds or commingle them. However, if 
the funds are commingled, this section applies to all of the commingled 
funds. Further, if a state or local government is required to 
contribute matching funds to supplement a federally funded activity, 
the matching funds are considered commingled with the federal 
assistance and therefore subject to the requirements of this section. 
Some HUD programs requirements govern any project or activity assisted 
under those programs. Accordingly, grantees should consult with the 
appropriate HUD program office to determine the scope of applicable 
requirements.

PART 1003--COMMUNITY DEVELOPMENT BLOCK GRANTS FOR INDIAN TRIBES AND 
ALASKA NATIVE VILLAGES

    3. The authority citation for 24 CFR part 1003 continues to read as 
follows:


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

    4. Revise Sec.  1003.600 to read as follows:


Sec.  1003.600  Faith-based activities.

    (a) Religious organizations are eligible, on the same basis as any 
other eligible organization, to participate in the ICDBG program. 
Neither the federal government nor a tribal government nor any other 
entity that administers any program or activity under this part shall 
discriminate against an organization on the basis of the organization's 
religious character or affiliation.
    (b) Organizations that receive direct HUD funds under the ICDBG 
program may not engage in inherently religious activities, such as 
worship, religious instruction, or proselytization, as part of the 
programs or services funded under this part. If an organization 
conducts such inherently religious activities, the inherently religious 
activities must be offered separately, in time or location, from the 
programs, activities or services supported by direct HUD funds under 
this part, and participation must be voluntary for the beneficiaries of 
the programs, activities, or services provided.
    (c) A religious organization that participates in the ICDBG program 
will retain its independence from federal, State, local, and tribal 
governments, and may continue to carry out its mission, including the 
definition, practice, and expression of its religious beliefs, provided 
that it does not engage in any inherently religious activities, such as 
worship, religious instruction, or proselytization, as part of the 
programs or services funded under a program or activity pursuant to 
this part. Among other things, religious organizations may use space in 
their facilities to provide ICDBG-funded services, without removing 
religious art, icons, scriptures, or other religious symbols. In 
addition, a religious organization participating in the ICDBG program 
retains its authority over its internal governance, and it may retain 
religious terms in its organization's name, select its board members on 
a religious basis, and include religious references in its 
organization's mission statements and other governing documents.
    (d) Exemption from Title VII employment discrimination 
requirements. A religious organization's exemption from the federal 
prohibition on employment discrimination on the basis of religion, set 
forth in section 702(a) of the Civil Rights Act of 1964 (42 U.S.C. 
2000e-1), is not forfeited when the organization participates in a HUD 
program. Some HUD programs, however, contain independent statutory 
provisions that impose certain nondiscrimination requirements on all 
grantees. Accordingly, grantees should consult with the appropriate HUD 
program office to determine the scope of applicable requirements.
    (e) An organization that receives direct funds under the ICDBG 
program shall not, in providing program assistance, discriminate 
against a program beneficiary or prospective program beneficiary on the 
basis of religion or religious belief.
    (f) ICDBG funds may not be used for the acquisition, construction, 
or rehabilitation of structures to the extent that those structures are 
used for inherently religious activities. ICDBG funds may be used for 
the acquisition, construction, or rehabilitation of structures only to 
the extent that those structures are used for conducting eligible 
activities under this part. Where a structure is used for both eligible 
and inherently religious activities, ICDBG funds may not exceed the 
cost of those portions of the acquisition, construction, or 
rehabilitation that are attributable to eligible activities in 
accordance with the cost accounting requirements applicable to ICDBG 
funds in this part. Sanctuaries, chapels, or other rooms that an ICDBG-
funded religious congregation uses as its principal place of worship, 
however, are ineligible for ICDBG-funded improvements. Disposition of 
real property after the term of the grant, or any change in use of the 
property during the term of the grant, is subject to government-wide 
regulations governing real property disposition (see 24 CFR parts 84 
and 85).
    (g) If a tribal government voluntarily contributes its own funds to 
supplement federally funded activities, the tribal government has the 
option to segregate the federal funds or commingle them. However, if 
the funds are commingled, this section applies to all of the commingled 
funds. Further, if a state or local government is required to

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contribute matching funds to supplement a federally funded activity, 
the matching funds are considered commingled with the federal 
assistance and therefore subject to the requirements of this section. 
Some HUD programs requirements govern any project or activity assisted 
under those programs.
    Accordingly, grantees should consult with the appropriate HUD 
program office to determine the scope of applicable requirements.

    Dated: May 28, 2004.
Paula O. Blunt,
General Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. 04-13874 Filed 6-18-04; 8:45 am]
BILLING CODE 4210-33-P